Steve Berman and his firm have petitioned a federal appeals court to disqualify a federal judge who referred them to the U.S. Department of Justice after finding “misconduct bordering on the criminal” in thalidomide cases.

Proxy advisers have again fallen under President Donald Trump’s scrutiny with a new executive order that amplifies a novel securities theory—the idea that a proxy advisers’ clients may qualify as a group under federal securities law.

When an appeal involves legal issues that are novel or of statewide importance, appellate counsel should consider soliciting amicus curiae (friend of the court) participation in support of their client’s position.

A New York federal judge paused a $2.6 million lawsuit Tuesday against Zurich Insurance over unpaid insurance coverage following the collapse of a Bronx school construction site after both parties asked for a stay pending the outcome of a state court lawsuit involving the same claims.

U.S. District Judge Lewis J. Liman granted the pause without stating his reasoning. The project's contractor, The Morganti Group Inc., and Zurich American Insurance Co. had asked the court to pause the case pending the outcome of a New York state court case against Morganti and Zurich filed by Morganti's subcontractor, J&A Concrete Corp.

Morganti attorneys requested a pause in the federal lawsuit on Monday. They wrote in a letter to Judge Liman stating that J&A Concrete filed the lawsuit over the "same loss under the same insurance policy." The loss occurred after the collapse of, and damage to, a Bronx school construction project in 2023.

"J&A's claim in that state court action is included in Morganti's damages in this action," Morganti said in the letter.

Morganti filed the federal complaint in May, alleging a breach of obligations under a builder's risk policy after Zurich Insurance refused to cover the contractor's loss.

The Connecticut-based builder had entered into a $57 million contract with the New York City School Construction Authority in January 2022 to build a three-story addition to Public School 138 Samuel Randall in the Bronx.  The contract required the school authority to maintain owner-controlled insurance.

The school's project manager entered into a $100 million builder's risk policy with Zurich, which included coverage for Morganti and its subcontractors, such as J&A Concrete.

Trouble hit the project when J&A Concrete began pouring cement in July 2023. The concrete molds collapsed, causing $2.6 million in damage to the project. Zurich allegedly denied coverage of the claim.

In the federal lawsuit, Zurich Insurance and Morganti had requested a 90-day pause to the case in September while they sought to reach a settlement. During those 90 days, however, J&A Concrete filed an amended complaint in state court by adding a claim against Zurich.

"Adding Zurich to the state court action has complicated the parties' ability to conclude the settlement in this matter," Morganti said in its Monday letter to the court.

Now, all three parties have entered into settlement discussions, according to Morganti's letter. Morganti then requested the pause, believing that the state court action would resolve the issues raised in its federal lawsuit.

"Morganti believes that settlement with the plaintiff in the state court action would fully dispose of this case as well," Morganti said.

Counsel for Zurich Insurance declined to comment Tuesday. Counsel for Morganti didn't immediately respond to a request for comment.

Morganti is represented by Peter J. Martin and Christopher V. Fenlon of Hinckley Allen & Snyder LLP.

Zurich Insurance is represented by Philip C. Silverberg and Hilary M. Henkind of Mound Cotton Wollan & Greengrass LLP.

The case is The Morganti Group Inc. v. Zurich American Insurance Co., case number 1:25-cv-03924, in the U.S. District Court for the Southern District of New York.

The Second Circuit has backed the dismissal of mismanagement and fraud counterclaims lodged by a real estate investment trust and its subsidiary in a dispute involving a collateralized loan-obligation investment fund, ruling that related agreements for the fund don't support their counterclaims.

In its unpublished opinion filed on Nov.19, a three-judge panel rejected NexPoint Diversified Real Estate Trust and its subsidiary NHF TRS LLC's breach of fiduciary duty, negligence and tortious interference counterclaims, which were previously dismissed by a New York federal court in March 2024.

The counterclaims, which mainly revolved around "asset quality tests," were filed against ACIS 6 fund manager ACIS Capital Management, ACIS Capital's owner and principal Joshua N. Terry, and ACIS Capital's sub-adviser Brigade Capital Management LP.

The tests are part of an agreement that established ACIS 6 and a related portfolio management agreement, according to the panel.

NexPoint's counterclaims are about the asset quality tests featured in the portfolio management agreement, the panel said. NexPoint has conceded that it isn't a part of that agreement because it and its subsidiary are subordinated noteholders for the fund, according to the panel.

Additionally, the panel said the fund establishment agreement doesn't state that the fund will be in default if the subordinated noteholders don't get paid or if the fund doesn't meet the standards set by the asset quality tests. NexPoint also failed to show how the agreement allows it to sue over the tests, the panel ruled.

