Facebook's IPO: Lawsuits, Billions Lost, and Wall Street Wins

There is something attractive about a criminal trial. Most of our beloved shows involve violent crimes and the aftermath of police and prosecutors trying to seek justice. Maybe too many. I lost count with how many CSI shows there are.

We are enamored with the whole process and the high stakes involved. A person's liberty is at stake versus the justice rightfully needed for the victim's family. It is fundamental to our core that we see to it that criminals are punished and that's why it catches our attention.

For me though, a botched initial public offering of a tech company and the legal aftermaths captures my interest. I'm just fascinated with the idea that an attorney can wave around a disclosure form and some documentary evidence representing the current trading price of a Facebook share and win an argument. And there are many people who are trying to do just that.

In May, the news coverage was heavy on the genius of Mark Zuckerburg and the meteoric rise of the social networking site. Look in the Wall Street Journal today and there are articles about dozens of lawsuits pending against Facebook and the underwriter, Morgan Stanley.The bases for their claims is  that the required disclosures given to investors prior to the public offering were insufficient and the analysts failed to provide realistic revenue projections.

The plaintiffs, investors who lost a substantial sum of money from the IPO, argue that there should have been more information given as to  Facebook's problems with advertisement, revenue, and trend that users are accessing Facebook with their mobile devices.

In other words, the investors feel duped into buying a stock that was overvalued. It sounds ridiculous, right? They should have been more careful. Haven't they heard of "buyer beware?"

Wall Street is never simple and that has been proven with the third largest IPO in our history. There seems to be a lot of news coming forward that despite investors losing money and Facebook losing respect in the mind of investors, Wall Street ended up with more money than usual. That shouldn't sound ridiculous, they always win.

The banks used an underwriting provision called a stabilization clause, or a Greenshoe option, to minimize their risk. It paid off. While Zuckerburg lost billions, Morgan Stanley was handing out the pool of about $100 million.

Not only did banks profit from their underwriting services, they profited from taking short positions on the Facebook stock. Traders at Goldman Sachs and JP Morgan took positions that the shares would decline in value. These complicated and controversial trades almost always benefit the banks despite the damage done to the issuing company.

When its all said and done, we have laws in place which enable investment banks to engage in this business. We can put some blame on Facebook for overvaluing itself or the underwriters for failing to disclose all material information. At this point, it may not matter. The average investor lost money, Facebook lost money, and the banks made money. Like I said, it is totally legal but its like they are getting away with a crime. The banks are the ones robbing the investors.

It may be best to just watch CSI. In those shows, there is always justice at the end.

Mayweather Knocked Out in Court!

Floyd Mayweather Jr. is one of the most successful boxers of all time. He has a perfect record of 43-0. No losses, and all wins. It's too bad for him that it does not carry over into the court. He's losing all those fights.

A couple of days ago, Mayweather was forced to pay his nemesis, Manny Pacquiao, over $113,000 in legal fees and costs. Pacquiao's attorneys made the legal jab when Mayweather failed to show up to his own deposition. The court stated that it was "obviously intentional," and ordered monetary sanctions.

This case is not for a battery or an upper punch. Pacquiao sued Mayweather in federal court for defamation when Mayweather made a statement that claimed Pacquiao used performance enhancing substances. Instead of retaliating with his fists, Pacquiao retained an attorney. I would have liked to see the fight on pay-per-view.

A defamation case gives justice to those who believe that their reputation has been tarnished due to a false statement. Pacquiao has every legal right to pursue this remedy, but it seems unnecessary. Mayweather seems to be losing the fight for the public's respect. It could be because of his domestic abuse conviction or the controversial win against Victor Ortiz. But, its probably a combination of the two.

Mayweather is also losing any fans he may have had in the legal field. He is blatantly disrespecting the judiciary. The deposition of a party is a necessary part of the discovery process. It allows all of the necessary evidence to come before the court. It is within the court's power to sanction those individuals that refuse to participate and rightly so.

I do not think it will have any effect on Mayweather's finances. He makes millions for each fight he takes part in, before it is even decided who wins. One contract showed that a Mayweather-Pacquiao fight would have netted over $50 million for both. A $113,000 sanction is like chump change to the champ.

Ultimately, this dispute between the two must be decided in the boxing fans eyes highest court  - the boxing ring. We will have to wait and see whether Mayweather wins this legal fight first. It's not looking good, his 0-2 record in court  proves the law has been the Kryptonite to this undefeated boxing champ.

Vote (with an ID) or Die!

From 1776 until now, we have had men and women die for our freedom. In risking and sacrificing their lives , our citizens in uniform believed that it secured the rights of all people. Including those people without photo identification.

