Michael Douglas Owes Him $1M, Pal Says
Areas of Focus | 2008/04/29 15:57
Actor-producer Howard Zuker says Michael Douglas forced him out of the company the two men co-founded, American Entertainment Holding Co., owing him a promised $1 million bonus. Zuker appeared under the name Zach Norman in "Romancing the Stone," "Night Moves," "Hard Times," and other movies.

In his Superior Court lawsuit, Zuker says Douglas has been AEHC's main financial backer since it began. Zuker says he and Douglas became friends in 1976, after meeting at the Cannes Film Festival. He claims that in 1998, he suggested that Douglas and he buy the American Play Company, which held rights to what the complaint calls "a massive library of thousands of owned or managed intellectual property rights."

He claims Douglas eventually agreed to finance Zuker's purchase of APC. But AEHC had trouble getting off the ground, Zuker says. Despite multiple funding injections from Douglas, AEHC was never able to raise enough money to meet its operating budget.

Zuker blames this on Douglas' repeated vetoes of potential investors, and on investment banker Christopher Baker, who invested $2.5 million in AEHC, but allegedly blocked further investments for nearly two years by failing to complete a Private Placement Memorandum to define the terms for potential investors.

Eventually, Zuker claims, Baker drafted a memorandum that "relegated AEHC from the centerpiece of the deal to a bit player."

Baker also is a defendant in this case.

Zuker says the new deal called for AEHC to give up its rights to the film library. The memorandum cut out AEHC financially and replaced it with Granite-Glass, Douglas's and Baker's joint company, as manager of the company's "Film Fund." It allegedly earmarked $7 million in profits for Douglas's and his wife, Catherine Zeta-Jones's, production companies.

The new plan was "directly contrary to the parties' prior understanding and conversations, and a blatant attempt to co-opt AEHC's valuable business opportunity," according to the complaint.


Booksellers Challenge Oregon Censorship Law
Areas of Focus | 2008/04/28 15:57
An Oregon law that prohibits distribution of sexually explicit material to minors interferes with the right to provide materials protected by the First Amendment, Powell's Books, other booksellers and Planned Parenthood claim in Federal Court.

Oregon Statute 167.051 to 167.057, signed into law in July 2007, is "unconstitutionally vague because it fails to provide fair notice as to what constitutes a criminal offense," the complaint states.

The law does not require intent to harm. It makes it a crime to provide sexually explicit material to a child "if the person intentionally furnishes a child, or intentionally permits a child to view, sexually explicit material and the person knows that the material is sexually explicit."

Planned Parenthood claims the law will impair it ability to provide sexual education.

The ACLU and Powell's Books, the country's largest independent book store, are among the plaintiffs in the lawsuit.

Stoel Rives and the New York firm Sonnenschein Nath & Rosenthal represent the plaintiffs.


Anatomy of a Deal Gone South
Areas of Focus | 2008/04/25 16:04

When Peter Ehrenberg testified in a Georgetown, Del., courtroom in December, it marked a first in the Lowenstein Sandler M&A partner's 34-year career. Never before had he taken the witness stand to defend one of his contracts. Then again, nothing like what happened between his client, Cerberus Capital Management, and United Rentals Inc. had ever befallen one of his deals.

The trouble started Nov. 14, when Cerberus announced that it was backing out of a $4 billion agreement to buy United Rentals. That a private equity buyout collapsed was hardly unique -- the latter half of 2007 was the worst of times for the credit markets, and by extension, for dozens of deals signed earlier in the year. Suddenly, lenders had no way to off-load the huge loans they had agreed to issue to finance multibillion-dollar private equity deals. With the banks looking for any possible way out of their debt commitments, deals seemed to blow up every week. United Rentals was just the latest casualty. But this is where the similarity to most other failed deals ends.

The deal lawyers worked nights and weekends to get a contract signed while the banks were still amenable to financing the highly leveraged buyout. They were successful: On July 22, both sides agreed that Cerberus would pay $34.50 a share for the rental company. But in drafting the language, the lawyers had left vague a key provision that specified what United Rentals could do if Cerberus backed out of the deal. United Rentals claimed that a clause in the contract gave it the right of specific performance -- the ability to force Cerberus to close the deal, provided the financing was still there. Cerberus claimed that its only obligation was to pay a $100 million breakup fee. Five days after Cerberus bowed out of the deal, United Rentals filed suit in the Delaware Court of Chancery, seeking to force Cerberus back to the altar for a shotgun wedding. After reviewing the contract, Chancellor William Chandler III concluded that the wording in the clauses was ambiguous enough to warrant a trial.