According to the Second Circuit, NexPoint's tortious interference and breach of fiduciary duty counterclaims alleged the counter-defendants were obligated to manage the fund in ways that weren't contractual.

However, the panel ruled that New York law bars these types of tort claims, and it also pointed to the New York Court of Appeals' 2023 decision in IKB International SA v. Wells Fargo Bank NA.

"In IKB International, the New York Court of Appeals directed the dismissal of a claim alleging a breach of post-event-of-default fiduciary duties," the panel said. "The court held that 'the action should proceed under a contract theory' because 'plaintiffs use identical language when describing their contract-based claims' and '[t]he harm alleged.'"

"That parallels what the NexPoint parties are doing here, where their duty-based claims rely on factual allegations of breach of contract," the panel added.

U.S. Circuit Judges Debra A. Livingston, Barrington D. Parker and Maria A. Kahn sat on the panel for the Second Circuit.

Counsel for NexPoint, Terry, ACIS Capital and Brigade Capital didn't respond to requests for comment Thursday.

Terry and ACIS Capital are represented by William B. Adams, Jonathan E. Pickhardt and Blair A. Adams of Quinn Emanuel Urquhart & Sullivan LLP.

Brigade Capital is represented by Jason C. Hegt of Latham & Watkins LLP.

NexPoint and NHF TRS are represented by Mazin A. Sbaiti and Griffin S. Rubin of Sbaiti & Company PLLC.

The case is U.S. Bank National Association v. The Charitable Donor Advised Fund LP, case number 25-643, in the U.S. Court of Appeals for the Second Circuit.

When Securities Exchange Commission (SEC) Chair Paul Atkins recently announced Commission action to permit mandatory arbitration provisions to be inserted into corporate charter documents, he noted that this action was “among the first steps of my goal to make IPOs great again.”

The U.S. Securities and Exchange Commission announced Monday that it will not review most of the requests it gets from publicly traded companies hoping to exclude shareholder proposals from corporate ballots this proxy season, saying that it will not object to the exclusions due to time and resource constraints.

The SEC's Division of Corporation Finance put out a statement outlining a new policy for shareholder proposal exclusions for the current proxy season.

Publicly traded companies often ask the division for a letter stating that the company won't face an enforcement action for excluding certain proposals, but the agency said it won't review those requests this year and will instead just allow companies to exclude proposals based on the company's representation that the proposal is improper.

"Due to current resource and timing considerations following the lengthy government shutdown and the large volume of registration statements and other filings requiring prompt staff attention ... the division has determined to not respond to no-action requests for, and express no views on, companies' intended reliance on any basis for exclusion of shareholder proposals," the statement read.

The only exclusion letters it plans to review and respond to are those requesting to exclude proposals that could violate state law, because the agency said that there isn't currently much guidance on that type of exclusion.

In making the decision to review exclusions based on state law, the division pointed to a speech that SEC Chair Paul Atkins gave in Delaware last month.

In that speech, Atkins seemed to encourage companies to seek the SEC's staff views on whether Delaware law prohibits shareholders from forcing votes on nonbinding issues. Delaware is where the majority of the nation's Fortune 500 companies are incorporated.

Atkins argued that it is possible that there is no right for shareholders to force a vote on such proposals under that state's laws.

"If a company makes this argument and seeks the SEC staff's views, and the company obtains an opinion of counsel that the proposal is not a 'proper subject' for shareholder action under Delaware law, this argument should prevail, at least for that company," he said.

Erik Gerding of Freshfields LLP, the former director of the SEC's Division of Corporation Finance, told Law360 in an email Monday that Delaware's courts may take a different position than that expressed by Atkins.

Shareholders may challenge the position in court, he said.

"If [the courts] do agree [with Atkins], another question is whether this theory applies to all nonbinding shareholder proposals or only ones dealing with 'environmental' or 'social' matters," Gerding said.

Under the Biden administration, the SEC allowed shareholder proposals on hot-button topics like climate change and abortion to proceed to a vote over the objection of business groups and conservative activists.

The SEC's sole Democratic commissioner, Caroline Crenshaw, issued a statement Monday slamming the new policy as "an act of hostility toward shareholders."

She took particular issue with the letters of no objection that the division said it will grant to companies that self-represent that they have a reasonable basis to exclude a proposal.

The statement "cloaks itself in neutrality by expressing that the division will not weigh in on any company's exclusion of shareholder proposals, but then it hands companies a hall pass to do whatever they want," Crenshaw said. "It effectively creates unqualified permission for companies to silence investor voices (with 'no objection' from the commission)."

