U.S. Legal Updates: High-Stakes Cases Reshaping Policy, Tech, and Accountability
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Facebook Prevails: Supreme Court Dismisses Securities Fraud Lawsuit
The U.S. Supreme Court dismissed a securities fraud lawsuit and decided to avoid any intervention in the order against Meta, formerly Facebook, on Nov 22. The decision was made based on misusing user data and misleading investors. The court also dismissed a lower court appeal by Meta that once allowed a class action lawsuit led by Amalgamated Bank to proceed in 2018. This decision has left the lower court decision intact without resolving the legal issue.?
This case is one of two alleged securities fraud lawsuits in which companies were held accountable for private litigants' rights. The other is Nvidia, which is still awaiting a ruling after the arguments against Facebook. The plaintiffs in the latter case allege that Facebook has failed to disclose the 2015 data breach information related to Cambridge Analytica. They also accused them of misleading investors and violating the Securities Exchange Act, which impacted 30 million users. The Act mandates all publicly traded companies to disclose business risks.
What is the impact?
The stock of Facebook dropped after the media started reporting user data misuse. The issue escalated after it was revealed that Cambridge Analytica misused user data 2016 during Donald Trump’s presidential campaign. This led investors to file securities fraud lawsuits to recover losses from their Facebook stocks and seek unspecified damages. The question is diabolical whether they violated the law by not disclosing data breaches in their business-risk reports and mentioning them as hypothetical.?
Andy Stone, the spokesperson, further claimed that all the claims asserted by shareholders were unfounded and affirmed that the company should not be held accountable for disclosing risks that have already occurred. The company also rationalized this, stating that reasonable investors view risk disclosures as forward-looking. However, the data breach owing to Cambridge Analytica prompted the company to settle the case for $100 million and also separately pay a $5 million penalty to the U.S. Federal Trade Commission for the issue.
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Inching Toward Justice: Legal Fee Tracker Highlights 3M Earplug Settlement's Path to $540 Million
The 3M earplug case is one of the most significant mass tort litigation cases in the U.S. and is approaching its resolution. The plaintiffs are working to secure their legal fee from the $6 billion settlement, which would amount to about $540 million. This historic case will affect hundreds of U.S. service members and veterans who experienced permanent hearing damage from faulty earplugs. Aearo Technologies made these Combat Arms earplugs designed to protect military personnel from noise. The settlement is aimed at compensating both attorneys and victims by 2025 Spring.?
The situation aggravated with Aearo Technologies, the earplug manufacturer, filing bankruptcy in 2022 to claim $1 billion for liabilities and financial strain related to the case. The Aearo’s filing was dismissed by a bankruptcy judge, stating that their financial condition did not warrant bankruptcy. This further led the plaintiff’s attorneys to accuse Aearo of misusing the bankruptcy courts to escape their legal responsibility for their manufactured defective earplugs.?
What makes it unique?
The case is currently consolidated in Florida's federal court. It is one of the most significant personal injury settlement cases, and the parties involved received compensation for their consolidated efforts throughout the litigation process. The legal teams in the earplug litigation have spent more than 364,000 hours on this case and are entitled to benefit fees for their work in the mass tort. However, a federal appeals court has ruled that tracking billable hours using a software application is unpatentable. Realtime Tracker brought up this view in a LexisNexis case of patent infringement. M. Casey Rodgers, U.S. District Judge, has approved a 9% hold-back on class funds, facilitating attorneys' move forward in receiving their fees.?
A retired federal judge, David Herndon, has also emphasized the need for a thorough review to ensure equitable compensation for the legal teams, as thousands of claimants are involved in this complex case. Lawyers gathered evidence, prepared strategies, and did extensive legal research, depositions, negotiations, and outreach to affected veterans and service members. This cost holding is allocated to be compensated from the settlement funds for managing around 16 trials, where they won 10 trials, including the preparation and expert testimonies.?
A similar case was seen in San Francisco, where a federal court judge approved a $2 million attorney fee for negotiating a $8 million settlement. The settlement involved individuals affected by a data breach at Orrick, Herrington & Sutcliffe law firm. The incidence reflects that substantial compensation can be earned even in complex legal settlements. The plaintiffs also reflected on how this case was not a mere courtroom battle but also involved raising the voice of a larger mass.?
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U.S. Federal Trade Commission Launches Broad Antitrust Investigation into Microsoft
U.S. Federal Trade Commission (FTC) Global antitrust scrutiny of Microsoft (MSFT. O), inspecting its software licensing and cloud computing units. This investigation, which began under FTC Chair Lina Khan's leadership, marks a significant regulatory escalation as Khan is expected to leave in January. However, the investigation's direction could be more apparent following the election of U.S. President Donald Trump, who is expected to appoint a successor with more business-friendly policies.?
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At the heart of the FTC's inquiry are allegations that Microsoft is abusing its dominance in the markets for productivity software, like Office, to impose onerous licensing terms. These terms allegedly prevent customers from moving their data from Microsoft's Azure cloud into rival offerings. This topic is being challenged among competitors and industry members, with accusers stating that Microsoft is pursuing a lock-in effect via its cloud services. The FTC investigation also examines Microsoft's practices concerning cybersecurity and artificial intelligence (AI) products.?
