Speaking about the lawsuits, IRS Commissioner Mark Everson stated that:

I am deeply disturbed by the allegation that a major franchisee of the nation's second-largest tax preparation firm is intentionally preparing improper tax returns with inflated refunds. I'm particularly concerned that many taxpayers of modest means could actually end up owing the government thousands of dollars if they claimed an improper refund.

The five corporations named as defendants are Chicago Suit: Smart Tax, Inc. of Chicago; Ask Tax, Inc.; Atlanta Suit: Smart Tax of Georgia, Inc.; Detroit Suit: So Far, Inc.; and Raleigh Suit: Smart Tax of North Carolina, Inc.; all Jackson Hewitt Tax Service franchises. The suits also name Farrukh Sohail, who wholly or partially owns each of the five corporations, as co-defendant.

Personal Injury Class Actions

Many seek to try personal-injury cases as a class action. There is very little chance a nationwide personal-injury class will be certified in any jurisdiction. Pharmaceutical products liability litigation requires the substantive law of fifty different states, and product liability law (as well as the learned intermediary defense) has substantial differences from state to state, making a class impossible. "No class action is proper unless all litigants are governed by the same legal rules."This is because variations in state law may swamp any common issues and defeat predominance."Thus, In re Vioxx Products Liability Litigation held that a nationwide personal-injury class was inappropriate in the Vioxx litigation.

Moreover, as Judge Fallon noted, the individualized issues are complex:

The plaintiffs' allegations that Merck failed to warn doctors adequately regarding the alleged health risks of Vioxx--whether they sound in strict liability or negligence--necessarily turn on numerous individualized issues such as: the alleged injury; what Merck knew about the risks of the alleged injury when the patient was prescribed Vioxx; what Merck told physicians and consumers about those risks in the Vioxx label and other media, what the plaintiffs' physicians knew about these risks from other sources, and whether the plaintiffs' physicians would still have prescribed Vioxx had stronger warnings been given.

Constitutional due process demands Merck have the opportunity to defend against each case individually: "one set of operative facts would not establish liability and the end result would be a series of individual mini-trials which the predominance requirement is intended to prevent." Similarly, the fact that plaintiffs have individualized damages claims, including claims for non-economic damages, prevents compliance with the predominance requirements. (In the now-infamous Dukes v. Wal-Mart case, in order to shoehorn the case into certification, the Ninth Circuit permitted the class plaintiffs to waive what would be billions of dollars of non-economic damages if the complaint's allegations were true, a mechanism that seemed designed to benefit the trial lawyers ahead of any class member that had actually suffered injury.) One would not expect Judge Fallon to certify even the individual state personal-injury class actions.

An interesting question is whether Judge Fallon will be willing to hold that his federal decision would bind pending state-court class action certification decisions, or whether plaintiffs will have the opportunity to shop for a better ruling. Judge Easterbrook in In re Bridgestone/Firestone, Inc. held that a federal ruling that a class certification was inappropriate precluded state courts from certifying a class action on the same facts, and that the Anti-Injunction Act did not prohibit a federal court from enjoining such proceedings.

Given the unlikelihood of a personal-injury class action certification, why would the plaintiffs' bar devote any resources? The answer can perhaps be found in the Supreme Court's decision in American Pipe & Construction Co. v. Utah which held that the statute of limitations for individual class members' causes of action were tolled while a class action certification was pending. As Jim Beck and Mark Herrmann point out on their Drug and Device Law blog, this decision creates an incentive to file putative class actions that are not necessarily strong on the merits. Ironically, as the two note, the American Pipe Court justified its holding on the grounds that, without a tolling rule, courts would be deluged with duplicative filings. But American Pipe has had no administrative advantage in practice.

Medical Monitoring Class Actions

Merck faces a variety of class actions seeking medical monitoring relief. Medical monitoring was originally devised as a remedy in the unique case of an airline accident. The case involved depressurization and hypoxia where there was no question that the plaintiff children, refugees from Vietnam, faced irreparable harm without an immediate comprehensive medical exam. Plaintiffs took that precedent and ran with it, seeking to extend it to situations where relief was not so clear-cut.

