Legal News

Midway Games in legal war over 'Mortal Kombat' franchise

A Hollywood production company has sued video-game publisher Midway Games, claiming it owns intellectual property rights in the lucrative "Mortal Kombat" franchise that Midway is trying to sell as part of its bankruptcy proceedings.

In a complaint filed Wednesday in Delaware bankruptcy court, Threshold Entertainment said the "Mortal Kombat" film and television properties it produced form the basis for the franchise's rich mythology, without which the game's characters would have remained flat video-game personas.

Santa Monica, Calif.-based Threshold also filed an objection to Midway's proposed auction of its assets.

Midway filed for Chapter 11 protection in February. Last month, the company said Warner Bros. Entertainment Inc. had submitted a $33 million bid for substantially all of its assets, including the "Mortal Kombat" franchise. Warner Bros. is a stalking-horse bidder, meaning it sets the floor for future bids in a court-supervised auction process.

In its court filings, Threshold said it has an exclusive license to produce works for film and television based on "Mortal Kombat." This license dates back to a 1993 agreement between Midway and Lawrence Kasanoff, the head of Threshold.

"The 'Mortal Kombat' franchise, as it stands today, is far more a creation of Threshold and Kasanoff than of Midway," said Threshold, which estimated that the franchise has grossed more than $4 billion to date.

Threshold said it wants the court to make sure Midway's asset sales will "not impair or interfere" with its "Mortal Kombat" intellectual property rights.

Threshold produced two full-length "Mortal Kombat" films that were released in 1995 and 1997.

The company also runs mortalkombat.com and has produced TV specials, soundtrack albums and a live stage show.

The bankruptcy judge in Delaware is scheduled to hold a hearing on Midway's proposed asset sale on July 1.

A Midway spokesman said the company does not comment on pending litigation.

Source

Medical Malpractice Survivors Decry Possible Stripping of Rights in President's Health Care Plan

Sixty-four survivors of medical malpractice from 21 states sent a letter to President Obama today expressing extreme concern that the rights of medical malpractice victims have become a "political bargaining chip" in the President's efforts to sell his health care plan, and that their rights may be stripped away as a result. Reports now indicate that the President supports measures that would drastically limit injured patients' rights to trial by jury by allowing biased medical societies or politicians to make liability decisions. The group of malpractice survivors has requested a meeting with President Obama to express dissatisfaction with the President's willingness to include far-reaching medical malpractice limits in his national health care proposal.

Full Story.

Supreme Court says act on age restriction for judges not fair

A divided Illinois Supreme Court sided Thursday with a Cook County judge who argued that state law shouldn’t prevent him from trying to keep his job after he turns 75.

Under the state’s Compulsory Retirement of Judges Act, a judge “is automatically retired at the expiration of the term in which the judge attains the age of 75.”

The Illinois Constitution permits the legislature to pass a law setting a mandatory retirement age for judges. But the Retirement of Judges Act runs afoul of the Constitution because it fails to treat all judges the same way, the Supreme Court said in a 4-2 decision. The seventh justice, Robert Thomas, didn’t participate in the ruling.

As written, the act creates an “irrational classification” that would block a 75-year-old judge from seeking retention while allowing a 76-year-old to run for a judicial seat if he or she isn’t already a judge, according to the majority opinion written by Justice Charles Freeman.
If lawmakers want to properly enact an age restriction on judges, they might have to do so through a constitutional amendment, Free-
man wrote.

The ruling came as welcome news to Judge William Maddux, who filed the lawsuit that eventually made its way to the Supreme Court.
“There’s something about my nature. I don’t like anybody else to tell me when I have to quit, particularly the legislature,” Maddux said Thursday.

Maddux, who turns 75 in January, is presiding judge of the law division of Cook County Circuit Court. His current judicial term expires in fall 2010.

In light of Thursday’s court decision, Maddux said he probably would seek retention next year.

A 1992 appellate court ruling — which the Supreme Court said Thursday was a mistake — would have allowed Maddux to run in a contested election for judge, though he couldn’t run for retention.

But Maddux said he had no interest in a contested race.

When judges stand for retention, they don’t run against any other candidates. Instead, voters are asked to decide “yes” or “no” on whether a particular judge should keep his or her job.