Unfortunately, the right to vote has been turned into a polarized issue. Just like with any issue our elected officials can argue about, it has become a party line vote. I would not be surprised if Republicans and Democrats took party positions on whether Coca-Cola or Pepsi was more American.

It did not have to be this way. Right after the Tea Party birth in 2010, newly Republican-controlled legislatures started passing voter ID laws with the hopes of preventing fraud. There was only one problem with their goals. There was no fraud occurring.

Before Pennsylvania's highest court heard arguments on the validity of the law, both parties stipulated that, "[the state] will not offer any evidence in this action that in-person voter fraud has in fact occurred in Pennsylvania and elsewhere,” nor will it "offer argument or evidence that in-person voter fraud is likely to occur in November 2012 in the absence of the Photo ID law."

With no evidence of past fraud or evidence that fraud will likely occur in the future, the Pennsylvania Republican Legislature has passed laws that could prevent thousands from voting. And there just so happens to be evidence of the law's negative effect on the poor, minority, and elderly. Even Jim Cramer, the host of Mad Money, has said it has caused a burden to his father.

Pennsylvania's counsel should have at least mentioned that there have been 13 credible cases in the past 10 years throughout the whole country. I mean its less than the amount of UFO sightings reported, but it is still a number. 

If this law is not about preventing fraud, then what is it really about? Could it be about politics? Sadly, there's recorded evidence to support that.

Mike Turzai, the Pennsylvania House Majority Leader, said so clearly while he was being recorded. In puffing his chest in a speech regarding the Pennsylvania House's accomplishments he stated, "voter ID, which is going to allow Mitt Romney to win the state of Pennsylvania, done!"

That takes some brass. The main legislator responsible for passing the voter ID law in Pennsylvania said that it will allow Mitt Romney to win, not that it will prevent in-person voter fraud.

I know that some Republicans will shrug their shoulders and dismiss it immediately. I know that for other moderate and reasonable minded Republicans it will cause a moment for concern. Winning a presidential election is not as important as the fundamental right to vote.

Many years ago, this country came to the conclusion that it is better that everyone get's an opportunity to vote. Not just a few. We decided that everyone should have a say in what direction America should take.

When the lower court in Pennsylvania relied on precedent to rule in favor of the voter ID law, it cited a 1869 case in which the court upheld a tough and similar law. That historic case said that if the law were not passed, the vote “would be to place the vicious vagrant, the wandering Arabs, the Tartar hordes of our large cities, on a level with the virtuous and good man.”

I do not think the Republicans have a monopoly on virtuous and good men. Nor do I think the Pennsylvania legislature should be the judge on what is virtuous. That should be left to Someone else. And when I head into the ballot box on November 6, I hope that I do not have to bring my birth certificate, social security card, and driver's license. As far as I'm concerned, all I need is my belief that we can move forward.








 

Innocent Until Strong Armed into Court?

The dust has settled and the cycles are long gone but there still remains a fog over the polarizing figure, Lance Armstrong.

It has been almost a week since Armstrong has decided to drop his fight against the United Stated Anti-Doping Agency ("USADA") and there has already been screams of constitutional violations and injustice. One yahoo contributor called Armstrong the modern day "Robin Hood," and called the whole situation a "travesty of justice."

I think she's completely right. This reminds me of when the Sheriff of Nottingham stripped Robin Hood of his archery trophies because of his alleged doping. There was absolutely no proof that the witch concocted the testosterone steroid and supplied it to Robin of Loxley. And the testimony of Little John against Robin Hood was completely motivated by his desire to smear Robin's name. Obviously I jest. Robin Hood fought the allegations till the end and ultimately proved his innocence.

Lance Armstrong is undeniably an inspiring figure. He was diagnosed with testicular cancer as a young man and beat it. His charity does great work and helps individuals live a more healthy lifestyle. But, this does not change the fact that there is overwhelming evidence that he cheated. Armstrong's courage and success against a horrible disease does not mean a successful argument can be made that he has been denied his due process rights.

USADA, in accordance with authority given to it through various treaties ratified by the United States Congress, moved to sanction Armstrong when a number of people came forward willingly to testify against him. The list of adverse testimony was credible and long. The list's length may have rivaled the Tour de France route.

Instead of vindicating his claims of innocence with an adversarial proceeding that would have given him the opportunity to cross-examine his teammates, present exculpatory evidence, and present his own witnesses, Armstrong elected to drop the fight. He issued a statement later in the week that said we should not cry for him. Don't worry, I won't.