Courts have differed on the appropriateness of expansion of this new cause of action to cases where plaintiffs have suffered no physical injury. The Supreme Court, for one, rejected medical monitoring as a remedy under the Federal Employers' Liability Act in Metro-North Commuter Railroad v. Buckley, noting the dangers of creating a new cause of action that might create unlimited liability, the difficulties of having a court administer a complicated medical plan, and the individualized nature of plaintiffs' medical conditions. Indeed, a wide-open medical-monitoring cause of action would expose nearly every manufacturer in America to liability, given the possibility of arguing that any given substance from automobile pollution to over-the-counter medicine to saturated fats could bring rise to the need for medical monitoring. Meritorious and meritless claims would be difficult to distinguish, and the confusion would almost certainly encourage fraud. The West Virginia Supreme Court, at the other end of the spectrum, created a medical monitoring cause of action in Bower v. Westinghouse Electric and North American Philips Corporation. A very small risk of injury was sufficient to create a cause of action, and there was no requirement that the medical monitoring be effective, or even that there be oversight by the court to ensure that lump sum payments were used for the sought-after remedy.

The Vioxx medical monitoring class action that is furthest along arises in Judge Higbee's courtroom in Atlantic City, Sinclair v. Merck. The New Jersey Supreme Court had already endorsed a broad medical monitoring remedy in Ayers v. Township of Jackson, which permitted a lump-sum payment in an environmental tort case involving drinking water. Even so, with the exception of environmental torts, New Jersey had only permitted medical monitoring where there was physical injury. Moreover, the New Jersey products liability law required an injury before bringing suit. Thus, Judge Higbee dismissed Sinclair as outside of New Jersey medical monitoring law: a product-liability suit could not claim risk of injury to support a medical monitoring remedy. The New Jersey Court of Appeals reversed on grounds that the dismissal was premature. Still, even if Sinclair returns to the trial court, there remains no evidence that Vioxx has a long-term effect once it has been metabolized from the system, and thus no scientific evidence supporting a medical monitoring remedy.

"Consumer Fraud" Class Actions

The greatest danger to Merck shareholders comes from the dozens of "consumer fraud" class actions seeking recovery under various broad state consumer fraud laws. These lawsuits seek recovery, claiming not that Vioxx caused them personal injury, nor that Vioxx did not effectively alleviate pain, but that, because Merck allegedly failed to disclose information to the public, it received a higher price than it would have otherwise. Plaintiffs argue that the broadest of these consumer fraud laws do not require any showing of reliance, or a showing that the consumers for whom recovery is sought were affirmatively misled. In one such case, International Union of Operating Engineers Local 68 Welfare Fund v. Merck, Judge Higbee held that New Jersey's consumer fraud laws applied to all of Merck's United States sales and certified a nationwide class of third-party insurers; an intermediate court affirmed that class certification, which is now pending before the New Jersey Supreme Court, which will hear argument shortly.

This class action certification did not take into account basic choice-of-law principles by applying New Jersey law to transactions in all fifty states, regardless of the location of the doctor who prescribed the drug, the patient who took the drug, or the third-party payor. The court's rationale asks, in effect, "What state wouldn't want stricter consumer-fraud liability?" But defendants maintain that it is reasonable to assume that several states are concerned about the disincentives created by overdeterrence when consumer liability attaches without injury at the same time liability attaches with injury.

Second, the court undid the statute's requirement that consumer fraud must be shown to cause an individual's injury by rewriting the requirement to fit the class action, and holding that it was sufficient to allege "pervasive" defendant misconduct. But class actions are procedural devices, and cannot change the underlying substantive law or the rights of a defendant to present every available defense (a right reaffirmed by the Supreme Court in Philip Morris v. Williams). Third, it remains unclear how "ascertainable loss" is going to be calculated on a class-wide basis. Every third-party payer has its own individualized means of determining which prescription drugs will be covered by its formulary. Should the Local 68 suit proceed, plaintiffs will seek treble damages disgorging billions of dollars paid to Merck for Vioxx, plus attorneys' fees.