By running in a contested election, rather than for retention, Maddux likely would go up against other judicial hopefuls. He estimated that a campaign for a circuit court judgeship in Cook County would cost at least $200,000, in part because of the expense of TV advertising.

“Getting into a contested election is not a lot of fun,” he said. “Imagine, 75 years old and (I’d) have to go out there, kissing babies again.”

Maddux’s attorney, David Novoselsky, said the court’s decision represents “a victory for the electorate.”

“This really isn’t a victory for the judiciary,” he said. “This enhances the right of the public to vote for who they want.”

Attorney General Lisa Madigan’s office argued the other side of the case, asking the Supreme Court to uphold a lower court’s dismissal of the Maddux lawsuit.

“We respect the court’s decision,” Madigan spokeswoman Robyn Ziegler said Thursday.

Adriana Colindres can be reached at 782-6292.

Source

Riverstone Settles Pay-to-Play Charges with New York AG

New York Attorney General Andrew M. Cuomo today announced an agreement with private equity firm Riverstone Holdings LLC (“Riverstone”) to reform the public pension fund investment system and to resolve Riverstone’s role in Cuomo’s investigation of corruption involving the New York State Common Retirement Fund (“the CRF”). Under the terms of today’s agreement, Riverstone will adopt Cuomo’s Public Pension Fund Code of Conduct and pay $30 million in restitution to the CRF.

Attorney General Cuomo’s code of conduct bans investment firms from hiring, utilizing, or compensating placement agents, lobbyists, or other third-party intermediaries to communicate or interact with public pension funds to obtain investments. To avoid pay-to-play schemes, the Code prohibits investment firms (and their principals, agents, employees and family members) from doing business with a public pension fund for two years after the firm makes a campaign contribution to an elected or appointed official who can influence the fund's investment decisions. This provision would also bar all firms currently doing business with the pension fund from making such campaign contributions. Investment firms must also disclose any conflicts of interest to public pension fund officials or law enforcement authorities, to increase transparency and avoid abuse of the fund for personal gain.

Riverstone is the second company to sign on to Cuomo’s Code of Conduct and will pay $30 million in restitution to the CRF. This brings to $50 million the total amount collected by Attorney General Cuomo on the Carlyle/Riverstone investments. The Carlyle Group (“Carlyle”) signed onto the code last month and paid $20 million to the State of New York to resolve its role in the Attorney General’s ongoing investigation.

IRS Defends Tax Proposal for Employer-Issued Mobile Phones

The IRS defended its proposals to enforce a law that taxes personal use of employer-provided cellphones, saying the changes are aimed at helping businesses comply, not taxing individuals.

Dow Jones Newswires reported Thursday that an IRS proposal released this week could wind up taxing employees on 25% of the value of their work cellphone. The IRS notice was meant to make it easier to enforce a 1989 law that treats employer-provided cellphones as a taxable fringe benefit.

A senior IRS official Friday said the agency is more concerned about making sure employers deduct the correct amounts for cellphone equipment and services provided to employees, than it is about taxing those employees on benefits.

"The motivation for the notice is to clarify how employers can justify a deduction. It wasn't aimed at employees," the official told Dow Jones in a telephone interview.

The IRS notice dated June 8 discusses tax implications of employer-provided cellphones both for the employer and the employee.

Marianna Dyson, a lawyer at Miller and Chevalier who specializes in the taxation of employee benefits, said that as a practical matter, the IRS proposals would affect both the business and the employee.

For instance, if IRS implemented its proposal to limit business deductions to 75% of the value of the employer-provided cellphones, and deem the rest personal use, the remaining 25% would have to be counted in an employee's gross income.

That would trigger both income tax and payroll tax withholding requirements on the employee's wages.

"If they decide 25% is personal use, guess what? It is a wage, and you have to withhold on it," Ms. Dyson said. "For IRS to suggest this would have no impact on employees, is a little disingenuous."

Ms. Dyson also noted that the IRS Notice does not address how self-employed individuals should handle deducting cellphone expenses.

"Right now, self-employed people have to document every single business call. They are driving around with one hand on the wheel and one on the phone and one in the log book," said Ms. Dyson.

"This doesn't do anything for them," she noted.

The IRS official said the requirement that cellphones be treated as fringe benefits is outdated, and could place a burden on employers. The 1989 law provides that the value of cellphone services can be excluded from an employee's gross income, and can be a deductible expense to the employer, only if the employee keeps strict records showing that the phone was used for work only.

