Risk Update

Finance and Pharma — Drug Company Calls Clerk-driven DQ Motion Misguided, Investment Bank Beats Conflicts Allegation, Lawyer Conflict Considered

Posted Dan Bressler

“Prosecutors Ask Judge to Question Charlie Javice Lawyer Over Alleged Conflict” —

  • “Federal prosecutors are asking a judge to investigate whether or not an attorney for Charlie Javice, the founder of the student loan fintech start-up Frank, may have a conflict of interest, given that he represented her in a prior investigation unrelated to her pending fraud case.”
  • “David Siegal of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo is not accused of wrongdoing, according to the U.S. Attorney’s Office for the Southern District of New York. But prosecutors do want the judge to bar Siegal from cross-examining witnesses or making arguments relating to matters in which he was personally involved.”
  • “The case is before U.S. District Court Judge Alvin Hellerstein of the Southern District of New York. Prosecutors claim Javice willfully misled JPMorganChase into acquiring her start-up for $175 million. She has pleaded not guilty.”
  • “Prior to starting Frank—a student financial aid start-up—Javice was employed by JPMorganChase, where multiple colleagues accused her of misconduct unrelated to her federal indictment. Javice was twice interviewed by investigators at Morgan, and Siegal represented her in connection with that investigation and questioning. The alleged misconduct included misuse of corporate credit cards for personal use,and use of personal emails and devices for business purposes.”
  • “While Siegal at that point turned over some of Javice’s texts to Morgan investigators, prosecutors say they now know her messages contained significantly more responsive communications—including about the alleged fraud on J.P. Morgan. Prosecutors say they intend to present some of those communications at trial and claim Javice caused Siegal to convey false information as part of his representation.”
  • “Though they do not seek to disqualify him, prosecutors ask Hellerstein to hold a Curcio hearing, to address any potential conflicts that may arise as a sworn or unsworn witness at trial. Meanwhile, Javice is seeking to sever her case from her co-defendant and former colleague Olivier Amar, claiming they have antagonistic defenses and that he will turn on her.”
  • “Prosecutors oppose the motion, saying the request identifies no prejudice and is unsupported to warrant such a request so soon before trial.”

“Drug Co. Wants To Keep Judge On Alopecia IP Case” —

  • “The developer behind an Eli Lilly & Co. alopecia drug has called allegations the company’s lawyers deliberately hired a New Jersey federal judge’s former law clerk both ‘low and baseless’ and a ‘transparent attempt to remove the judge who decided against it.'”
  • “In a response filed Tuesday, drug developer Incyte Corp. minimized the involvement of an unnamed Gibbons PC associate in a patent case Incyte has been litigating since last year against Mumbai, India-based generic Sun Pharmaceutical Industries. Incyte licenses its patents to Eli Lilly, which markets the alopecia drug Olumiant, and filed suit to stop the release of a competing alopecia drug from Sun, called Leqselvi. Lilly, however, is not involved in the case.”
  • “The case had been reassigned to New Jersey’s U.S. District Judge Julien Neals in August, and earlier this year, Sun filed a bid to disqualify him, claiming that Gibbons had hired one of the judge’s former law clerks who had been involved in the case while working for the judge. Since filing the suit last June, Incyte has been represented both by lawyers at Gibbons and Finnegan Henderson Farabow Garrett & Dunner LLP.”
  • “The clerk that Gibbons hired, according to the filings, had been working for Judge Neals when he was considering blocking Sun from launching its rival hair loss product until the end of Incyte’s patent case, something he decided to do last November. At a September preliminary injunction hearing, the ‘former clerk occupied a prominent position’ and was ‘sitting nearly parallel with’ the judge, Sun says.”
  • “Incyte presented a different view of the clerk’s involvement in the case before the clerk was hired by Gibbons. ‘The former law clerk merely attended, as an observer, a single status conference and technology tutorial, just days before he left his clerkship,’ counters Incyte.”
  • “‘After the case was reassigned to Judge Neals, the former law clerk — who was in the final month of his clerkship — did not assist Judge Neals with deciding the preliminary injunction motion and did not substantively work on the case,’ says the drug developer. The clerk’s only involvement in the patent case since working at Gibbons was assisting ‘one of his colleagues over the Thanksgiving holiday with preparing a joint motion to seal,’ which had been put in front of U.S. Magistrate Judge James Clark, not Judge Neals, notes Incyte. “
  • “The company sees the move from Sun as ‘a transparent attempt to remove the judge who decided against it’ in the injunction battle, per the response.”

“Goldman Sachs Secures Dismissal of Celebrity Manager’s Lawsuit Over Failed Deal” —

  • “Sullivan & Cromwell beat back a celebrity business manager’s claims that Goldman Sachs breached an alleged fiduciary duty by helping an affiliate lock down a $7 billion private equity sale, while advising the management firm on a proposed, rival transaction.”
  • “In dismissing the fraud case against Goldman Sachs, Justice Margaret Chan of the New York County Supreme Court said the KSFB Management LLC, whose principals have reportedly provided business management services for Beyoncé and Drake, hadn’t plausibly shown it was owed a fiduciary relationship by Goldman Sachs. KSFB was represented by Quinn Emanuel Urquhart & Sullivan.”
  • “The justice pointed to a Jan. 2023 letter through which KSFB engaged Goldman Sachs to pursue a joint sale with Focus Financial Partners LLC, which later abandoned the deal in favor of a multibillion-dollar acquisition. In the letter, KSFB agreed that ‘potential conflicts of interest’ may arise as Goldman was also advising Focus, and that the interests of KSFB and Focus ‘may not always be aligned,’ according to the decision.”
  • “‘These are not, as KSFB suggests, mere boilerplate disclaimers. To the contrary, construed in the entire Engagement Letter, these representations contemplated the exact conflict at the center of KSFB’s claims,’ Chan said on Thursday.”
  • “The justice added that, regardless of the letter, the breach of fiduciary duty claim was insufficiently pleaded. The breach claim relies on the ‘bald and unsupported assertion’ that Goldman Sachs was charged with seeking a deal in KSFB’s best interests, Chan said.”
  • “The lawsuit concerned two transactions that were pursued in 2022, an unrealized joint sale between KSFB and Focus of Focus subsidiary, NKSFB, and Focus’ later sale to Clayton Dubilier & Rice LLC. However, the relationship between KSFB and Focus dates back years, as KSFB provides management services to NKSFB, with KSFB claiming that its management has allowed NKSFB to flourish.”
  • “In a complaint filed against Goldman Sachs and Focus, KSFB claimed that Focus pushed a potential joint sale of NKSFB to prevent KSFB from abandoning NKSFB while Focus pursued a potential sale to Clayton Dubilier & Rice. As part of that joint sale, KSFB retained Goldman Sachs as an adviser, even though the bank was also advising Focus, and signed a three-way non-disclosure agreement, according to Chan’s decision.”
  • “But Chan dismissed the complaint wholesale, finding that KSFB much of the suit relied on an alleged fiduciary duty that the company failed to allege existed on Goldman Sachs’ or Focus’ part.”