A California federal judge had little patience for an OpenAI co-founder trying to limit his forced participation in Elon Musk's lawsuit challenging the ChatGPT maker's transition to a for-profit structure, admonishing the former executive for contesting a magistrate judge's order with motions filed while federal courts work unpaid.

U.S. District Judge Yvonne Gonzalez Rogers, in just a few pages, on Friday held nonparty Ilya Sutskever to the order requiring the former executive to sit for another deposition to discuss his financial stake in OpenAI and to produce a memo he sent to members of the artificial intelligence company's board ahead of a decision to remove Greg Brockman as board chairman.

Judge Gonzalez Rogers said U.S. Magistrate Judge Thomas S. Hixson rightly deemed both the memo and Sutskever's financial stake — estimated by Musk to be in the "billions" — relevant to the case in which Musk alleges he was duped into donating tens of millions of dollars to OpenAI on the promise the company would remain a nonprofit, only for it to seek to convert into a for-profit structure. OpenAI finalized that transition last week, with the nonprofit OpenAI Foundation maintaining control over the for-profit entity.

In rejecting Sutskever's motion for relief from the magistrate judge's order and refusing to stay that mandate, Judge Gonzalez Rogers noted the extraordinary circumstances under which federal courts must now address such filings.

"The court reminds the parties that due to the government shutdown funding for the federal judiciary has lapsed and court staff are working without payment. Where possible, the parties should resolve discovery disputes without court intervention," Judge Gonzalez Rogers said in a footnote. "Having now reviewed the merits of this allegedly emergency motion, Sutskever should not have filed the instant motions, especially given the standard of review. Counsel shall exercise more restraint in the future."

A source familiar with the matter confirmed Sutskever has produced the Brockman memo and has agreed to sit for a new deposition by a Nov. 5 deadline. His initial reticence had prompted Musk to try and tee up contempt proceedings against the former executive, only for Judge Hixson to refuse last week, asserting that Sutskever can't be in contempt because the magistrate judge never set a deadline for compliance.

Reviewing Judge Hixson's mandates on an "extremely deferential" standard, Judge Gonzalez Rogers agreed Friday that "Sutskever's financial interest in OpenAI is directly relevant to bias, particularly if Sutskever retained a large interest in the company (as a co-founder) after his departure."

Generally saying he'd held onto a financial stake, and that it had gone up, "is too general to be of any benefit," she said. She also admonished Sutskever for contending the magistrate judge violated his right to privacy.

"[Judge Hixson] did not act 'contrary to law' in determining that Sutskever's privacy interest was not sufficiently compelling, particularly when compared to the information's relevance to this case. Preferring one conclusion does not make the other contrary to law," Judge Gonzalez Rogers said.

Nor was Judge Gonzalez Rogers persuaded by Sutskever's request for more safeguards because Musk's lawyers disclosed in his first deposition the value of another OpenAI executive's financial stake. The judge called that disclosure "inadvertent," noted the question was withdrawn and pointed to the protective order covering sensitive information in the case, allowing it be shared only with outside counsel.

The judge was also dismissive of arguments that Musk signed away his right to the Brockman memo when agreeing to narrow the scope of Sutskever's subpoena.

"Sutskever's counsel agreed to produce categories of documents that appear, on their face, relevant to the Brockman memo," Judge Gonzalez Rogers said, such as on OpenAI's founding and safety, and potential conflicts of interest for Brockman.

"Moreover, Magistrate Judge Hixson did not commit clear error in deferring to the plaintiffs' explanation that they believed that the Brockman memo was 'self-deleting' and could not be discovered until Sutskever revealed at his deposition that he had retained the document. … That is a reasonable conclusion to draw," the judge said. "Sutskever's argument that Magistrate Judge Hixson 'disregarded' the parties' agreements and facts on the ground once again misconstrues the order. That Magistrate Judge Hixson did not find Sutskever's arguments persuasive does not suggest that he failed to consider them."

OpenAI and a representative for Sutskever declined to comment. Representatives for Musk did not immediately respond Monday to requests for comment.

Sutskever isn't the only OpenAI executive with whom Musk has been battling ahead of a March 2026 phase-one trial on his challenge to the company for-profit transition. Those fights were broken off from other parts of the case, like OpenAI's counterclaims accusing the world's richest person of a targeted "harassment" campaign.

Earlier in October, Judge Hixson allowed alternative service of a deposition subpoena on Mira Murati, OpenAI's former interim CEO, via FedEx, after Musk complained that the former OpenAI chief technology officer's security repeatedly "stonewalled" normal service.