The AAA-CAS, the alternative dispute resolution organization, that would have been the impartial determiner of Armstrong's guilt is not a perfect judicial proceeding. But that does not mean it is insufficient, obsolete, or unfair. One could make the argument that it is on par with most judicial courts in the United States.

A case in arbitration still has an equitable process. It is not a sham proceeding. Thousands of people use arbitration every year and receive an award or a favorable result. Furthermore, Armstrong would have been able to appeal in the event that he was found guilty of doping.

It is unfortunate to see people vilify USADA when it was simply doing what it was formed to do - keeping international sports free from doping. Of course, there may be some ways to improve the independence of the proceedings for the athletes accused of doping. Armstrong's case could have moved that conversation forward.

Armstrong made the decision to forego the arbitration yet still claim his innocence and victories. He does this despite the federal court's dismissal of his suit against USADA and determination that the AAA-CAS is a capable fact finder. It makes one wonder whether he has simply ran out of steam. Or maybe the performance enhancing drugs have no effect on his ability to present a case. I'll have to ask Robin Hood.

Legimate Rape: Something "Akin" to Rape?

I have friends that fall on every notch of the political scale. They range from tea party conservatives to occupy progressives.  With that in mind and as a preface, I want to discuss a heated political issue that should be non-partisan. I am afraid, however, that like with every public matter - it will turn into a dividing issue among friends and colleagues.

The 2012 election cycle is one of the most important in our lifetimes. There is a lot at stake in regards to what values and economic reforms we ultimately embrace. We have two distinct presidential candidates with clear differences in opinion about the economy. It will be a stark choice. However, many people are unaware that there are other important issues at stake.

Recently, a candidate for the senate in Missouri, Todd Akin, started a firestorm of controversy when he took up the issue of abortion. He was answering a question on why he vehemently opposes a rape exception to the anti-abortion law when he made the following statement:

"'From what I understand from doctors, that’s really rare,' 'If it’s a legitimate rape, the female body has ways to try to shut that whole thing down. But let’s assume that maybe that didn’t work or something, I think there should be some punishment, but the punishment ought to be of the rapist, and not attacking the child."

His statement is scientifically unsound. A woman's body cannot shut down ovulation of an egg merely because it was the product of rape. There is no legitimate rape. There is just rape.

I do not think this should be a dividing issue.

The comment, however, does put into perspective a Republican party position, which will cause debate. The Republican party wants to add a human life amendment which would ban abortion in all instances, even rape. The RNC will vote to add this position to its platform before the convention in Florida.

Furthermore, state legislatures, throughout the year, have attempted to pass "personhood" bills, which would legally make a fertilized egg a "person." The law's effect would make an abortion illegal in all circumstances.

It is not news that conservatives and Republicans are pro-life. It is newsworthy that elected officials are taking drastic measures to overturn forty years of precedent. Some of the candidates, like Akin, are explaining their position, albeit poorly.

Roe v. Wade, a 1973 decision, established abortion as a 14th Amendment liberty right. In Pennsylvania v. Casey, the court upheld that restrictions on previable abortions are unconstitutional when they cause an undue hardship to the woman. This has been the law for decades. The court in Casey even acknowledged that precedent should be followed to avoid further political polarization.

A pro-life individual has a right to oppose abortion. I understand the moral, ethical, and legal arguments against abortion. I emphasize with them. Everyone should do what they can  to help prevent abortions through education and counseling. Those tools needs to be utilized. That's where I draw the line.

Like my conservative friends, I think the government should stay out of our personal lives. Elected officials should not impose their religious beliefs via a constitutional amendment. Women should be able to make their own decisions.

No matter what I think, this election will have consequences. Even on non-economic issues, like abortion.

Ultimately, we can spend a lot of time trying to overturn a law or we can take steps to decrease the need for abortions. We can educate individuals about sex and its consequences. We should implement values in our schools that can help prevent unwanted pregnancies and strengthen the family.

I guess pushing for a radical change in the law regarding a woman's right to choose is also an option. That is why we have elections.

Don't "Like" this!

I write this blog for a number of reasons. One reason is that I want to give readers insight into important law cases that are being covered by the media. Second, I like to practice my writing skills. But probably the most important reason is that I want to get as many facebook "likes" as possible to boost my ego. As if my ego needed it.

But in all seriousness, as Facebook evolves and becomes more involved in our everyday lives, so does the law developing around social networking. It has been at the center of conversation about privacy rights. And just recently, it has been a topic of interest among 1st Amendment enthusiasts.