Shareholder Class Actions

Merck stock dropped dramatically when it announced the withdrawal of Vioxx from the market. And where there is a large drop in stock price, a shareholder class action usually follows, demanding that present shareholders compensate previous shareholders' losses (with a substantial commission for the trial lawyers who make the arrangement). Investors who are diversified shareholders are hurt by such lawsuits in the aggregate: the lawsuits merely transfer wealth from their left-hand pocket to their right-hand pocket, because ex ante, one is just as likely to be a seller of an artificially inflated share of stock as a buyer, and shareholder lawsuits do nothing to disgorge wealth from the innocent sellers. (Inside trades are, of course, another matter.) But attorneys' fees are calculated on the aggregate, and, of course, shareholders also pay for the defense of such claims.

A major event in any shareholder class actions comes when the court chooses the lead plaintiff. The internecine battle is especially noteworthy in this instance, because one of the lead firms appointed, Milberg Weiss, is under the shadow of an indictment after two of its regular lead plaintiffs pled guilty to taking kickbacks from the firm. Its lead client fired the firm, but Milberg Weiss did not inform the court, resulting in months of further litigation that was resolved when Milberg Weiss agreed to cut in another firm, Bernstein Litowitz, in the lead-counsel pay-offs. Merck's motion to dismiss the entire case is pending.

On Aug. 8, 2006, Forbes, along with nine other co-defendants, was charged in a 64-count superseding indictment related to the operation of a trafficking ring in Connecticut. Forbes was also charged, along with and two of his co-defendants, with sex trafficking minors and sex trafficking by force, fraud and coercion. Today, Forbes pleaded guilty to three counts of sex trafficking of minors; two counts of sex trafficking adult women through force, fraud or coercion; and conspiracy to use interstate facilities to promote prostitution. Forbes faces a maximum penalty of up to life in prison and a fine of up to $1.5 million.

"This sex trafficking case, like many others, involved the repeated victimization of American citizens," said Wan J. Kim, Assistant Attorney General for the Civil Rights Division. "All too often, these crimes occur right in our own backyards. The Justice Department will remain dedicated to prosecuting this form of modern-day slavery."

"Women and girls being forced to commit sexual acts against their will and under the threat of violence is a brutal crime," said Kevin J. O'Connor, U.S. Attorney for the District of Connecticut. "Federal law enforcement is committed to vigorously prosecuting those who engage in human trafficking, especially when minors are victimized."

Human trafficking prosecutions are a top priority of the President of the United States and the Department of Justice. In the last six fiscal years, the Civil Rights Division, in conjunction with U.S. Attorneys' Offices, has increased by six-fold the number of human trafficking cases filed in court.  In fiscal year 2006, the Department obtained a record high number of defendants charged and defendants convicted in human trafficking prosecutions.

The case was investigated by the Federal Bureau of Investigation, the Hartford and Windsor Police Departments, and the Internal Revenue Service. The case is being prosecuted by Assistant U.S. Attorney Jim Genco and Special Litigation Counsel Andrew J. Kline of the Civil Rights Division's Human Trafficking Prosecution Unit.

"We have always been passionate about making great entertainment accessible to everyone, and the new price for PSP, as well as the continued growth of the "Greatest Hits" library, reflect our ongoing commitment to supporting and expanding the PSP community," said Jack Tretton, president and CEO, Sony Computer Entertainment America.

The PSP is in its third year of production, and lately has been outshone by the popular DS.

"The PSP needed a price cut to reinvigorate the market. Wal-Mart sold the PSP for 169 dollars for five hours on Black Friday -- a time in which we believe the company was able to sell over 100,000 pieces of hardware," BMO Capital Markets analyst Edward Williams said in a client note.

Williams said main beneficiaries of the price cut should be video-game retailer GameStop, and to a lesser extent Take-Two Interactive Software, which has a healthy line-up of games for the paperback book-sized device.

"In general, though, all publishers should benefit," Williams said.

In 2006, PSP shipments rose to nearly 25 million units worldwide, with more than one million new PSP systems sold in North America in December alone. In addition, software shipments increased to more than 90 million units last year, according to Sony's figures.

The PSP platform is also slated for further market penetration this year with new game releases. The 2007 game releases lineup includes "God of War," "Ratchet & lank," "SOCOM: U.S. Navy SEALs," "Daxter," and "Syphon Filter: Dark Mirror."

Sony Computer Entertainment America is a division of global electronics maker Sony.

A representative for Sony in Japan said there would not be an immediate price cut on the PSP in that market.

