Legal News for Mon 7/8 - Boeing Pleads Guilty, GOP Challenge to ESG Investing, Tesla Shareholders Contest $7b Legal Fee and Sen. Menendez Closing Arguments

Minimum Competence

This Day in Legal History: Vermont Abolishes Slavery

On July 8, 1777, Vermont made history by becoming the first state to abolish slavery through the formal adoption of its new state constitution. This landmark event occurred during the American Revolutionary War, reflecting the evolving values of liberty and human rights among the colonists. Vermont's constitution, drafted in Windsor, boldly declared that all men are born equally free and independent, explicitly prohibiting slavery. This was a pioneering move, as the nation itself was still grappling with the institution of slavery, which would not be federally abolished until the 13th Amendment in 1865. The framers of Vermont's constitution were influenced by Enlightenment ideals and a commitment to individual freedom. Their decision set a precedent and provided a moral compass for other states and the future United States. Vermont's abolition of slavery marked an early and significant step toward the broader movement for abolition and civil rights in America. This moment in legal history underscores the state's progressive stance and its contribution to the fight for human dignity and equality.

Boeing has agreed to plead guilty to criminal fraud conspiracy and pay a $243.6 million fine to settle a U.S. Justice Department investigation into two fatal 737 MAX crashes in Indonesia and Ethiopia that killed 346 people. This plea deal, pending judicial approval, marks Boeing as a convicted felon. The settlement has faced criticism from victims' families who demand a trial and stricter penalties. The guilty plea endangers Boeing's eligibility for government contracts but spares the company from a potentially damaging trial. The agreement also mandates Boeing to invest $455 million over three years to enhance safety and compliance, and imposes an independent monitor to oversee these efforts. Additionally, Boeing's board will meet with the victims' families. The DOJ's charges stem from Boeing's false statements to the FAA about the MCAS software linked to the crashes. The deal does not protect Boeing from future investigations or shield its executives. The court will finalize the plea agreement by July 19.

Boeing's criminal fraud conspiracy charge revolves around their false representations to the FAA regarding the MCAS software, designed to push the airplane's nose down under specific conditions. This misrepresentation significantly contributed to the crashes, highlighting a grave breach of regulatory trust and aircraft safety protocols.

Boeing to plead guilty to fraud in US probe of fatal 737 MAX crashes | Reuters

A lawsuit challenging a Biden administration rule that permits socially conscious investing by employee retirement plans will be a significant test for how courts review federal regulations after a recent Supreme Court decision. The New Orleans-based 5th U.S. Circuit Court of Appeals will hear the case brought by 25 Republican-led states against the U.S. Department of Labor's 2022 rule, which allows 401(k) and other plans to use environmental, social, and corporate governance (ESG) factors as tiebreakers in investment decisions. U.S. District Judge Matthew Kacsmaryk initially upheld the rule based on the Chevron deference doctrine, which the Supreme Court has since overturned, now requiring courts to independently assess agency rules. This change is expected to impact various government regulations.

The core issue is whether the 1974 Employee Retirement Income Security Act permits considering non-financial factors in investment decisions. Critics argue that such factors threaten workers' retirement savings. The 5th Circuit, known for its conservative stance, may nullify the rule even without Chevron deference. The outcome will set a precedent for future challenges to federal agency powers and regulations. The case highlights the ongoing debate over the scope of federal agency authority and the influence of judicial interpretation on regulatory policies.

Republican challenge to ESG investing rule could showcase risk to US agency powers | Reuters

Tesla shareholders will appear in court to contest a record-breaking $7 billion legal fee request linked to CEO Elon Musk's $56 billion pay package. This fee, sought by investor Richard Tornetta and his legal team after winning a lawsuit that voided Musk's 2018 stock option pay package, has been called "outlandish" by many Tesla shareholders. Tornetta's attorneys argue they are entitled to 11% of the value returned to Tesla, approximately 266 million shares worth about $67 billion, asserting that this percentage is modest by Delaware legal standards. They seek payment in Tesla shares, equating to $370,000 per hour worked.

Tesla and its shareholders argue that the fee is disproportionate and unprecedented, vastly exceeding the current highest shareholder litigation fee of $688 million from an Enron class action. Tesla contends that the fee should be as low as $13.6 million, especially since shareholders recently ratified Musk's pay package, nullifying the supposed benefit of Tornetta's legal victory. The case will be heard by Chancellor Kathaleen McCormick, with a decision expected to take weeks or months. This ruling could set a significant precedent for future shareholder litigation fees.

Tesla investors to urge judge to reject record $7 bln legal fee in Musk pay case | Reuters

Closing arguments in the corruption trial of Senator Bob Menendez are set to begin after more than seven weeks of testimony. Federal prosecutors allege that Menendez accepted bribes, including cash, gold bars, and payments for mortgages and cars, in exchange for aiding Egypt in securing U.S. military assistance and helping New Jersey businessmen with their legal and business interests. Evidence presented included gold bars and $480,000 in cash found at Menendez's home.

Menendez, who has pleaded not guilty to 16 charges including bribery and fraud, is accused of using his wife, Nadine Menendez, as an intermediary for the bribes. Nadine Menendez, also pleading not guilty, will face trial separately in August. The case has significantly impacted Menendez’s political career, leading to his resignation as chair of the Senate Foreign Relations Committee. Despite running for re-election as an independent, his chances are slim.

Key testimonies included statements from two New Jersey prosecutors and insurance broker Jose Uribe, who claimed to have bribed Menendez. Uribe testified that Menendez acknowledged helping him avoid state probes. Menendez's defense argued the cash and gold found were related to his wife's activities and their cultural background, citing Menendez's Cuban heritage as a reason for keeping cash at home. Menendez declined to testify. Closing arguments from prosecutors will start in the early afternoon and are expected to continue into Tuesday, followed by the defense's closing arguments.

Senator Menendez's corruption trial heads to closing arguments | Reuters

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