Musk was an early funder of ChatGPT. In the suit filed last year, Musk accused OpenAI and CEO Sam Altman — Musk's former business partner — of setting the business' "founding agreement aflame" by moving to make the organization private. Musk said OpenAI was baiting and switching investors by allowing them to pour money into a technological innovation they believed would remain public.

Musk later brought in Microsoft, OpenAI's longtime partner and financial backer, as a defendant. Musk contended he was tricked into contributing $45 million with the false promise that OpenAI would remain a nonprofit.

OpenAI and Microsoft have sought to stop the first phase of nonprofit claims in their tracks, arguing they owe Musk nothing, in part because there was never a binding promise for OpenAI to remain a nonprofit.

Sutskever is represented by Simona Agnolucci, Eduardo E. Santacana, Anika Holland, Harris Mateen and Remy Carreiro of Cooley LLP.

Musk is represented by Marc Toberoff and Jaymie Parkkinen of Toberoff & Associates PC, and Steven F. Molo, Robert K. Kry and Jennifer Schubert of MoloLamken LLP.

The OpenAI parties are represented by Jordan D. Eth, William Frentzen and David J. Wiener of Morrison Foerster LLP, William Savitt, Bradley R. Wilson, Sarah K. Eddy, Steven P. Winter and Nathaniel D. Cullerton of Wachtell Lipton Rosen & Katz, and Alison L. Plessman, Stephanie Xiao and Nicholas Kellum of Hueston Hennigan LLP.

Microsoft is represented by Russell P. Cohen, Howard M. Ullman, Nisha Patel, Andrew J. Levander and Jay Jurata of Dechert LLP.

The case is Elon Musk et al. v. OpenAI Inc. et al., case number 4:24-cv-04722, in the U.S. District Court for the Northern District of California.

Brian Procel Jeremiah Levine A longtime Miller Barondess LLP trial lawyer has joined forces with a former Los Angeles federal prosecutor to launch a nationwide litigation boutique representing both plaintiffs and defendants in high-stakes business disputes.

The founders of Santa Monica, California-founded Procel Levine LLP are litigator Brian Procel and Jeremiah Levine, who most recently worked as an assistant U.S. attorney, according to the new firm's Tuesday announcement.

Procel Levine officially launched this month and handles matters involving fraud, class actions, privacy, entertainment, real estate, financial services disputes, government investigations, white-collar criminal defense and breach of fiduciary duty.

"We're drawn to the David-versus-Goliath cases," Levine told Law360 Pulse Thursday. "Those are the kinds of matters we're passionate about. Taking on powerful organizations or industries and standing up against practices that are unjust or unfair. That's the work we find most rewarding."

Brian Procel handles complex commercial disputes involving investor and consumer fraud, class actions, breach of fiduciary duty, lender liability, intellectual property, entertainment and real estate. He founded Procel Law, co-founded Miller Barondess and began his career at Quinn Emanuel Urquhart & Sullivan LLP, according to the announcement. He is a graduate of the University of California, Berkeley-School of Law.

"Procel Levine LLP delivers big law quality with the efficiency and personal attention of a boutique firm," Procel told Law360 Pulse. "We win for our clients, and we do it the right way: ethically, efficiently and aggressively."

Procel said he and Levine have known each other for years, and appreciate each other's skills.

"Together, we bring a powerful background of trial experience to clients facing complex, bet-the-company litigation throughout the U.S.," Procel said in a statement. "We are strategists who think twelve moves ahead and put outcomes over hours, meaning clients receive trial-tested advocacy that's efficient and principled."

As a federal prosecutor, Jeremiah Levine indicted the largest white supremacist case in the history of the Justice Department, the firm said. He also prosecuted complex Racketeer Influenced and Corrupt Organizations Act matters and white-collar crime, including bank fraud and COVID-19 benefits fraud. He began his legal career as a litigator at Morrison & Foerster after graduating with honors from Harvard Law School.

"Having both come from big law earlier in our careers, we are uniquely positioned to deliver big law quality with the efficiency and personal attention of a boutique firm," Levine said in a statement. "We thrive on tackling high-stakes cases – often against opponents with far larger teams – and have a track record of prevailing in those matters."

Procel Levine recently represented Stockdale Capital Partners, a multibillion-dollar real estate investment firm, as the defendant in a contractual dispute with Maguire Partners involving a large downtown Los Angeles commercial property. The firm won summary judgment on the vast majority of claims, and following mediation, the remaining claim was dismissed with prejudice, resulting in a complete victory for Stockdale, according to the announcement.