The UK hacker behind unprecedented cyberattacks on US military and NASA computer systems in late 2001 and early 2002 lost an appeal Tuesday in the UK High Court to avoid extradition to the US. Last May, a UK judge recommended extradition for Gary McKinnon to face criminal charges in a US court as a cyber-terrorist, allegedly causing $700,000 in damages. UK Home Secretary John Reid quickly approved the extradition recommendation.

McKinnon will apply to have his case heard before the UK House of Lords as one last chance to avoid extradition. If extradited and convicted in US courts, McKinnon may face serving his entire sentence in US prisons because of the cyber-terrorist charges. McKinnon admits that he hacked into US computer systems seeking evidence that the US concealed evidence of UFOs and other "hidden technology," but claims the level of damages asserted by the US is "ridiculous."

The Board of Directors of Katten Muchin Rosenman LLP is pleased to announce that it has elected 11 attorneys to partner.

"This is a group of very talented attorneys," said Vincent A. F. Sergi, the Firm's National Managing Partner. "They have all demonstrated the commitment to professionalism and dedication to client service that we expect of those who advance in the firm, and we look forward to their continued success."

The board selected attorneys from seven practices (Corporate, Commercial Finance, Intellectual Property, Litigation and Dispute Resolution, Real Estate, Tax Planning, Trusts and Estates) across four Firm offices.

In Chicago:

Valentina Famparska, in the Tax Planning Practice, concentrates on federal and state taxation, focusing in venture capital, private equity and emerging growth companies, partnerships, and mergers and acquisitions. Ms. Famparska graduated from Sofia University School of Law, Bulgaria with a law degree and highest honors. In Bulgaria, she practiced for five years in the areas of commercial law, corporate law and taxation. She also worked as a legal advisor for the Bulgarian Ministry of Finance, Department of Taxation. Ms. Famparska received a law degree, magna cum laude, from Loyola University Chicago School of Law.

Brooks T. Giles, in the Corporate Practice, concentrates on private company mergers and acquisitions. He has represented both buyers and sellers in acquisitions, including stock purchases, asset sales, tax-free mergers, and leveraged buyout situations. Mr. Giles also has experience in public and private corporate finance transactions, including registered and 144A debt offerings, registered equity offerings and venture capital financings. His public company experience includes mergers, tender offers, hostile proxy contests and general corporate advice, including poison pills. Mr. Giles received his B.A. from the University of Chicago and holds both a J.D. with honors and an LL.M. from Duke University School of Law.

Derek F. Ladgenski, in the Commercial Finance Practice, concentrates on all aspects of corporate finance, including secured and unsecured senior financing, mezzanine financing, equity co-investments and similar products for a wide variety of lending syndicates and institutional and entrepreneurial finance and corporate clients. He has experience with several distinct lending products, including secured and unsecured asset-based and cash flow loans, debtor-in-possession financings, loans to distressed companies, securitizations, Islamic Shari'ah-compliant loans, real estate-based loan packages, loans to energy and utility companies and secured and unsecured mezzanine loans. Mr. Ladgenski holds a B.S. with distinction and a B.A. from the University of Illinois at Urbana-Champaign and received his J.D., magna cum laude, from the University of Illinois College of Law.

Stephen J. Lombardo, III, in the Corporate Practice, concentrates his work primarily in the areas of private equity/venture capital, mergers and acquisitions and general corporate work. He has worked on a wide range of transactions (valued from $1 million to $15 billion) representing clients in a wide variety of industries including restaurant and food, technology, manufacturing, healthcare, aerospace, and finance. He holds a B.S.B.A. as well as a J.D. from Georgetown University, and is also a CPA.

Eric A. Smith, in the Corporate Practice, focuses his work primarily in private equity and mergers and acquisitions, but also counsels clients in matters related to public and private securities matters. His primary focus is representing private equity funds and their portfolio companies. He has also been involved in providing advice to corporate clients involved in leveraged buyouts, consolidations, restructurings and various other types of corporate transactions, as well as to executives involved in various private equity transactions. Mr. Smith holds a B.S. with honors from the University of Illinois at Urbana-Champaign and a joint J.D., magna cum laude, M.B.A. from the University of Illinois in Champaign.