"At the time this was enacted, every single call cost $4 or $5. That is not the world we live in anymore," the official said. "We've been hearing from companies that [the requirement] is too burdensome. We needed to think about how we could make it less expensive," the official said.

Source

Citigroup launches public exchange offers

Citigroup Inc. on Wednesday launched a series of public exchange offers that will effectively give the government a 34 percent stake in the troubled bank.

Citigroup expects to convert into common stock a total of $58 billion of preferred stock and trust preferred securities, assuming full participation in the swaps.

Citigroup said in late February that it wanted to offer investors the option of exchanging preferred stock into common stock as a way to boost its capital reserves. As such, the government agreed to convert about $25 billion of its $45 billion preferred investment in the bank to common stock, which will give it a 34 percent stake in the New York bank.

The deal boosts Citi's common equity -- a benchmark the government is using to measure a bank's ability to absorb losses.

Citigroup has been one of the most troubled banks throughout the financial crisis. Investors have long criticized its board and management for allowing the bank to make big investments in the risky housing market -- actions that led to Citigroup reporting billions in losses.

New York Securities Lawyers Blog.

Source

GM hoping for speedy sale and exit from Chapter 11

General Motors hopes to follow the lead of fellow U.S. automaker Chrysler by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.

But Detroit-based General Motors Corp. is much larger and complex than its Auburn Hills, Mich.-based rival and isn't up against Chrysler LLC's tight June 15 deadline with Fiat.

Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges. But as with Chrysler, she notes that the Treasury Department made sure many of GM's moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.

"They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time," Lindstrom said.

GM nailed down deals with its union and a majority of its bondholders and arranged to sell off most of its Opel operations in Europe in order to appear in court Monday with a near-complete plan to quickly emerge with a chance to become profitable.

The government has said it expects GM to come out of bankruptcy protection within 60 to 90 days. By comparison, the judge overseeing Chrysler's case approved the sale of its assets to a group led by Italy's Fiat Group SpA in just over a month. Some industry observers think Chrysler could emerge as early as this week.

During Monday's hearing GM Attorney Harvey Miller stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2 billion in cash left.

"If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible," Miller said in his opening statement.

The automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake. The Canadian government would take 12.5 percent of the "New GM," with the United Auto Workers union getting 17.5 percent and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

Attorneys for GM stakeholders packed the stuffy courtroom well ahead of the automaker's first-day Chapter 11 hearing. U.S. Judge Robert Gerber moved swiftly through the agenda's more than 25 mostly procedural motions.

Gerber set GM's sale hearing for June 30, putting it on a path similar to that of Chrysler. Objections are due on June 19, with any competing bids required to be submitted by June 22.

Gerber also gave GM immediate access to $15 billion in government financing to get it through the next few weeks, and interim approval for use of a total $33.3 billion in financing, with final approval slated to be ruled on June 25. The funds are contingent on GM's sale being approved by July 10. Gerber also approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs.

The sheer size of GM makes it a more complicated case than Chrysler.

GM made twice as many vehicles as Chrysler's 1.5 million last year and employs 235,000 people compared with Chrysler's 54,000. GM also has plants and operations in many more countries, meaning it will likely have to strike separate deals to navigate the bankruptcy laws of those places.

The company is moving forward with just four core brands - Chevrolet, Cadillac, Buick and GMC. GM China Group President Kevin Wale said late Monday an announcement on the sale of the iconic Hummer brand is expected "imminently." Plans for Saturn are expected within weeks.

GM Chief Executive Fritz Henderson said GM has learned a few things by watching Chrysler's case.

"Certainly the court showed that it can address 363 (sale) transactions in an expeditious fashion," Henderson said at a press conference Monday. "Particularly in our case with what will be a very large 363 transaction."

GM's Monday filing for Chapter 11 bankruptcy protection is the largest ever for an industrial company. GM, which said it has $172.81 billion in debt and $82.29 billion in assets, had received about $20 billion in low-interest loans before entering bankruptcy protection.

Source

NC Legislature approves tax law change for Apple

The General Assembly on Monday approved changing the state's tax law with hopes it will result in Apple Inc. announcing a $1 billion investment within days.

The Senate voted 40-8 to go along with conditions including that the company invest in a rural area. The final round of debate lasted less than a minute.