As the deal lawyer who drafted the contract for Cerberus, Ehrenberg was in the unenviable position of having to defend decisions he'd made under pressure months earlier. At trial, he and other Lowenstein lawyers testified that they repeatedly made clear to United Rentals lawyer Eric Swedenburg, then a senior associate at Simpson Thacher & Bartlett, that specific performance wasn't acceptable and that Swedenburg had said he understood. But Ehrenberg's testimony didn't explain his rationale for why he hadn't simply crossed out the clause that was causing all the trouble. Instead, Ehrenberg had nullified the clause -- or so he thought -- by adding a sentence at the end that made it "subject to" another clause, the $100 million breakup fee clause. "I'm not aware of any mistakes in drafting," he testified. But he did concede that it might have been simpler to delete the offending section. (Ehrenberg declined to comment for this story.)

At the time the deal was drafted, in July, the breakup fee remedy was common; the specific performance remedy was not. Swedenburg also declined to comment for this story but a lawyer familiar with the case says that Swedenburg understood Cerberus' position on the contract yet also realized that, as written, the contract left some wiggle room. "Lawyers live with ambiguity if they think it advantages them," this lawyer says. It wasn't Swedenburg's job to tell Ehrenberg that there was a bigger hole in the contract than he may have realized.

Kevin Rinker, a Debevoise & Plimpton partner who practices in the area of private equity and who presented a case study of the deal to his fellow partners, agrees with this analysis. From the testimony, he says, it appears Ehrenberg won a point during the negotiations but then failed to clearly articulate it in the contract. Kenneth Adams, a former Jones Day and Winston & Strawn lawyer who now advises law firms on contract matters, goes a step further. "It was a major failure of drafting," he says. "What happens if and when someone walks is a do-not-pass-go issue."

Lawyers familiar with the deal say they believe the United Rentals case offers a glimpse into a little-noticed but common practice: Deal lawyers often agree to contracts with ambiguous language for the sake of compromise. Whether this is what happened here, or whether Ehrenberg simply made a mistake, is unknown, but the lesson is clear. "Not­withstanding the pressures of the deal, you really have to think hard about every provision," Rinker says.

United Rentals was founded in 1997 by Bradley Jacobs, who had made his fortune consolidating waste removal companies. His goal was to do the same for the scattered, mostly family-owned heavy equipment rental industry. A year into its existence, United Rentals had acquired 38 rental companies accounting for 109 stores in 20 states. By 2007, the company, based in Greenwich, Conn., had 700 locations and had grown into the largest equipment rental company in the world, with annual revenues of more than $3.5 billion.



Film Editor Says He Was Cheated
Areas of Focus | 2008/04/24 16:14
Damien Leveck, a film editor, claims Paulist Productions and Forgiveness LLC defrauded him of wages and wrongfully fired him while he worked on a film called "Forgiveness."

In his Superior Court claim, Leveck says he worked as a creative adviser for Apple until he "was courted by Frank Desiderio of Paulist and Forgiveness to be an in-house editor for film projects."

He claims Desiderio offered him $60 an hour, but the paychecks were hinky from day one - first, without deductions and without overtime; then his pay rate was cut to $50 an hour - then to $30 an hour. Then, he says, the defendants denied him two months wages completely, "claiming Plaintiff was working on a pro-bono basis."

Leveck claims Desiderio told him the pay cuts were necessary because Desiderio had lost $2 million on a previous film, called "The Jesus Experience."
Leveck claims that while all this was happening, he was working 12 to 20 hours a day on the film, "Forgiveness."

During this time, Leveck says, Desiderio was soliciting members of his church to invest in the film project on which Leveck was being cheated.

"Mr. Desiderio was selling stock in the film at a minimum investment of $30,000," the complaint states. "Mr. Desiderio was fraudulently inducing members of the church to invest in the project by claiming that the church would benefit from the donations. Mr. Desiderio received investments from the parishioners ranging from $30,000 to $60,000. Mr. Desiderio made it clear that Father Liam Kidney was in no way to know about the investments."

Represented by Todd Harrison, Leveck demands punitive damages for wrongful termination, fraud, conversion, breach of contract, interference, and Labor Code violations.


