Daily Dicta: Skadden Scores for Chapstick; a $290M Securities Settlement; Spotify on the Hot Spot

It’s January and ridiculously cold almost everywhere. That makes this prime Chapstick season.

But the lip balm, which is made by Pfizer Inc., is under fire for deceptive labeling and marketing.Represented by Skadden, Arps, Slate, Meagher & Flom, Pfizer in 2016 was hit with a putative class action in Manhattan federal court for claiming Chapstick Total Hydration is “100% NATURAL” and “Clinically Proven” to provide “healthier,” “more youthful looking lips.”The plaintiffs say the product contains synthetic and “unnatural” ingredients and has not been subject to any “scientifically valid clinical testing” verifying the advertised effects on users’ lips. (How do you clinically test for “more youthful looking lips” anyway?)But U.S. Magistrate Judge Barbara Moses just gave Pfizer a break, recommending that the court toss the negligent misrepresentation and unjust enrichment claims with prejudice; and to dismiss without prejudice the breach of express warranty claims as well as all remaining claims, to the extent they’re based on non-label advertising.The case is one in a series challenging the parameters of the term “natural.” The U.S. Food and Drug Administrationasked for public comments on the question in 2015, and may issue guidance … soon. (Or not. No one knows really knows.)U.S. District Judge Laura Taylor Swain denied Pfizer’s earlier bid to stay the case under the doctrine of primary jurisdiction, because the FDA guidance, if/when it arrives, is expected to apply to food, not cosmetics. Now, Moses has recommended narrowing the scope of the case. “It is not even clear from their pleading whether [plaintiffs] ‘viewed’ the non-label advertising before or after they made their purchases, much less which allegedly false claims or representations they saw, read, or heard through those channels,” she wrote.Moreover, “plaintiffs are silent as to when they purchased the Chapstick products. They are equally silent as to when they discovered or should have discovered the alleged breach of warranty.’”The plaintiffs are represented by Shepherd, Finkelman, Miller & Shah; Pomerantz; Eggnatz, Lopatin & Pascucci; and Richman Law Group. The Skadden team includes partners John Beisner and Jessica Miller and counsel Nina Rose and Thomas Fox.

A $290M Payout for a Case With ‘Absolutely No Merit’

Allergan Inc. investors stand to recover $290 million after Kessler Topaz Meltzer & Check and Bernstein Litowitz Berger & Grossman wrangled a settlement from Bill Ackman’s Pershing Square Capital Management and Valeant Pharmaceuticals International for an alleged insider trading scheme. With a Feb. 26 trial date looming, Ackman and Pershing—represented by Kirkland & Ellis and Kramer Levin Naftalis & Frankel—and Valeant—represented by Sullivan & Cromwell and Hueston Hennigan—agreed on Dec. 29 to settle the three-year-old suit, despite claiming it had “absolutely no merit.” The case stems from an alleged insider trading scheme. Shareholders of Botox-maker Allergan said Valeant and Ackman in 2014 “struck a simple but unlawful bargain,” according to the complaint filed in U.S. District Court for the Central District of California. Valeant planned a hostile takeover of Allergan. In exchange for insider information about the plan, Ackman allegedly “agreed to secretly acquire nearly 10 percent of Allergan’s stock and commit those shares to support Valeant’s bid.” When Valeant disclosed its takeover bid in April 2014, Allergan stock skyrocketed. In the end, Valeant didn’t even acquire Allergan—it was outbid by Actavis—but Pershing walked away with $2.2 billion in profits. The class action is based on what plaintiffs call the “obvious unfairness of Pershing’s massive profit while so many less privileged Allergan investors sold their shares to Pershing without knowing Valeant’s plans.” In mid-December, U.S. District Judge David Carter issued a tentative summary judgment ruling that tilted in the plaintiffs’ favor. The settlement calls for Pershing Square to pay $193.75 million, with Valeant paying $96.25 million. “This settlement not only forces Valeant and Pershing to pay back hundreds of millions of dollars, it strikes a blow for the little guy who often believes, with good reason, that the stock market is rigged by more sophisticated players,” said Kessler Topaz partner Lee Rudy.

Spotify on the Spot for Copyright Infringement

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Tom Petty and the Heartbreakers headline the sold out BottleRock day 2 in Napa, California in 2017[/caption] Music streaming service Spotify has been hit with a massive copyright infringement suit by a music publisher that claims its songwriter clients including Tom Petty, Neil Young and Stevie Nicks are being cheated out of their rightful royalties. First reported by The Hollywood Reporter, the suit filed in U.S. District Court for the Central District of California by Donahue Fitzgerald on behalf of Wixen Music Publishing Inc., seeks at least $1.6 billion in damages—$150,000 per song, times 10,784 songs—plus injunctive relief. The suit suggests more than 20 percent of songs on Spotify lack proper copyright licenses.“While Spotify has become a multibillion dollar company, songwriters and their publishers, such as Wixen, have not been able to fairly and rightfully share in Spotify’s success, as Spotify has in many cases used their music without a license and without compensation,” wrote Donahue Fitzgerald’s Daniel J. Schacht, best known for his role in successfully challengingWarner Music Group’s copyright on “Happy Birthday to You.” The case settled in 2016 for $14 million and the song entered the public domain.According to the complaint, Spotify cut deals with the major record labels to secure the rights to sound recordings. But Wixen says Spotify “failed to properly obtain the equivalent rights for the compositions.”It’s not a new allegation. Spotify settled a suit by the National Music Publishers Association in 2016 for $25 million in unpaid royalties plus a $5 million penalty.A pair of consolidated class actions, initiated by David Lowery of Cracker and Camper van Beethoven and singer-songwriter Melissa Ferrick, are poised to settle for $43 million, pending approval by U.S. District Judge Alison Nathan in the Southern District of New York.Wixen wants its artists out of that settlement, which it calls “grossly insufficient”—but Spotify lawyers including Andrew Pincus of Mayer Brown aren’t making it easy.“The right to choose whether to participate in a class settlement by either remaining in the settlement class or opting out is an individual right of each class member,” Pincus wrote in November. “[N]either Wixen Music nor its attorneys have provided any evidence that they were in fact authorized to file the Requests for Exclusion on behalf of class members.”Following a fairness hearing in December, Nathan found that it was “ambiguous” whether Wixen had the authority to opt out on behalf of its clients. She has called for additional briefing on extending the opt-out period for Wixen artists.

Lateral Watch

Lauren Wachtler joins New York-based Phillips Nizer as co-head of the 62-lawyer firm’s litigation department. She was previously a partner at Mitchell Silberberg & Knupp. The daughter of Sol Wachtler, who was chief judge of the New York Court of Appeals from 1985 to 1992, she has tried more than 50 cases to verdict, representing clients in industries including fashion, retailing, design, manufacturing and construction. Robins Kaplan nabbed David Graff, a rainmaker who was co-chair of Anderson Kill’s corporate litigation and commercial litigation practice. He’s expected to take three associates with him to Robins Kaplan’s New York office. My colleague Christine Simmons at The New York Law Journal reports that Graff’s clients have included Peter Deutsch, CEO of Deutsch Family Wine & Spirits; Dov Charney, former CEO of American Apparel; and Europac Energy investments funds. Read the full story here.

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