Sen. Tom Apodaca, R-Henderson, urged rejection. He had previously lambasted business recruiters and lawmakers for focusing on high-profile, big companies and ignoring small businesses. Sen. David Hoyle, R-Gaston, said small companies near the site of a promised data center would benefit by providing services.

"There is a lot in this for small businesses," Hoyle said.

The legislation was sent to Gov. Beverly Perdue, who was expected to sign the bill into law quickly.

An Apple spokeswoman said the company had no comment.

The bill would give the qualifying company a break on state corporate income taxes. The tax break could be worth about $46 million in the next decade, assuming the lone, unnamed company projected to qualify reaches its $1 billion investment target within nine years of starting, according to a memo by legislative fiscal staffers.

The Associated Press reported last month that the unidentified company being targeted by the tax break is Apple, which is seeking a site for its East Coast data warehouse. These facilities, also called server farms, are huge, climate-controlled computer warehouses that can process vast flows of data needed as business functions and everyday life increasingly depend on Internet traffic.

Data centers are heavy users of power and water and are usually spread over large spaces. Google Inc. opened one last year near Lenoir in the western North Carolina foothills. In 2007, state and local governments offered Google an incentives package worth up to $260 million over 30 years, one of the largest in state history, to land the $600 million data complex.

Court orders Dish to pay $103 million to TiVo

A federal court has awarded TiVo $103 million plus interest in its long-running patent dispute with EchoStar Communications and ordered EchoStar to disable infringing features found on its subscribers' digital video recorders.

U.S. District Judge David Folsom on Tuesday also found EchoStar, which is now part of Dish Network, in contempt of court for violating a permanent injunction by reprogramming millions of DVRs with a new "workaround."

"The harm caused to TiVo by EchoStar's contempt is substantial," Folsom wrote. "EchoStar has gained millions of customers since this court's injunction was issued, customers that are now potentially unreachable by TiVo."

Englewood, Colo.-based Dish, which has roughly 13.6 million subscribers, said in a statement it would appeal the contempt ruling and file a motion to stay an order that requires it to disable the disputed DVR features within 30 days.

"Our engineers spent close to a year designing around TiVo's patent and removed the very features that TiVo said infringed at trial," the company said. "Existing Dish Network customers with DVRs are not immediately impacted by these recent developments."

The Alviso, Calif.-based maker of set-top boxes applauded the decision.

"We are extremely gratified by the court's well reasoned and thorough decision, in which it rejected EchoStar's attempted workaround claim regarding the TiVo patent, found EchoStar to be in contempt of court, and ordered the permanent injunction fully enforced," TiVo said in a statement. "EchoStar may attempt to further delay this case but we are very pleased the court has made it clear that there are major ramifications for continued infringement."

Source

New Drink Tax Widely Opposed

A push for new taxes on soda, beer and wine to help pay for Americans’ health care is stirring up more than just the beverage industry.

Advertisers, corn refiners — even addiction treatment centers — have mobilized their lobbyists, reflecting how a tax increase for a handful of popular products can reverberate broadly across Washington’s interest groups.

The Senate Finance Committee is considering raising taxes on alcohol and imposing a new levy on soda and other naturally sweetened drinks to help pay for overhauling health care. The committee calls them “lifestyle tax proposals,” saying the levies would slow sales of unhealthy products that contribute to rising medical costs.

Soft drink and alcohol lobbyists have snapped into action, though so far their campaigns have been quiet compared to the blaring, multimillion-dollar battles that typify major showdowns.

Their low-key approach is due partly to committee leaders’ warnings to refrain from public attacks or be accused of sabotaging health care overhaul. They’ve also held back because they have faced only modest lobbying from tax proponents, and because they think the proposal may prove so unpopular that it ultimately won’t threaten their businesses.

“They don’t want to call attention to a quietly smoldering fire,” said Rogan Kersh, an associate dean at the Wagner School of Public Service at New York University.

Besides alcohol, drinks with sugar, high fructose corn syrup and similar sweeteners would be targeted, though diet drinks with artificial sweeteners would not. Other industries also are on alert, worried that the idea of “lifestyle taxes” could spread to other products deemed unhealthy.

“Are they going to hit couch manufacturers? School districts that have canceled physical education?” joked Neil Trautwein, health care lobbyist for the National Retail Federation, which opposes the plan and whose members include fast-food restaurants.