Philip J. Tortorich, in the Trusts and Estates Practice, concentrates in the areas of tax- and estate-planning matters, primarily representing wealthy individuals and closely-held corporations. His work includes consulting with clients regarding tax-efficient structuring of corporate entities, including C corporations, S corporations, limited-liability companies, limited partnerships, and hybrid-type entities. He also designs trusts that shift the future growth of a client's net worth out of the client's estate while minimizing the exposure to gift taxation. Mr. Tortorich regularly advises clients on structuring personal family investment companies, as well as their philanthropic goals. He holds a B.A. from Loyola University Chicago and a J.D., cum laude, from Loyola University Chicago School of Law.

In Los Angeles:

James J. Thompson, in the Corporate Practice, counsels clients on a wide range of matters including mergers and acquisitions, joint ventures, reorganizations, formation and financing transactions for emerging growth companies, public and private offerings of equity and debt securities, 1933 Securities Act and 1934 Exchange Act compliance and periodic reporting, corporate governance matters and general corporate representation. He advises publicly-traded corporations and privately-held corporations and other business entities, investment banks, commercial banks and other financial institutions. He has represented clients in industries including, technology, e-commerce and the Internet, health care, biotechnology, real estate, gaming, entertainment, education, financial services and consulting sectors. He holds a B.A., magna cum laude, from Georgetown University and a J.D. from the University of Southern California School of Law.

Laurie Cohen Yoo, in the Litigation and Dispute Resolution Practice, concentrates her practice in real estate litigation. Ms. Yoo represents retail shopping center owners, managers, and developers in a wide range of matters including lease enforcement, public access, and disability discrimination (ADA). She regularly counsels clients on shopping center management issues and enforcement of private property interests. She holds a B.A., cum laude, from Pomona College and a J.D. from UCLA School of Law.

In New York:

Julie Pechersky, in the Litigation and Dispute Resolution Practice, focuses on the defense of private and publicly-traded companies and their directors and officers in securities actions, directors' and officers' liability actions, and governmental and regulatory investigations and litigation. She also serves as counsel to companies in internal investigations. Ms. Pechersky has represented clients in a wide range of matters relating to allegations of accounting irregularities and securities fraud. Prior to joining the Firm, Ms. Pechersky clerked for Chief Judge Sylvia Rambo, United States District Court for the Middle District of Pennsylvania. She holds a B.A. with honors from the University of Pittsburgh and a J.D. from New York University School of Law.

Susan Lee Saslow, in the Real Estate Practice, concentrates in all aspects of real estate transactional matters, including commercial acquisitions and dispositions, leasing, real estate finance and development of all types of real properties. Her practice primarily focuses in the areas of conventional and securitized real estate financings. She has extensive experience representing institutional clients and private investors and developers in sophisticated debt and equity financings, advising both borrowers and lenders in complex transactions involving multi-state, multi-property portfolios, mezzanine financings, securitized loan originations, construction loans and loan participations. She holds a B.A. from Wesleyan University and earned her J.D., cum laude, from Albany Law School of Union University.

In Washington:

Justin L. Krieger, in the Intellectual Property Practice, focuses on intellectual property litigation, patent prosecution, and client counseling with a technical background in chemistry. Mr. Krieger concentrates on patent litigation and has participated in all phases of patent litigation including discovery, trial and appeals. As a registered patent attorney, Mr. Krieger is also actively involved in prosecuting patent applications in the chemical engineering, metallurgical, nanotechnology, medical device, mechanical, consumer products, business method and software technology fields. He has extensive experience prosecuting domestic and international patent applications including reexamination and reissue applications. He has also provided numerous non-infringement and validity opinions in the chemical, polymer and mechanical arts from both due diligence and litigation perspectives. Mr. Krieger received a B.S. in Chemistry from the College of William and Mary and his J.D. from the University of Florida College of Law.

Katten Muchin Rosenman LLP is a full-service law firm with offices in the nation's largest centers of business, government, finance and technology and an affiliated entity in London. With over 650 attorneys in more than 40 areas of practice, Katten provides timely and cost-effective counsel to clients in numerous industries. Katten provides advice for a wide range of public and private companies - from entrepreneurial, emerging-growth, and middle market firms to global Fortune 100 corporations - as well as government entities, institutions of higher learning, museums and a host of other charitable and cultural organizations.

http://www.kattenlaw.com