Police Maliciously Set Him Up, Doctor Says
Areas of Focus | 2008/04/23 15:54
The Melbourne Police Department trained people to pose as patients seeking medical treatment for nonexistent illnesses, provided them with false medical records, trained them to give false medical histories, then sent them to walk-in clinics and arrested a doctor on false felony charges of distributing controlled substances, Dr. Nima Heshmati claims in Federal Court.

Heshmati claims the bogus operation caused him to be thrown into jail and his medical license to be suspended.

He claims the defendants knowingly provided false testimony about their office visits. "Each and every prescription issued by Dr. Heshmati was medically necessary and followed the medical standards for the prescribing of these controlled substances," the complaint states.
Heshmati demands punitive damages for conspiracy, false imprisonment, and civil rights violations. He also sues several Melbourne police officers as individuals, and the Florida Department of Health and other state agencies.


Supreme Court To Hear Uranium Trade Case
Areas of Focus | 2008/04/22 16:07
The U.S. Supreme Court agreed to consider whether uranium enriched in France and imported to the United States for use in nuclear power plants is subject to U.S. trade laws.

Eurodif SA, a French uranium-enrichment company, and U.S. utility companies argued that the imported uranium constitutes a "service" - and not a "good" subject to punitive tariffs - because the utilities provide the raw uranium and simply pay Eurodif to enrich it.

Concluding that uranium enrichment is a "manufacturing process" and not a service, the Commerce Department in 2002 imposed a 20 percent antidumping duty on Eurodif imports.

The Federal Circuit overturned that ruling in March 2005, a decision the high court agreed to review. The case could make it more difficult for U.S. companies to obtain protective tariffs on cheaper imports.


Convicted terror plotter sent to ’Supermax’
Legal Topics | 2008/04/21 15:54

Convicted terrorism plotter Jose Padilla will serve his term at a Colorado federal prison known as “Supermax” for its strict, isolated conditions and roster of infamous inmates, prison officials said Friday.

Padilla, 37, was sent from a Miami prison to the high-security facility in Florence, Colo., on Thursday, said Bureau of Prisons spokeswoman Felicia Pounce. Padilla was sentenced in January to about 17 years, but counting time already served and good behavior deductions his projected release date is Feb. 9, 2021 — or about 13 years.

At Florence, Padilla joins such well-known inmates as “Unabomber” Theodore Kaczynski, Sept. 11 attacks plotter Zacarias Moussaoui and Eric Rudolph, convicted of the 1996 Olympics bombing. Other neighbors among the 485 inmates are attempted shoe-bomber Richard Reid, FBI turncoat Robert Hanssen and Oklahoma City bombing conspirator Terry Nichols.

Padilla attorney Michael Caruso said in an e-mail Friday that Supermax is “a living hell” where inmates spend most days in 7-foot-by-12-foot cells and have little contact with the outside world. Caruso noted that others convicted of supporting terrorism, such as the “Lackawanna Six” group in upstate New York, were not sent to the nation’s toughest prison.

Caruso called the decision “yet another example of Jose being treated differently and in a more punitive fashion than others who have been accused of similar crimes. I genuinely fear that Jose’s mental health will erode to an even greater degree.”

Padilla and two co-defendants were convicted in August of three terrorism-related charges after a three-month trial in Miami federal court. The other two men, 45-year-old Adham Amin Hassoun and Kifah Wael Jayyousi, 46, remained in custody Friday at Miami’s downtown detention center.

The three were part of a support cell that sent money, recruits and supplies to Islamic extremist groups around the world, prosecutors said at trial. They had faced possible life sentences, but each was given lesser terms by U.S. District Judge Marcia Cooke.

All three are appealing their convictions and sentences, and federal prosecutors are also appealing the sentences as too lenient.

Padilla was arrested in May 2002 at Chicago’s O’Hare International Airport on suspicion of plotting with al-Qaida to detonate a radioactive “dirty bomb” in the U.S., although those allegations were not made at his trial. Testimony showed that Hassoun recruited Padilla at a Florida mosque to attend an al-Qaida terrorist training camp in Afghanistan.

Padilla, a U.S. citizen, was held in military custody for 3 1/2 years and was the subject of numerous legal challenges to his continued detention. He also claimed he was mistreated and tortured at a Navy brig, but Bush administration officials denied that.



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