The firm is also representing four former LSV Asset Management partners in their $100 million lawsuit pending in Chicago. In that case, LSV founder Josef Lakonishok, Chief Legal Officer Josh O'Donnell and other C-suite executives are accused of engaging in a fraudulent scheme to force the sale of their equity at a significantly reduced price. In June, the firm defeated LSV's motion to dismiss the case, allowing the plaintiffs' key claims of breach of fiduciary duty and breach of the implied covenant of good faith to move forward, the announcement stated.

A North Carolina business court judge has dismissed a lawsuit from shareholders alleging leaders of an investment fund allowed an exchange of more than $300 million in diversified assets for "worthless" illiquid equity, finding the complaint did not allege either a material benefit or a substantial likelihood of liability as to the adviser.

Judge Julianna Theall Earp said in the order Friday the suit does not currently satisfy the derivative demand prerequisite.

"Plaintiffs have failed to meet a threshold requirement necessary for this court to have subject matter jurisdiction," Judge Earp said.

The suit was brought on behalf of Hatteras Master Fund LP against its directors and adviser Hatteras Investment Partners LP, and involves four "feeder" funds and a master fund. The four named shareholders and plaintiffs — Joseph Meyer, Henry G. Schwartz Jr., James M. Alland and Carol C. Collier — invest in three of the four feeder funds.

The master fund is directed by David B. Perkins, H. Alexander Holmes, Steve E. Moss, Gregory S. Sellers and Thomas Mann, according to the suit, and they are all named defendants. All the funds are controlled by Hatteras Investment Partners, which in turn is controlled by Perkins, the plaintiffs said.

According to the plaintiffs, the defendants caused the master fund to enter a transaction with The Beneficient Company Group LP, also known as "Ben," that led to a 98% drop in value of the master fund.

At a hearing in September, Corri A. Hopkins of Parker Poe Adams & Bernstein LLP, counsel for Perkins and Hatteras Investment Partners, said the shareholders did not fulfill pre-suit requirements under North Carolina and Delaware laws, like serving a demand on the fund's general partner before suing.

And the plaintiffs admitted they did not make a litigation demand on the limited partnership's general partner, Judge Earp noted in the order Friday.

They also did not adequately plead that the adviser received a material benefit from the Ben transaction that would have made the demand futile, or that the demand would be futile because the adviser faced a substantial likelihood of liability on their claim, according to the order.

When moving to dismiss the suit, the defendants had argued the plaintiffs only generally describe the terms of any purported agreements between Ben and Hatteras Investment Partners, and that the size of the transaction alone is not material to show demand futility.

Judge Earp agreed with the defendants on Friday.

"That the business opportunities Ben proposed to the Adviser would presumably involve large sums of money is insufficient to show materiality without facts to put those amounts in context," Judge Earp said.

The judge also said the plaintiffs failed to meet the "heavy" burden of showing that Hatteras Investment Partners displayed "willful misfeasance, gross negligence, bad faith, or reckless disregard of its duties."

"Because fiduciaries must take risks ... they are exposed to liability for breach of fiduciary duty only if their breach of the duty of care is extreme," Judge Earp said, citing the Delaware Chancery Court's 2009 decision In re Citigroup Inc. Shareholder Derivative Litigation .

In a July opinion in another suit against Hatteras Investment Partners in the North Carolina Business Court, Judge Matthew T. Houston declined to allow another investor to voluntarily dismiss its lawsuit against Hatteras Investment Partners and move it to Delaware because it failed to plead facts demonstrating a legitimate claim under Delaware law.

Hatteras Investment Partners was also named in a putative class action filed in Chancery Court in April 2024, in which stockholders in Hatteras-managed funds alleged breaches of fiduciary duty in conjunction with the Ben transaction. In August, A North Carolina Business Court judge declined to allow Hatteras Investment Partners to remove the case to Delaware federal court.

Representatives of the parties did not immediately respond to requests for comment Tuesday.

The four shareholders are represented by Paul D. Malmfeldt of Malmfeldt Law Group PC, and Matthew E. Lee, Jeremy R. Williams and Eric G. Steber of Lee Segui PLLC.

Perkins and Hatteras Investment Partners are represented by Corri A. Hopkins and Melanie Black Dubis of Parker Poe Adams & Bernstein LLP.

Holmes, Moss, Sellers and Mann are represented by Edward B. Davis and Joshua B. Durham of Bell Davis & Pitt PA, and Joshua L. Solomon and Phillip Rakhunov of Pollack Solomon Duffy LLP.

The Hatteras Master Fund LP is represented by Jennifer K. Van Zant, Greg Gaught, Clint S. Morse and Gabrielle E. Supak of Brooks Pierce McLendon Humphrey & Leonard LLP.

The case is Meyer v. Hatteras Investment Partners LP, case number 2024CVS27958, in the North Carolina Business Court.