Category Archives: All The News That’s Fit To Blog

Texas billionaire Sam Wyly has been in litigation over the settlement in the Computer Associates securities class action for years, alleging that plaintiffs’ counsel improperly settled the case for a low amount just prior to the company’s public disclosures of accounting fraud. The 10b-5 Daily has previously posted about Wyly’s efforts to obtain documents related to the case (see here, here, and here). Having finally obtained the documents earlier this year, Wyly has brought a fraud action in New York state court against the relevant plaintiff law firms. Newsday has an article on the suit.

Quote of note: “The heart of Wyly’s claim is the distinct difference between two sets of shareholder lawsuits filed against CA — one in 1998 following a sharp drop in CA’s share price, and another in 2002 following revelations of federal probes of CA’s accounting. . . . The suit takes exception with the law firms’ claims that allegations in the two suits were largely similar and therefore could be combined for the purposes of a settlement. The suit claims that if allegations in the latter suit had been properly researched and argued, the settlement would have been much larger. Instead, Wyly’s suit argues, the 2002 suit never even reached the discovery phase.”

Addition: An alert reader notes that Wyly has not actually been given the documents he was seeking from plaintiffs’ counsel. According to the relevant court docket, production has been stayed pending an appeal of the court’s decision.

The trial of the year – if you are a securities litigator – has come to an end. Reuters and the Associated Press report that the jury in the JDS Uniphase trial has returned a unanimous verdict in favor of the defendants. (Thanks to Securities Litigation Watch for the links.)

Quote of note (Associated Press): “Christopher Dewees, JDS Uniphase’s chief legal officer, said the company participated in multiple settlement talks since the lawsuit was filed in 2002, but the parties remained ‘very far apart.’ ‘The company is obviously extremely pleased that the jury recognized that this case is without merit,’ he said in an interview. ‘But it is obviously chagrined to have spent the time, effort and money over the past 6 years to achieve this verdict.'”

The New Jersey Law Journal has an article discussing the status of the various Vioxx-related securities litigations pending against Merck & Co. The company entered into a $4.8 billion product liability settlement last week, which may make the plaintiffs’ cases easier to win. The securities class action, however, was dismissed earlier this year on statute of limitations grounds. The dismissal is being appealed to the Third Circuit. (The 10b-5 Daily has previously posted about the lead plaintiff dispute in the case.)

Plenty of cases get snatched from the hands of juries by settlements on the courthouse steps. The JDS Uniphase trial, however, is still going strong. More updates can be found on Crash.net (click here) and a San Jose Mercury News blog.

Quote of Note (San Jose Mercury News): “As of now, it looks like closing arguments will start sometime on Monday (maybe) and continue through at least Tuesday.”

Addition: Meanwhile, Securities Litigation Watch reports that another securities class action trial has gotten underway in the D. of Arizona. The corporate defendant in the case, which started in 2004, is Apollo Group.

A few interrelated items of note:

(1) The New York Law Journal has a column (Nov. 15 edition – subscrip. req’d) on possible securities litigation reform. Professor John Coffee argues that “we have too little securities litigation in the contexts where it would be useful and too much securities litigation in the contexts where it is useless.” He suggests a compromise reform that would “restore ‘aiding and abetting’ liability by overturning Central Bank, while also placing a percentage ceiling on the non-trading corporation’s liability in a secondary market case.”

(2) Professor Coffee states in his column that the number of securities class actions has dropped and “no real upturn is in sight.” Others are not so sure. The D&O Diary had a post two weeks ago noting that a significant upturn in filings appeared to be underway. That trend is continuing, fueled largely by filings from a single plaintiffs’ law firm. Coughlin Stoia has filed ten new securities class actions so far this month (click here for a press release search).

(3) Lots of suits leads to lots of settlements. RiskMetrics has released the Securities Class Action Services (SCAS) 50 Power Rankings report, which ranks the top 50 plaintiffs’ law firms based on various settlement statistics. Coughlin Stoia heads the list for cumulative dollar value of securities class action settlements from 2003 to 2006.

While media reports on the JDS Uniphase securities class action trial have tapered off since the opening statements, there is one place to get updated reports – Crash.net, a motorsport website. It turns out that Kevin Kalkhoven, the former CEO of JDS Uniphase and a defendant in the case, is one of the owners of the Champ Car World Series. Accordingly, Crash.net is following the trial closely, with a focus on Kalkhoven (click here, here, here, here, and here for the last two weeks of coverage).

Quote of note: “The trial is scheduled for nineteen days, which means if all goes according to plan, the evidentiary portion of the trial will end on Friday 16 November. Then, the thanksgiving week will be a ‘break’ for all lawyers and jurors, before reconvening the following week for closing arguments and jury deliberations.”

After the large settlement comes the large fee request. The Tyco settlement, at $3 billion with an additional $225 million to be paid by PricewaterhouseCoopers (the company’s auditor), has been hailed as the largest payout ever by a single corporate defendant in a securities fraud lawsuit. The Wall Street Journal has a report on the attorneys’ fees requested by the lead counsel for the plaintiffs – $460 million, or 14.5% of the settlement. Three institutional investors who are members of the class have objected to the size of the request. WSJ Law Blog has a rundown of the numbers.

Quote of note: “In similar cases, known as mega securities settlements, fees have averaged closer to 10%. ‘This is something of an outlier in terms of the percentage of the fee request,’ says Adam Savett, a director of the Securities Class Action Services Group, a unit of RiskMetrics Group. He added, ‘Plus, the sheer size of the fee check that the judge will picture in his mind might pose a burden.'”

There was talk about an increase in the number of securities class action trials back in 2005, but the trend never went anywhere. Not surprisingly, therefore, the start of the trial in the JDS Uniphase case has generated a fair amount of media attention. The case has an interesting history, including the lead plaintiff taking out a newspaper advertisement urging JDS Uniphase employees to disclose what they know about the alleged fraud.

Coverage of the opening statements in the trial can be found in Reuters (plaintiffs), the San Jose Mercury News (plaintiffs), and, from a few hours ago, the Associated Press (defendants).

Addition: RiskMetrics Group has put together a handy summary of post-PSLRA securities class action trials (via WSJ Law Blog).

There has been an interesting development in the long-running Coca-Cola securities class action. According to media reports, the defense has sought denial of class certification based on alleged misconduct by lead counsel for the plaintiffs (Coughlin Stoia and Chitwood Harley) relating to payments to witnesses. Coca-Cola asserts that these are the “same sort of tactics” that the former lead attorney on the case has admitted to as part of a recent criminal plea agreement. Coverage can be found in the Wall Street Journal, and Reuters.

A few items of interest:

(1) The D & O Diary has a post examining recent securities class action decisions involving foreign investors. One type of litigation that is receiving a lot of attention is “foreign cubed” cases (defined as an action brought in the U.S. against a foreign issuer, on behalf of a class that includes not only investors who purchased the securities in question on a U.S. securities exchange, but also foreign investors who purchased the securities on a foreign securities exchange).

(2) Securities Litigation Watch has a post on a recent Ninth Circuit case setting out the standard for determining when an investor is on inquiry notice of his securities fraud claim for purposes of the running of the statute of limitations. The case is Betz v. Trainer Wortham & Co., Inc., 2007 WL 2874369 (9th Cir. Oct. 4, 2007).

(3) Two new papers on determining securities fraud damages have been published: Inflation and Damages in a Post-Dura World (David Tabak – NERA) and The Loss Causation Requirement for Rule 10b-5 Causes-of-Action: The Implication of Dura Pharmaceuticals v. Broudo (Allen Ferrell – Harvard; Atanu Saha – Alix Partners).