Bobby Bland and other sheriff deputies probably did not expect that a simple "like" could jeopardize their careers. They surely did not anticipate that they would be arguing in front of the federal circuit court of appeals about Facebook. No matter what the expectations were, the following decision could potentially affect how government employees socialize online.

The deputies of Hampton, Virgina are arguing that a simple online click is protected free speech. The Sheriff who fired them, allegedly because the deputies liked a competitors Facebook page during a local election, is arguing that it is not. They fought the law in the district court, and the law won.

The district court judge held that a Facebook "like" is insufficient speech to warrant protection. It saved the judge some time because he did not have to analyze the three-prong test to determine whether the state's conduct was retaliation to their "speech." If their conduct did not amount to speech, then obviously it could not  be speech regarding the public concern, which state employees may  constitutionally engage in.

The district court judge cited cases argued by the deputies in which the court did hold that Facebook activity is protected. He distinguished these cases, however, by stating that they differ markedly in one crucial way: both cases involved actual speech. They had commented on a post.  Maybe the judge is not a Facebook user because most people know that a "like" could have the same effect as a comment or even more. I mean everyone knows that if a woman "likes" a man's status update, it's because she has a crush on him.

After the case, there was a firestorm of commentary from different individuals, associations, and professionals. The ACLU, Facebook, prominent lawyers, and users each gave their two cents. Everyone came up with their own unique analogy for a Facebook "like" to actual speech. Facebook Inc. analogized a "like" to a campaign sign in the yard. An attorney analogized it to wearing a campaign button on a shirt. The ACLU analogized it to an "I like Ike" pin. How original. Although if I had to pick a winner - it would be the ACLU.

The United States Court of Appeals for the Fourth Circuit will have the opportunity to reverse the District Court. If it decides to uphold the decision, government employees will definitely have be more careful on Facebook. Like that's a bad thing. But, I do predict that it will be reversed because the courts are more likely to classify  this type of activity as protected speech. However, if it is "speech," it does not necessarily mean that the appellants would win. The three-prong test would still need to be employed.

Part of me actually wants the decision to be upheld. Maybe then, people will start to think about the consequences of their social networking activities, thinking before posting. But, let's be honest. I will probably see a "bong hit" on my news feed before the day is over.

iRipped: Battle of the Smartphone Giants

Chances are that the phone in your pocket is either a Samsung device or the coveted iPhone. Together the tech titans sell over 41% of all the smartphones in the market. And, I just found out via my news app that both companies are 100% committed to winning the high stakes legal battle they are embroiled in.

In 2007, Steve Jobs introduced the original iPhone. He was right; it was revolutionary. But, the important question now, five years later, is whether its been ripped off by a big competitor.

The Constitution mandates that the Executive Branch "promote the progress of science...by securing for limited times to inventors the exclusive right to their respective discoveries." This mandate allows inventors to bring lawsuits into federal court to protect their products. Or, like in this case, protect the future success of its brand.

It looks like Apple may have a few ambitious attorneys because it is not timid when it comes to enforcing it's patents. On June 30, 2011 Apple filed its amended complaint against Samsung stating that, "instead of pursuing independent product development, Samsung has chosen to slavishly copy Apple's innovative technology..." Ouch.

This case is not only about patent infringement. Apple's complaint also contained claims of Lanham violations. For Apple to win on these additional claims, it will need to show that Samsung intentionally made its products to confuse consumers. And no, not confusion regarding price differences.

Winning a Lanham Claim

Apple is arguably the best technology company. It offers sleek products that talk to you. Siri has been known to carry on conversations better than most patrons at a local bar. The ironic thing about the lawsuit is that Apple will have to argue and successfully prove that consumers believe Samsung devices are the same as iPhones. To win versus Samsung, Apple will argue that its devices are just as revolutionary.

A New York case sums up actual confusion. "[Consumers are confused when there is a] likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question." In other words, when you go to best buy - you are not be able to tell the difference between a Samsung and Apple product. Consumer sophistication is one of the factors for the court to consider when determining a finding of confusion.

This legal standard will make it difficult for Apple to win on these trade dress claims in my opinion. The ordinary smartphone user is financially wealthy and sophisticated. I know its shocking but young college-educated individuals are likely to be a consumer of these devices. These facts bolster Samsung's arguments that most consumers are sophisticated enough to not be confused. Although, I do know some college graduates that are dumb as bricks. I'll refer Apple to them.

Apple v. Samsung is a big case. The outcome will have serious consequences in the mobile phone market. I am sure the other big players will be watching closely. As for me, I already set notifications to alert me of any new developments. It was not too difficult, my Samsung Galaxy S III is just like an iPhone.