Monthly Archives: May 2004

May 13, 2004 · 9:13 pm

“What Do You Have To Have? Pictures?”

The 11th Circuit (Florida, Georgia, Alabama) is a tough place to bring a successful securities class action. That appears to be the conclusion of a Miami Daily Business Review feature article (via law.com – regist. req’d) on the topic. The article notes that a recent NERA report found that 10 percent of the securities class actions filed in the 11th Circuit since the passage of the PSLRA have been dismissed within two years – tied for second place among all circuits. The article also profiles some prominent cases.

Quote of note: A plaintiffs’ attorney in Florida contended “that the 11th Circuit’s standard for inferring intent to defraud — as set out in the 11th Circuit’s 1999 decision Bryant v. Avado — has ‘heightened the pleading requirements beyond the intent of Congress. Motive and opportunity and damages are not enough [in the 11th Circuit],’ [the plaintiffs’ attorney] said. ‘What do you have to have? Pictures? You almost need an insider to get to discovery.'”

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May 13, 2004 · 3:21 pm

Competing With Gusto

The Wall Street Journal has an article (subscrip. req’d) on the lead plaintiff hearing held last week in the mutual fund trading practices cases. (The 10b-5 Daily has posted about the cases frequently, most recently on speculation that the settlements could total $1 billion.)

Quote of note: “‘Nobody should expect to get rich off this case,’ said U.S. District Judge J. Frederick Motz in early April. ‘If there is any recovery, the great bulk of the recovery should go to those who were injured, not to their lawyers, particularly in light of the fact that so much of the underlying investigative work has already been done by public authorities,’ he added. ‘Any of you who have expressed an interest as being appointed as plaintiffs’ counsel are forewarned that we mean what we say. You may wish to reconsider your request for appointment in light of this observation.’ The admonishment did little good. Six dozen lawyers showed up at last week’s hearing to angle for a lead counsel spot.”

Quote of note II: “Legislation passed by Congress in 1995 and affirmed in court rulings dictate that plaintiffs with the largest financial stake in a case should get lead-plaintiff status, which usually makes their lawyers lead counsel. But it isn’t always clear which investor suffered most, especially when there are different ways of showing harm. In the mutual-fund cases, lawyers presented myriad formulas to make their clients look like the biggest losers.”

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May 12, 2004 · 7:24 am

Cornerstone Releases Report On Settlements

Cornerstone Research has released an updated report on post-Reform Act settlements of securities class actions through 2003. The findings include:

(1) Of the 96 settlements in 2003, almost 85% were for less than $20 million. Five cases settled for more than $100 million.

(2) 20% of post-Reform Act settlements have involved Section 11 or 12(a)(2) claims and median settlements as a percentage of “estimated damages” are significantly higher for these cases.

(3) Approximately 30% of post-Reform Act settlements have involved institutions serving as lead plaintiffs (as compared to approximately 15% before the Reform Act). After controlling for various factors, the report finds that settlement amounts are higher in these cases.

(4) Less than 15% of post-Reform Act cases have been accompanied by the filing of a derivative action.

Cornerstone’ also announced that its report on securities class action filings for 2003 (done jointly with Stanford Law School’s Securities Class Action Clearinghouse) will be released shortly.

Addition: The New York Law Journal (via law.com – regist. req’d) has an article on the report.

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Filed under Lies, Damn Lies, And Statistics, Settlement

May 11, 2004 · 12:33 pm

More On The Citigroup Settlement

There is extensive press coverage today of Citigroup’s $2.65 billion settlement in the WorldCom case. Some highlights:

Additional Settlements – The Wall Street Journal (subscrip. req’d) reports that the lead plaintiff has given the other defendant banks in the WorldCom litigation 45 days to settle under the same formula used by Citigroup. If the banks agree, they would pay about $2.8 billion to bond investors.

Allocation – The Associated Press reports that, according to the lead plaintiff in the case, Citibank’s payment will be allocated with $1.45 billion to bondholders and $1.2 billion to shareholders.

Attorneys’ Fees – The Wall Street Journal (subscrip. req’d) and the London Evening Standard report that the complex attorneys’ fees arrangement in the case may result in fees of around $140 million for the plaintiffs’ firms handling the litigation.

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Filed under Settlement, WorldCom

May 10, 2004 · 12:12 pm

“We Want To Put The Entire Era Behind Us”

Citigroup Inc. (NYSE: C) has announced a settlement of the claims against the company in the WorldCom litigation. Citigroup will make a payment of $2.65 billion, or $1.64 billion after tax, to be allocated between class period purchasers of WorldCom stock and WorldCom bonds. According to the press release, the path to settlement became easier last Thursday when New York State Comptroller Alan Hevesi, who oversees the lead plaintiff in the case, agreed to face-to-face discussions. Citigroup also announced that after settling the WorldCom claims it will have a “litigation reserve” of $6.7 billion on a pre-tax basis to address other legal matters, including the Enron securities class action.