The new focus suggests a wide-ranging examination of how Microsoft has acted in the market may be choking off competition in many technology sectors. Microsoft declined to comment on the ongoing investigation. Rivals, including Amazon and Google, have complained about Microsoft's cloud computing practices for years. Microsoft's licensing policies were alleged to "lock customers in" to Azure, in complaints submitted to the FTC last year. A group representing Amazon, Google, and other online companies, NetChoice, has been outspoken about these issues, noting the immense power that Microsoft's licensing choices have over the broader market.?
In a related development, in September, Google complained to the European Commission, alleging that Microsoft demanded a 400 percent premium to run Windows Server in rival cloud environments and that security updates were delayed on non-Microsoft setups. Such practices spurred regulatory scrutiny. According to Bloomberg, the FTC's request for many documents indicates that the agency is willing to monitor Microsoft closely.?
This is hardly the first time Microsoft has been in the regulatory crosshairs. The FTC and other antitrust regulators have investigated Microsoft's competition in AI, including its $650 million purchase of the AI start-up Inflection AI. Microsoft has been relatively insulated from the horde of antitrust actions against tech giants like Meta Platforms, Apple, and Amazon in the past. Alphabet's Google, for example, faces two high-profile lawsuits for anti-competitive practices in online search.
Microsoft's participation in the broader tech industry investigations was further highlighted when Satya Nadella, Microsoft's chief executive, recently testified at Google's trial that Google was using exclusive deals with publishers to maintain its dominance in A.I.-generated information. The Trump administration's approach to Big Tech regulation may determine the future of the FTC's inquiry into Microsoft. Trump's first term featured aggressive antitrust actions — suits against Google and Facebook — but the administration also took steps that benefited Microsoft, including a controversial $10 billion Pentagon cloud contract. This simultaneous dual approach means the fate of the current investigation is still up in the air.?
Finally, the FTC's investigation continues, capturing a pivotal moment for Microsoft and the tech industry. The probe reflects ongoing concerns about market power and competitive fairness and the shifting of the regulatory landscape under different political administrations. The next several months will be key to the trajectory and outcome of this high-stakes antitrust investigation.
Source Link: https://www.reuters.com/technology/microsoft-faces-wide-ranging-us-antitrust-probe-2024-11-27/
Federal Judge in Texas Rules Against Conservative Litigants in Key Cases
In a notable deviation from his usual rulings, U.S. District Judge Matthew Kacsmaryk, appointed by former President Donald Trump, delivered two significant victories to the Biden administration and Special Counsel Jack Smith this week. Judge Kacsmaryk, known for his conservative-leaning decisions, dismissed a lawsuit challenging energy-efficiency requirements and rejected an effort to block the potential destruction of records related to investigations into former President Trump.
On Tuesday, Judge Kacsmaryk dismissed a lawsuit from the Competitive Enterprise Institute (CEI), a conservative think tank, against the U.S. Department of Energy's (DOE) new energy-efficiency standards. These standards, adopted in February and April, set limits on water usage for household clothes washers and dishwashers. The CEI, representing two consumers, argued that these regulations were burdensome and unnecessary.
The basis of Kacsmaryk's dismissal was jurisdictional. He interpreted the Energy Policy and Conservation Act (EPCA) of 1975 to mean that such challenges must be brought before a federal appeals court, not a district court. Citing a precedent from the 2nd U.S. Circuit Court of Appeals in 2004, he stated, "'May' means 'must' in the context of EPCA jurisdictional grants," effectively directing the case to the 5th U.S. Circuit Court of Appeals.
Devin Watkins, a lawyer with the CEI, expressed their disappointment and indicated they were considering their next steps, which could include an appeal or a request for reconsideration.
This ruling came just a day after Kacsmaryk rejected a lawsuit by Texas Attorney General Ken Paxton. Paxton had sought to prevent the potential destruction of records related to Special Counsel Jack Smith's investigations into Trump. Paxton's lawsuit, filed on November 14, was based on a Freedom of Information Act (FOIA) request, claiming the need to preserve these documents.
However, Kacsmaryk found Paxton's allegations speculative and unsupported by evidence. He denied issuing a temporary restraining order, stating that there were no plausible claims that Smith had destroyed or intended to destroy any records pertinent to Paxton's FOIA request.
These rulings are particularly noteworthy given Kacsmaryk's reputation for siding with conservative litigants on issues such as LGBTQ rights, immigration, and gun control. His courtroom in Amarillo, Texas, has become a favored venue for conservative cases, a practice critics call "judge shopping." Last year, he gained national attention for suspending the approval of the abortion pill mifepristone, a decision later partially overturned by the U.S. Supreme Court.
The two cases—Word v. U.S. Department of Energy, No. 2:24-cv-00130, and State of Texas v. Garland, No. 2:24-cv-00240—underscore the complexities and strategic considerations in federal litigation. In the first case, the plaintiffs challenged federal regulations on environmental grounds, while in the second, a state official sought to intervene in federal criminal investigations.
The outcomes of these cases highlight the unpredictability of judicial decisions and the ongoing legal battles shaping U.S. policy. As the Biden administration navigates these challenges, the implications of Kacsmaryk's rulings will likely reverberate through future legal strategies and political discourse.
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