In Roberts v. Dean Witter Reynolds Inc., 2003 WL 1936116 (M.D. Fla. March 31, 2003), the court found that the legislative history of the Sarbanes-Oxley Act of 2002, which extended the statute of limitations for federal securities fraud claims to the earlier of two years after the discovery of the facts constituting the violation or five years after such violation, revealed Congress’s intent to revive claims that had already expired as of the date of the legislation’s enactment (July 30, 2002). The court, however, primarily relied on floor statements made by a single senator and a few sentences in a congressional analysis of the legislation in reaching this conclusion. It also certified an interlocutory appeal.
The Fulton County Daily Report has coverage of the oral argument in Roberts before the U.S. Court of Appeals for the 11th Circuit. The panel apparently expressed skepticism about the lower court decision, including Chief Judge Edmonson’s comment that to establish Congress meant to revive time-barred claims: “You’re going to have to show me something with neon light and underlined by Congress.” The 11th Circuit will be the first federal court of appeals to rule on this issue.
Quote of note: “[Visiting 9th Circuit Senior Judge] Farris later chimed in that Congress knows how to use the word ‘revive,’ suggesting that if Congress had wanted Sarbanes-Oxley to be able to revive previously expired claims, it could have done so. ‘They didn’t,’ Farris added.”
The 10b-5 Daily has previously posted about the recent district court decisions (including Roberts) addressing the retroactivity of the new statute of limitations.
Monthly Archives: November 2003
Did Congress Intend To Revive Time-Barred Claims?
Filed under Appellate Monitor
Fighting Fraud In Florida
The Boca Raton News offers a roundup of Milberg Weiss’ securities class actions, especially those filed in Florida.
Filed under All The News That's Fit To Blog
DPL Settles
DPL, Inc. (NYSE: DPL), the parent company of Dayton Power and Light Co., and their former accountants, PricewaterhouseCooopers, have obtained preliminary court approval for the settlement of the securities class action pending against them in the S.D. of Ohio (as well as related state court derivative actions). The class action was originally filed in July 2002.
The settlement is for $145.5 million. The announced source of funds is as follows: 1) $70 million from DPL; 2) $70 million from DPL’s liability insurers; and 3) $5.5 million from PWC. According to an Associated Press article, plaintiffs’ counsel may receive up to $50.9 million in fees. Final arguments on the settlement will be heard December 22.
Filed under Settlement
NYLJ Article On Solicitation Dispute
The New York Law Journal has an article (via law.com – free registration req.) on Judge Cote’s opinion &order in the WorldCom solicitation dispute. (The 10b-5 Daily has previously posted about the court’s decision and the underlying dispute.)
Filed under Lead Plaintiff/Lead Counsel, WorldCom
Aon Settles
Aon Corp. (NYSE: AOC), a Chicago-based insurance holding company, has announced a preliminary settlement of the securities class action pending against the company in the N.D. of Ill. (a separate derivative action filed in state court is also included in the settlement). According to a report in the Chicago Tribune, the case was “filed after Aon announced disappointing earnings in the second quarter of 2002” and alleges that Aon had “released inaccurate information about the corporation’s performance” prior to that announcement.
The settlement, which is subject to court approval, is for $7.25 million. Aon is also required to enact certain corporate governance reforms.
Quote of note: “Aon paid a relatively small amount to settle the cases and make them go away, said D. Cameron Findlay, Aon executive vice president and general counsel. ‘While we thought these lawsuits were absolutely meritless, we settled for a nominal amount that reflects the nuisance value,’ he said.”
Filed under Settlement
Court Rules On Solicitation Dispute In WorldCom Case
As previously reported in The 10b-5 Daily, Milberg Weiss and Bernstein Litowitz are in the midst of a dispute over the recruitment of individual bondholders to bring securities fraud claims against WorldCom and related parties. Bernstein Litowitz, who represents the lead plaintiff in the main investor action against WorldCom, has complained in a series of submissions to the court that Milberg Weiss provided “misleading solicitations” to WorldCom bondholders suggesting that they would not obtain a fair share of any settlement obtained in the main investor action and should bring their own individual actions.
Yesterday, District Judge Cote issued an opinion & order concerning this matter. The court found that Milberg Weiss has engaged in an “active campaign” to encourage pension funds to file individual actions and is running the individual actions as “a de facto class action.” Moreover, the firm’s communications have resulted in “some confusion and misunderstanding of the options available to putative class members.”
The court ordered that a separate notice (in addition to the normal class certification notice) be sent to each plaintiff who has filed an individual action, with the initial draft to be written by Bernstein Litowitz. The requests for relief made by Bernstein Litowitz in its November 4 submission to the court were denied, but leave was granted for the firm to bring a formal motion on the subject.