News coverage can be found in Bloomberg, Reuters, and the New York Times.

Quote of note (Bloomberg): “Chief Executive Officer Charles Prince said Citigroup faced claims seeking $54 billion in the WorldCom lawsuit. ‘We made a $1.64 billion insurance policy to avoid a roll of the dice in front of a jury,’ Prince said on a conference call with investors. ‘We want to put the entire era behind us.'”

Quote of note II (Bloomberg): “Saudi Prince Alwaleed bin Talal, Citigroup’s largest individual shareholder, said Prince and Citigroup Chairman Sanford Weill called him this morning and he told them ‘I’m backing them all the way. If this was to go to court it would be so big, God help us,’ Alwaleed said. ‘The trend in the U.S. and New York is against corrupt practices. Look at Martha Stewart.'”

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Filed under Settlement, WorldCom

May 7, 2004 · 5:01 pm

Ten Years Is A Long Time

According to a Reuters article, the CFO of Royal Ahold has told a Dutch newspaper that the U.S. securities class actions brought against the company in the aftermath of its recent accounting scandal could “‘last long, even 10 years is possible.'” Complicating the situation, Royal Ahold’s D&O insurance carrier has served the company with a court summons in an attempt “to terminate the Directors, Officers and Corporate Liability policy of $100 million for Ahold’s U.S. Foodservice subsidiary where much of the profit overstatements took place in 2002.” (The 10b-5 Daily has posted about this case before, most recently concerning the court’s discovery decision issued last March.)

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May 6, 2004 · 7:31 pm

TALX Settles

TALX, Corp. (Nasdaq: TALX), a St. Louis-based business process outsourcer of payroll data-centric services, has announced the preliminary settlement of the securities class action pending against the company in the E.D. of Mo. The case, originally filed in December 2001, alleges that TALX made misleading statements that did not properly account for certain software and inventory, did not reflect certain write-offs, and did not accurately disclose certain business prospects. The settlement is for $5.75 million and will be paid by TALX’s insurance carriers.

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May 6, 2004 · 5:54 pm

Motion To Dismiss Denied In AOL Time Warner Case

The Washington Post reports that Judge Shirley Wohl Kram has denied most of the motion to dismiss in the AOL Time Warner securities class action pending in the S.D.N.Y. The complaint alleges that the defendants, both before and after the 2001 merger of AOL and Time Warner, improperly inflated results through ’round-trip’ deals that in effect overpaid other companies for goods, services, or equity in exchange for advertising revenue. In 2002, AOL Time Warner restated $190 million in revenue.

Judge Kram threw out some of the plaintiffs’ claims, including those against former AOL chairman Steve Case and various bondholder claims, but found that the allegations in the complaint “established sufficient circumstantial evidence of misbehavior or recklessness for the case to move forward” against the company and various current and former officials. (The 10b-5 Daily has posted frequently about the case, most recently about a discovery decision issued by the court last October.)

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Filed under Motion To Dismiss Monitor

May 5, 2004 · 10:35 pm

Group Pleading Takes Another Blow

The “group pleading” doctrine creates the presumption that the senior officers of a company are collectively responsible for misrepresentations or omissions contained in public statements made by the company (e.g., press releases, SEC filings). The U.S. Court of Appeals for the Fifth Circuit has recently held, in the first circuit court decision to address the issue, that the group pleading doctrine was abolished by the enactment of the PSLRA’s heightened pleading standards.

That decision is beginning to have an impact outside of the Fifth Circuit. In In re Cross Media Marketing Corp. Sec. Litig. 2004 WL 842350 (S.D.N.Y. April 20, 2004), the court found that the PSLRA’s “use of the singular ‘defendant’ counsels against group pleading in actions arising in securities fraud cases since the enactment of the [statute].” The court cited the Fifth Circuit decision and held that group pleading could not be used to establish that the individual defendants made misrepresentations or acted with scienter (i.e., fradulent intent).

Holding: Motion to dismiss granted with leave to replead.

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Filed under Motion To Dismiss Monitor

May 4, 2004 · 6:28 pm

Press Coverage Of The Big Breakup

The Milberg Weiss split has generated press coverage, including articles in the New York Law Journal (via law.com – free regist. req’d), Reuters, Bloomberg, and the San Diego Union-Tribune.

Quote of note (Reuters): “[T]he two firms agreed on a structure in which lawyers already working on a case would continue to work on it, even if that meant having attorneys from both firms on a case. A committee has been set up to deal with any spats.”

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