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Good morning. The country’s first NFT insider-trading case was a win for federal prosecutors, bolstering future allegations involving those types of assets. Plus, Starbucks will press its appeal in a labor dispute today in the 6th Circuit; a new criminal justice alliance wants to erase the “trial penalty” of rejecting plea deals; and Proskauer is heading into a major hearing in a $636 million malpractice case. It’s May the 4th, and we’re glad you’re with us.
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REUTERS/Florence Lo/Illustration
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A federal jury in Manhattan convicted a former product manager at NFT marketplace OpenSea in what prosecutors said was the first insider trading case involving digital assets, reports Luc Cohen.
Nathaniel Chastain was accused of buying NFTs he had decided to feature on the OpenSea website and selling them shortly afterward to make more than $50,000 in illegal profit. The trial, among one of several high profile digital asset cases brought by the U.S. Attorney’s office in Manhattan, could have broader implications for assets that do not fit into existing regulations preventing investment advisers, brokers and others from trading on material nonpublic information, legal experts have said.
“If this case sticks, there is precedent that insider trading theory can be applied to any asset class,” Philip Moustakis, a former SEC enforcement lawyer and partner at Seward & Kissel, said before the trial.
Chastain had pleaded not guilty, and lawyers argued that OpenSea did not treat knowledge of what NFTs would be featured on its home page as confidential information when Chastain worked at the company. “You can’t hold Nate to a standard that didn’t exist,” Chastain’s lawyer, Daniel Filor of Greenberg Traurig, told jurors in his closing argument on Monday.
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- President Joe Biden nominated four federal judges for vacancies on the Michigan, Pennsylvania, Connecticut and D.C. trial benches. The nominees include D.C. Court of Appeals Judge Loren AliKhan, who would be the first South Asian woman on the D.C. district court; and Susan DeClercq, Ford’s director and special investigations counsel. She would be the first East Asian federal judge in the state if confirmed to serve on the Eastern District of Michigan. (Reuters)
- A former federal prosecutor asked the Ohio Supreme Court to reject an ethics board’s recommended sanction for professional misconduct involving inappropriate remarks to a legal intern. Mark Bennett and his lawyers contend a “fully stayed” six-month suspension should be imposed, based on punishment in prior unrelated misconduct cases involving others. (Reuters)
- Morgan Lewis added a 10-lawyer Stroock team — including three partners — focused on consumer financial services litigation and regulatory matters. The partners joining the firm are Arjun Rao, Brian Frontino and Allen Denson. New York-founded Stroock earlier this year laid off a group of lawyers and business professionals, citing a slowdown in legal work as a reason for culling jobs. (Reuters)
- Orelia Eleta Merchant, a top lawyer in New York Attorney General Letitia James’ office, was confirmed to serve on the Eastern District of New York bench on a 51-48 vote. Sen. Lindsey Graham, the top Republican on the Senate Judiciary Committee, was the sole member of his party to vote for Merchant. (Reuters)
- The 3rd Circuit’s new rule mandating a 5 p.m. Eastern deadline for all filings takes effect on July 1 but includes a grace period until the end of 2023 for electronic filings submitted after the deadline. (Reuters)
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REUTERS/Amanda Andrade-Rhoades
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A onetime client of Proskauer Rose is suing the firm for an alleged cut-and-paste contract drafting mistake that, in his view, enabled his partner in a multibillion-dollar hedge fund to oust him without paying him a fair share. The former client’s lawyers at Susman Godfrey have obtained what they consider to be damning internal evidence from Proskauer lawyers. But Proskauer and its lawyers at Williams & Connolly are hoping to squelch the case on summary judgment, arguing that the real culprit is the hedge fund manager, not the law firm, and that Susman Godfrey should have sued him instead of Proskauer. Alison Frankel untangles this knotty, high-stakes dispute ahead of a May 9 summary judgment hearing in Massachusetts state court.
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“The Act does not give the secretary the power to make conduct that is ethical under existing federal and state law unethical simply by announcing it to be so.“
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—Amy Saharia of Williams & Connolly, counsel for online brokerage Robinhood, who told the Massachusetts Supreme Judicial Court that Massachusetts Secretary of State Bill Galvin overstepped existing laws when he imposed a standard requiring brokers to avoid or mitigate conflicts of interest when giving investment advice. In an enforcement action, Galvin alleged Robinhood used strategies that treated trading like a game to lure young, inexperienced customers, in violation of the regulation. Robinhood sued over the legality of the rule, and Suffolk County Superior Court Judge Michael Ricciuti in Boston found the rule improperly overrode Massachusetts state law governing stockbrokers’ duties and that Galvin went beyond his authority by adopting a regulation that conflicted with federal law. Ricciuti’s ruling knocked out a main part of the case against Robinhood, which is on hold pending the outcome of Galvin’s appeal.
