Henning on Cuban and the SEC

From The Wall Street Journal Law Blog (one of my favorite reads, by the way) comes this: a guest post by Peter Henning, a law professor from Wayne State University, discussing the battle between Dallas Mavericks' owner Mark Cuban and the SEC. Henning makes some great points about the ability of a billionaire to fight off questionable SEC charges -- where a defendent with less $$ might have a hard time. But he also makes some great points about the impact of an SEC investigation on reputation, and why Cuban doesn't really seem to care about either reputation or potential remedies:

Defendants in civil fraud actions often have to worry about the reputational effect of the case, and potential remedies that could be imposed. An individual may be barred from the securities industry or prohibited from serving as an officer or director of a public company if there is a violation. That happened to Martha Stewart when she settled the insider trading case the SEC filed against her. Thus, many SEC cases settle, always without an admission or denial of liability, to mitigate the potential harm from an adverse judgment.

Cuban seems to be in a different position in this regard. He already has a reputation as a bit of a rabble-rouser – just ask NBA Commissioner David Stern – so a decision finding him liable for securities fraud would not be all that harmful. He is not an officer or director of a public company, so the SEC isn’t even seeking a bar from service in those positions if it wins. While the amount involved in the case, about $750,000, is pocket change to Cuban, the incentive to settle the case to avoid harmful publicity and future career damage doesn’t seem to be much of an issue.

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Odd as it may sound, Cuban might be able to portray himself as the victim here of a government vendetta. He has a knack for generating good publicity in a bad situation, such as his stint working in a Dairy Queen after assailing the head of the NBA referees in 2002 as someone he wouldn’t hire to manage one of its restaurants. That comment cost him a $500,000 fine from the NBA, which isn’t much less than what the SEC is seeking as disgorgement in the insider trading case. I can’t wait to see how Cuban presents himself this time.

The full post is here.

I agree, by the way, with everything Henning writes, and he appears to have a good grasp on the interplay between legal and reputation matters. Perhaps I'll ask him to guest-post here some day...

In the meantime, it's worth considering whether more defendants should adopt the Cuban playbook when facing government investigation.

"Libel Tourism" and the First Amendment

Ever wonder about the flood of libel cases in the U.K.? You can thank the Internet. We now have the concept of "libel tourism" -- where, for example, a Saudi businessperson might sue me in London for this blog post (authored in New York), simply because my writing was disseminated, via the Internet, worldwide.

But why sue in London, especially since the chances of ever collecting on a judgment there are close to zero? Because it's easier to win a libel claim in the British courts -- and the reputation-enhancing impact of a victory over a defamer is sometimes worth more to the litigant than the damages themselves.

Here's an interesting article from today's New York Times that highlights the phenomenon. A key paragraph:

British courts have always been friendlier to libel claimants than their American counterparts. Until recently that did not matter much to American authors or publishers. But now the Internet makes anything published in the United States almost immediately available in Britain, too.

As the article details, there is a push to bring U.K. media law more in line with the U.S., but I wouldn't expect major changes anytime soon. Besides strictly legal justifications, the reasons to preserve the status quo range from the practical (some parties like having such a ready venue to clear their name in public) to the economic (it is likely a boon to the U.K. legal economy, similar to the way patent cases have benefited certain local economies in the U.S. -- see a 2006 New York Times article on the phenomenon, here). Thus, it may also be the case that other countries put pressure on the United States to bring its own First Amendment in line with international norms (for a discussion of just how free the U.S. is compared to other jurisdictions, see Adam Liptak's excellent 2008 New York Times article, here).

So how can journalists, editors and bloggers navigate a worldwide web of media laws in a environment where you can be sued in any jurisdiction anywhere in the world? One good resource is Charles Glasser's International Libel and Privacy Handbook, 2d Edition, published earlier this year by Bloomberg Press (order a copy, here; for a 2007 article Charles and I co-authored on the topic for The National Law Journal, click here).

Say what you will about the excesses of our First Amendment, but there's little doubt it offers protections in the United States that simply do not exist in other legal systems. I'd submit that such protections may come under attack in years to come, but it is vitally important that we not allow a gradual chipping away at the freedom of speech that is at the core of the American concept of civil liberty.

Udpated: Syracuse Speech

A video of the speech discussed below is now available here, for your viewing pleasure.

Original post follows.

JFH
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Syracuse Speech

On April 6, I spoke at Syracuse University College of Law, as part of their "Law, Politics and the Media Lecture Series," which is jointly sponsored by the law school and the Newhouse School of Communications. I was quite pleased to present "on a field that exists somewhere between the practice of law and traditional public relations: Litigation Communications..."

For the full text of my remarks, visit the PRCG website.

Here's a snappy little excerpt:

I’ll give you just one example, and this comes courtesy of a friend of mine who is a top lawyer and has been involved in many high-profile cases. He put it like this:

If your teenage daughter comes home one night, late, on a school night, and you ask “Where have you been?” and she says “No comment”… well, you're going to make some assumptions about what's going on.

And if she walks in and says: “Well, let me get back to you. What's your deadline?” you’re going to form a different set of assumptions.

But if her response is: “Look, I made a mistake, I'm sorry. I think I know how to prevent it from happening again.” Those two sentences are going to change the whole tenor of the conflict.

It sounds simple, and it is. But doing it well in the course of a billion-dollar lawsuit – well that’s where the art and science of litigation communications comes in. It’s like Willie Mays playing the outfield: a lot of hard work goes into making it look so easy.