Filed under Lead Plaintiff/Lead Counsel, WorldCom
The Perfect Storm Moves On
Class certification has been granted in the Interpublic Group (“IPG”) securities class action pending in the S.D.N.Y. The case is the result of a restatement IPG announced in August 2002 for the five years from 1997 to 2001, which corrected inter-company charges that had been wrongly declared as income for the European offices of one of IPG’s agencies. The only dispute on class certification was the length of the class period, which the court resolved in favor of the plaintiffs.
The 10b-5 Daily has previously discussed (in a post entitled “The Perfect Storm”), the court’s May 2003 denial of the motion to dismiss in this case.
Filed under All The News That's Fit To Blog
Telxon Settles
SymbolTechnologies(NYSE: SBL) has announced that its wholly-owned subsidiary, Telxon Corp., has entered into a preliminary settlement of the securities class action pending against the company in the N.D. of Ohio. The case was originally filed in 1998, prior to Symbol’s acquisition of Telxon, and alleges that the company and certain former officers engaged in improper revenue recognition practices and hid adverse business and financial conditions. Telxon’s motion to dismiss was denied in September 2000.
The settlement, which is subject to court approval, is for $37 million. Telxon’s insurers are expected to pay $12 million of this sum. The company has brought a separate, but related, suit against its former auditors and has “agreed to pay to the class, under certain circumstances, up to $3 million of the proceeds of that lawsuit.”
Filed under Settlement
Does The New Statute Of Limitations Revive Time-Barred Claims?
The Sarbanes-Oxley Act of 2002 extends the statute of limitations for federal securities fraud to the earlier of two years after the discovery of the facts constituting the violation or five years after such violation. Although the legislation clearly provides that it “shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act [July 30, 2002],” left unresolved is whether Congress intended to revive claims that had already expired under the earlier one year/three years statute of limitations.
Courts are beginning to address this issue, with mixed results. In Roberts v. Dean Witter Reynolds Inc., 2003 WL 1936116 (M.D. Fla. March 31, 2003), the district court found that Sarbanes-Oxley revived already time-barred claims because the legislative history demonstrates that Congress intended to achieve that result. The court, however, primarily relied on floor statements made by a single senator and a few sentences in a congressional analysis of the legislation in reaching this conclusion. Perhaps as a result, it certified an interlocutory appeal on the question that is currently pending before the U.S. Court of Appeals for the 11th Circuit.
In the meantime, two other district courts have issued contrary opinions. In Glaser v. Enzo Biochem, Inc., 2003 WL 21960613 (E.D. Va. July 16, 2003), the court concluded that “Congress did not unambiguously provide that the [new] limitations period would apply retroactively.” Last week, in In re Enterprise Mortgage Acceptance Co., LLC Sec. Litig. , 03 Civ. 3752 (S.D.N.Y. Nov. 5, 2003), the court held: (a) “there is no clear language in the statute stating that it applies retroactively or that it operates to revive time-barred claims;” (b) the statute expressly disavows that it is creating any new rights of action; and (c) the legislative history examined by the Roberts court does not support a finding that Congress intended to revive time-barred claims.
Stay tuned.
Addition: The opinion is now available on Westlaw – In re Enterprise Mortgage Acceptance Co., LLC Sec. Litig., 2003 WL 22955925 (S.D.N.Y. Nov. 5, 2003).
Filed under Motion To Dismiss Monitor
Loss Causation Still In The Spotlight
The summer of loss causation cases has turned into the fall of loss causation articles examining those decisions.
A column in the October 24, 2003 edition of the New York Law Journal focuses on the decisions in Broudo (9th Cir.) and Merrill Lynch (S.D.N.Y.), The authors conclude that the “fraud on the market theory should not be expanded to enable plaintiffs to establish both transaction and loss causation.”
Quote of note: ‘[I]f the fraud on the market theory can serve double duty in this way, then the distinction between these two forms of causation will have collapsed. This is inappropriate. The PSLRA expressly codifies loss causation as a separate, free-standing element of a Section 10(b) claim.”
Not to be outdone, the November 6, 2003 edition of the New Jersey Law Journal has its own article (via law.com – free registration req.) on loss causation. The article discusses the recent Emergent Capital (2d Cir.) decision and finds that the Second Circuit “has now plainly ruled that purchase-time price inflation is not enough and the plaintiff must in all cases plead a causal link between the complained-of omissions and the economic loss that was ultimately suffered.” (For The 10b-5 Daily’s take on Emergent Capital – see here.)
Quote of note: “In many cases, it may be that the same omission or misrepresentation that allegedly caused price inflation at the time of the transaction in fact also caused a subsequent decline in the securities’ market value when the misrepresentation becomes apparent or the undisclosed problem wreaks injury. But the lesson of Emergent Capital (and Semerenko in the 3rd Circuit) is that such a causal link cannot be presumed; it must be pleaded and proved.”
Filed under All The News That's Fit To Blog
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