Reuters reports that Judge Farnan of the D. of Del. has granted preliminary approval for the proposed $300 million settlement of the securities class action against DaimlerChrysler AG. The suit alleges that Daimler-Benz AG misrepresented the acquisition of Chrysler as a “merger of equals” to avoid paying Chrysler shareholders a takeover premium for their shares. (The 10b-5 Daily originally posted about the settlement in August.)
Monthly Archives: October 2003
Twenty Percent of $1 Billion Is Still A Lot
Securities Litigation Watch has a post on a decision by Judge Scheindlin of the S.D.N.Y. to reduce the proposed attorneys’ fees in the Independent Energy Holdings case from 25% to 20% of the recovery. The court evidently “suggested that the contingency risk asserted by plaintiffs’ counsel as part of the justification for fees is ‘often inflated.'”
It is difficult to figure out the best methodology for measuring contingency risk. Judge Scheindlin appears to have cited overall settlement rates for securities class actions, but that statistic does not provide much information about the contingency risk faced by a plaintiffs’ firm in the particular case before the court. (Securities Litigation Watch also notes that the overall settlement rates used in the decision appear to be out-of-date.)
In any event, Judge Scheindlin’s willingness to reduce the requested attorneys’ fees in a securities class action settlement may be a source of concern for the plaintiffs’ bar. The judge presides over the IPO allocation cases, where the investors are already guaranteed a recovery of at least $1 billion.
Filed under IPO Allocation Cases, Settlement
Hiding The Ball
When a court grants a motion to dismiss a securitites class action based on the failure to meet the heightened pleading standards of the PSLRA, the plaintiffs often seek to file an amended complaint addressing the identified deficiences. At least one court has found, however, that plaintiffs cannot take a wait-and-see-what-happens approach if they are aware of additional facts.
In In re Stone & Webster, Inc. Sec. Litig., 217 F.R.D. 96 (D. Mass. 2003), the court addressed whether to grant a motion for leave to file a second consolidated and amended complaint after dismissing most of the claims in the case because they were not plead with the required specificity. The plaintiffs premised their motion “on the theory that the facts that would allegedly remedy the pleading defects identified in the [court’s] order were ‘newly discovered,’ [but] conceded at the scheduling conference that much of this information was in fact available to them during the pendency of the motions to dismiss.” The court found that the plaintiffs’ failure to provide these additional facts while the court considered the motion to dismiss was “precisely the sort of ‘undue delay’ that should result in a denial of leave to amend.”
Holding: Motion for leave to amend denied.
Quote of note: “The fact that the plaintiffs chose to oppose the motions to dismiss on the grounds that their complaint was, in their view, sufficiently pleaded, rather than providing the additional information known to them during the necessarily lengthy period during which the motions to dismiss were being considered, smacks of gamesmanship bordering on bad faith.”
Filed under Motion To Dismiss Monitor
Enron ERISA Class Action Can Proceed
The Associated Press reports that Judge Melinda Harmon of the S.D. of Tex. has denied the motions to dismiss by Enron and Kenneth Lay in the ERISA class action brought by participants in the company’s retirement plan. In its 329-page order, however, the court did dismiss some of the other defendants (banks and Merrill Lynch).
There have been a wave of class actions alleging that companies and their officers violated their fiduciary duties under ERISA by making false statements that induced employees to invest in company stock at artificially inflated prices. (See this post in The 10b-5 Daily discussing how these suits parallel securities class actions.) The Enron suit is complicated by allegations that Enron executives sold off company stock while workers were locked out of their 401(k) accounts and the company’s stock price plummeted.
Addition: Erisablog contains a long list of related articles, as well as links to the order and other source documents.
Filed under ERISA Litigation
The 10b-5 Daily 