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

There will be no new posts on The 10b-5 Daily until next week (April 17).

The U.S. Supreme Court’s recent decision in Dabit and upcoming oral argument in Kircher has generated interest in the scope, meaning, and practical impact of the Securities Litigation Uniform Standards Act (“SLUSA”).

The author of The 10b-5 Daily, Lyle Roberts (Wilson Sonsini) will be moderating a Practicing Law Institute telephone briefing on this topic on Wednesday, April 19 at 1 p.m. ET. The briefing will cover the history of SLUSA, this term’s Supreme Court cases, and other current SLUSA issues. The panelists are Jay Kasner (Skadden Arps), who successfully argued the Dabit case on behalf of Merrill Lynch, and Robert Wallner (Milberg Weiss). CLE credit is available.

(1) The New York Law Journal has a column (via law.com – subscrip. req’d) in this week’s issue on the Supreme Court’s decision in the Dabit case.

(2) Professor John Coffee has a forthcoming article entitled Reforming the Securities Class Action: An Essay on Deterrence and its Implementation. He argues that the deterrence function of securities class actions would be enhanced by requiring corporate insiders to more frequently contribute to settlements. To accomplish this goal, Professor Coffee proposes two primary reforms: (a) the SEC should require a company’s independent directors “to assess the apportionment of liability among the corporation and its officers and explain in a public statement if they consider it to be fair to the corporation – and why;” and (2) “the court awarding attorneys fees in a securities class action should award substantially higher fees for the portion of the recovery obtained from insiders than on the portion obtained from the corporation.” Thanks to Lies, Damn Lies, and Forward-Looking Statements for the link.

There has been a considerable amount of media and blog coverage of the Dabit decision. Here is a partial roundup:

Media – Articles can be found in Bloomberg, the Financial Times, the New York Times, and the Washington Post.

Blog – Commentary, with some emphasis on the federalism implications of the decision, can be found on Concurring Opinions, Conglomerate, and PointofLaw.com.

The possibility that a number of companies have been backdating stock option grants to increase their value was the subject of a Wall Street Journal feature article (subscrip. req’d) this past weekend. The article notes that the practice “while not illegal in itself, could result in false disclosure.” As a result, a company may be “vulnerable to an allegation of securities fraud.” For some blogosphere commentary, see this post from Truth on the Market.

A recent district court decision discusses whether a lead plaintiff should be required to disclose its confidential sources as part of the discovery process. The court in In re CIGNA Corp. Sec. Litig., 2006 WL 263631 (E.D.Pa. Jan. 31, 2006) held that the defendants were entitled to the names of all individuals known by the plaintiff to have relevant knowledge, but the plaintiff was not required to specifically identify the confidential sources relied upon in the complaint. The court did note, however, that it would consider revisiting its decision if the defendants were presented with an overwhelming list of names.

Quote of note: “Of course, the recent identification of ‘Deep Throat,’ whose provision of information to the Washington Post led to the infamous Watergate scandal, also reminds us of the value of the free flow of information in a democratic society without fear of disclosure or retribution. However, as the D.C. Circuit’s decision in the case of Judith Miller shows, the ability to avoid disclosing a confidential informant is not absolute; in most instances there is indeed a balancing test. How should the optimal balance be determined in this case?”

The U.S. Chamber Institute for Legal Reform has released a paper entitled Securities Class Action Litigation: How is the System Working Ten Years After Enactment of the Private Securities Litigation Reform Act? The paper surveys various statutory, judicial, and policy issues that have arisen in this area of the law.

The Association of U.S. West Retirees is continuing its campaign against the attorneys’ fees being paid out in various settlements related to Qwest’s securities litigation (U.S. West and Qwest merged in 2000). Although the organization failed to reduce the attorneys’ fees in the shareholder litigation over the U.S. West/Qwest merger, it is back again, with some new colorful analogies, to challenge the attorneys’ fees request in Qwest’s recent $400 million securities class action settlement.

Quote of note: “‘It is all too obvious that lead counsel are the mere jackals to the government’s lions, feasting after both the United States Securities Exchange Commission and the United States Justice Department made the kill,’ [counsel for the Association of U.S. West Retirees] wrote. But ‘unlike the jackal, they seek the lion’s share’ of the settlement.”

Following up on his Wall Street Journal editorial from a few weeks ago, Professor Moin Yahya (University of Alberta) is debating Professor Larry Ribstein (University of Illinois) on whether short selling plaintiffs are engaged in illegal conduct. PointofLaw.com has all the action.

Dr. David Tabak of NERA Economic Consulting has written a working paper on the relationship between risk disclosures and damages in securities class actions. CFO.com has an article discussing the paper.

Quote of note (CFO.com): “Given the increasing potential for shareholder lawsuits, Tabak believes that top managers should give greater weight to the option of revealing the possibility of bad news before it becomes a certainty. The realization of such perils as an adverse interest-rate movement, a product failure, or an impending government probe ‘could easily lead to a large decline in a company’s stock price’ — a greater decline, he asserts, than what would have occurred earlier if the company had merely disclosed the probability that an event would take place.”