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- Starbucks’ clash over its workforce heads to the 6th Circuit, where lawyers for the company will argue it does not have to reinstate workers who were fired amid a union campaign, Daniel Wiessner reports. The court hearing comes as the coffee chain battles scores of legal disputes and scrutiny from Congress over its labor practices. A three-judge panel in Cincinnati will hear arguments in Starbucks’ bid to toss out a judge’s ruling requiring that the seven workers at a Memphis, Tennessee, cafe get their jobs back pending the outcome of a related case before the NLRB. Littler Mendelson’s Arthur Carter, co-chair of the firm’s business restructuring practice, will argue for Starbucks.
- Lawyers for Donald Trump will appear in state court in Manhattan for a hearing over whether the former U.S. president should be restricted to using materials turned over to him by prosecutors solely for his defense. Trump has pleaded not guilty to 34 felony counts of falsifying business records in a prosecution accusing him of making payments to two women before the 2016 election to suppress publication of their sexual encounters with him. The Manhattan district attorney wants to bar Trump from disclosing material on news or social media platforms without court approval. Trump’s defense team noted that key witnesses, former Trump lawyer Michael Cohen and porn star Stormy Daniels, also have attacked Trump and “made a living” out of publicly discussing the case.
- The U.S. Senate Judiciary Committee is scheduled to meet to vote on judicial nominees and legislation, as Sen. Dianne Feinstein’s continued absence from D.C. prevents items from advancing to the full Senate without Republican support. 1st Circuit nominee Michael Delaney was listed on the agenda for today’s meeting. Some Democrats have raised concerns about Delaney over a legal brief he signed in defense of a since-repealed New Hampshire law that required parents be notified before their minor child obtains an abortion. Delaney has said he had “extremely limited involvement” in the case.
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- Former President Donald Trump denied raping writer E. Jean Carroll in recorded deposition testimony played for a Manhattan federal jury, calling the allegation “the most ridiculous, disgusting story.” Trump will not be testifying, and his legal team told U.S. District Judge Lewis Kaplan they will not be calling any witnesses. (Reuters)
- Google won a jury trial in a long-running patent lawsuit in Delaware federal court over features in its smartphones and apps. The jury found Luxembourg-based patent owner Arendi S.A.R.L.‘s patent was invalid and that Google did not infringe it. Arendi’s attorneys did not immediately respond to a request for comment. (Reuters)
- A Seattle federal judge invalidated a key authorization needed to open an Alaska salmon fishery during the summer and winter, after agreeing with environmental groups that the federal government’s plan to protect wild salmon from overfishing, and the endangered whales that rely on them for food, was too vague. U.S. District Judge Richard Jones vacated portions of a 2019 U.S. National Marine Fisheries Services permit that is needed before the state can authorize commercial fishing in the area. (Reuters)
- A former FBI agent has been arrested for his alleged role in the Jan. 6, 2021, attack on the U.S. Capitol. Jared Wise, who was with the FBI until 2017, was charged with four misdemeanor counts and was caught on body-worn camera footage from police officers urging fellow protesters fighting with police to “kill ‘em.” (Reuters)
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- Paul Hastings hired Palo Alto-based partner Rudy Kim from Morrison Foerster, where he was head of the firm’s litigation department. (Reuters)
- Mayer Brown hired partner Richard Nelson for its global energy practice from King & Spalding in London. (Reuters)
- K&L Gates added Jamie Jackson in the firm’s D.C. as a partner focused on public policy. Jackson was previously senior counsel to former House Majority Leader U.S. Rep. Steny Hoyer. (K&L Gates)
- Jones Day brought on Ted Powers as a corporate partner in New York. Powers was previously at Pillsbury Winthrop. (Jones Day)
- Milbank added capital markets and restructuring partner Lawrence Wee in the firm’s New York office from Paul Weiss. (Milbank)
- Blank Rome hired Eric Tower as corporate, securities and M&A partner in Chicago from Thompson Coburn. Tower focuses on healthcare corporate transactions. (Blank Rome)
- Littler brought on Laurent Badoux as a Phoenix-based employment partner. Badoux previously led Buchalter’s labor and employment group in Arizona. (Littler)
- Fox Rothschild brought on Beth Trahos as a real estate partner based in Raleigh. Trahos was previously at Nelson Mullins. (Fox Rothschild)
- Duane Morris added Sal Subasinghe as an Austin-based trial partner. Subasinghe was previously at Culhane Meadows Haughian & Walsh. (Duane Morris)
- Epstein Becker brought on Heath Edwards as a Nashville-based employment and labor litigator. Edwards was previously at FordHarrison. (Epstein Becker)
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The U.S. Supreme Court’s pending rulings on affirmative action in college admissions programs could have broad consequences on companies’ diversity, equity, and inclusion initiatives and commitments to environmental, social, and governance, write Sharon Perley Masling, Ami Wynne and Elizabeth Goldberg of Morgan Lewis. Activist groups could be emboldened by the high court’s decisions. Here are a few practical steps for employers.
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