By Steven Brill
THE NFL'S LOOMING COURT TESTS
As the 2013 National Football League season begins, it's time for an update on the liability suits the league is facing from what the website Deadspin reported last April were "more than 4,000 former players" who claim to have suffered on-the-job brain damage. The same Deadspin report noted that helmet-maker Riddell is also a defendant in the suits and that in April a Colorado high school student won a $3.1 million judgment against Ridell after he was brain damaged and partially paralyzed following a concussion suffered in a 2008 practice drill.
In June of 2012, Forbes ran a story headlined, "NFL Faces Tobacco-Like Damages Reaching Billions Of Dollars In Concussion Litigation," and in December, the New York Times reported another wrinkle — that the NFL and its teams are fighting in court with 32 different insurance companies over whether their policies cover the league's and the teams' liability and legal costs.
"The N.F.L., which generates about $9 billion a year, may be equipped to handle these legal challenges," the Times wrote. "But colleges, high schools and club teams may be forced to consider severe measures in the face of liability issues, like raising fees to offset higher premiums; capping potential damages; and requiring players to sign away their right to sue coaches and schools. Some schools and leagues may even shut down teams because the expense and legal risk are too high."
Although that all seems pretty ominous, I haven't seen much lately about all of this legal warfare except for a story last month in USA Today with this intriguing headline about how the threat has spread to the nation's colleges and universities: "Does NCAA face more concussion liability than NFL?"
Are juggernauts like the NFL and the National Collegiate Athletic Association, not to mention the helmet-maker and the nation's high schools, really facing tobacco or asbestos-sized liability doomsdays? And what are they doing about it?
A BLUNDER BY COHEN'S LEGAL TEAM OR A BREACH BY THE SEC?
On Friday, July 22, the Securities and Exchange Commission filed a massive "failure to supervise" civil action against Steven Cohen that could put him and his giant hedge fund out of business for allegedly allowing insider trading. The following Monday, the Times' Andrew Ross Sorkin wrote a smart article questioning why Cohen and his firm would have settled insider trading cases against the SEC for $616 million just four months before without getting an assurance that this SEC deal would put the charges to rest rather than be a prelude, $616 million later, for the charges to be repackaged in another form (failure to supervise) against Cohen personally.
I assumed the morning I read Sorkin's piece that he or another reporter would soon provide an answer — a tick-tock kind of story about how Cohen's five-star legal team was snookered by the SEC negotiators. I haven't seen that story yet, and I bet it would be a good one.
Sorkin quoted one securities lawyer not involved in the case offering this explanation: "You have to believe whatever ambiguities existed were intentional on the S.E.C.'s part. It calls into question whether the agency negotiated in good faith."
Is that what happened? Does someone like Cohen really hire lawyers who depend on their adversary's good faith? Or don't his blue chip legal squadrons (at New York's Paul, Weiss, Rifkind, Wharton & Garrison and also Willkie Farr & Gallagher) charge what they charge because they're experts at spotting and tying down such ambiguities?
Sorkin implied an alternative explanation — that in filing the second case the SEC, taken over by a new, hard-charging leader, breached the collaborative spirit that has long characterized the way it deals with settling lawyers. Thus, Cohen's lawyers understandably relied on that spirit instead of fighting over every possible ambiguity. In fact, the way Sorkin hints at this scenario makes it seem it might have been spoon fed to him by an embarrassed Cohen legal team: "When Mr. Cohen made his original settlement agreement," Sorkin wrote, "the S.E.C.'s leadership was in transition, a clear red flag from a tactical perspective. With the addition of [newly appointed SEC chairwoman] Mary Jo White a month after the deal was reached, she pressed to continue the inquiry, and ultimately, the new action."
Whether the plotline involves White shaking up the SEC, Cohen's lawyers screwing up or, as I suspect, both, this is a story that Sorkin or some other reporter should hunt down. Whoever nails it should get a bonus if he or she can give us lots of quotes, with nothing bleeped, from the conversation in which the lawyers tell the irascible Cohen that he's just been sued again for what they just had him pay $616 million to put behind him.
THE 'WHALE' STAYS FREE
Speaking of lawyers and plea deals, Cohen might want to think about retaining whoever is defending Bruno Iksil, the JPMorgan Chase & Co. trader dubbed the "London Whale."
According to the New York Times, although Iksil is the man most identified with the trades that ended up losing JP Morgan $6.2 billion last year, his lawyer has managed to negotiate a non-prosecution agreement with prosecutors in New York, who brought charges last week alleging that the loses from Iksil's trades were initially deliberately understated.
In return, Iksil has reportedly promised to cooperate with the feds by providing information that implicates his supervisor at the bank, Javier Martin-Artajo, as well as a fellow trader named Julien Grout in the false reporting.
According to the Times, "the authorities suspect that Mr. Martin-Artajo instructed lower-level traders, including Mr. Grout and Mr. Iksil, to mask the size of the mounting losses last year."
Getting off by ratting out a higher-up is not unusual. Though in this case, Iksil's high profile and the relative anonymity of his supervisor — Martin-Artajo, whose name has not surfaced until now — might have made that trade a bit more difficult for the prosecutors to swallow. But it also seems that Iksil turned on his colleague, Grout, before Grout could turn on him.
In other words, the whale and his lawyers were entwined with Grout in the classic prisoner's dilemma. If neither man confessed, they both might have gone free because the feds would lack evidence; but whoever confessed first would definitely go free in exchange for nailing the other.
It would be fun to read a story about how the whale, his lawyers and the prosecutors played the game.
(Steven Brill is a Reuters columnist. The opinions are his own)