The PSLRA states that securities class action plaintiffs, within 20 days of filing a complaint, shall publish a notice advising the proposed class of the suit. After the publication of this notice, it is not uncommon for other plaintiffs’ firms (who have not filed complaints) to publish similar notices in the hopes of attracting a client who can be put forward as a lead plaintiff candidate. Not surprisingly, as discussed in this post on Securities Litigation Watch, the initial plaintiffs’ firms do not care for this practice. (Click here for more on the battle of the press releases from last June.)
Category Archives: All The News That’s Fit To Blog
Class Actions Overseas
France has been considering the implementation of a class action system. Those plans are coming under criticism, however, as at least one French attorney (who recently filed a suit against Vivendi on behalf of shareholders) looks to the Internet to recruit clients. The Associated Press has an article.
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For SEC Use Only
Section 304 of the Sarbanes-Oxley Act of 2002 provides that a company’s CEO and CFO must disgorge certain bonuses, equity-based compensation, and trading profits if the company is required “to prepare an accounting restatement due to the material noncompliance of the issuer, as a result of misconduct, with any financial reporting requirement under the securities laws.” Although Congress did not create an express private right of action in the statute, recent securities class actions and derivative suits often include a tag-along Section 304 claim.
The Legal Intelligencer reports (via law.com – free regist. req’d) that a federal judge finally has had the opportunity to address whether private litigants, as opposed to the SEC, can bring a Section 304 claim. In a derivative suit brought against Stonepath Group in the E.D. of Pa., Judge Dalzell has ruled that Congress did not intend to create an implied private right of action. The court found that another Sarbanes-Oxley provision expressly creates a private right of action, leading to the conclusion that Section 304’s silence should be interpreted as restricting enforcement of the statute to the SEC. The case is Neer v. Pelino – a Westlaw cite will be added to this post when available.
Addition: Neer v. Pelino, 389 F.Supp.2d 648 (E.D.Pa. 2005).
Trials and More Trials
The Recorder has an article (via law.com – free regist. req’d) by Michael Tu on the increase in securities class action trials.
Quote of note: “The varying results from these trial verdicts gives both plaintiffs and defendants reason to believe that they can, under the right circumstances, take their cases to trial and win. Given that increasingly aggressive settlement postures now being taken by plaintiffs are decreasing the defendants’ relative risks of going to trial in many cases, defendants are less likely to settle when they believe they have a defensible case.”
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Charitable Causes On Hold
The Wall Street Journal reports (subscrip. req’d) that the state court judge presiding over the Oracle derivative case has temporarily declined to approve the proposed settlement. The CEO of Oracle agreed to pay $100 million to charity on behalf of the company, while the company will make a payment of $22.5 million in legal fees to plaintiffs’ counsel. The terms of the settlement have come under criticism.
According to the article, the judge “seemed favorably disposed to the general outlines of the deal, but said he wanted more testimony about why Oracle shareholders should bear the cost of . . . legal fees.” The next scheduled hearing is on November 15.
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Supreme Court To Address Circuit Split On SLUSA
The Supreme Court has granted cert in the Dabit case (2d. Cir.) and will address the scope of the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”).
SLUSA preempts certain class actions based upon state law that allege a misrepresentation in connection with the purchase or sale of nationally traded securities. The issue before the Supreme Court is the application of the “in connection with” requirement. In particular, the court will resolve the circuit split between the Second and Seventh Circuits over whether SLUSA preemption applies to claims brought solely on behalf of persons who were induced to hold (but not purchase or sell) securities.
The 10b-5 Daily has posted frequently on this issue, including posts on the underlying Second Circuit opinion in the Dabit case finding that SLUSA only applies to purchaser/seller claims and the Seventh Circuit’s opinion in the Putnam Funds II case reaching the opposite conclusion. For a cite to an article discussing the circuit split and its ramifications, see this post.
More Dead Fish
The Rocky Mountain News has another article on the attorneys’ fees challenge in the $50 million settlement of the shareholder class action related to the merger of Qwest Communications and U.S. West. Having suggested that the settlement stunk “like a three-day-old unrefrigerated dead fish” (see this post), it is perhaps not surprising that the Association of U.S. West Retirees is pursing an appeal of the denial of its fees challenge.
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O Canada Again!
Mondaq’s has published a law firm summary of the new securities class action legislation set to go into effect in the Canadian province of Ontario. (The 10b-5 Daily has recently posted about the legislation.)
Quote of note: “[T]he Ontario regime contains two measures to reduce the potential for strike suits (although it remains to be seen how successful these measures will be). First, a plaintiff is required to obtain leave of the court before bringing a lawsuit, and the court will grant leave only if it is satisfied that the suit is being brought in good faith and has a reasonable prospect of success at trial. Second, the court must approve any proposed settlement of a lawsuit (this is also true of an SEC Rule 10b-5 lawsuit that is brought as a class action).”
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More On Charitable Causes
The New York Times and San Jose Mercury News have opinion columns today questioning the propriety of the Oracle derivative settlement announced earlier this week. The CEO of Oracle agreed to pay $100 million to charity on behalf of Oracle, with an additional payment of $22.5 million in legal fees to plaintiffs’ counsel.
Quote of note (Times): “John C. Coffee Jr., a professor of securities law at Columbia University, is not persuaded justice was served. He suggested that it ‘would be fairer if the plaintiffs’ attorneys would take their fee in the form of a charitable contribution that Mr. Ellison would make in their name to charities of his choice.’ Perhaps, he mused, Mr. Ellison would choose a charity that promotes tort reform.”
Quote of note II (Mercury News): “There’s certainly a long history of Silicon Valley tycoons giving less than full respect to the rights of shareholders. Whether this justifies such an unusual settlement is debatable. Either way, it’s going to be a tough call for Judge Schwartz.”
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Charitable Causes
The derivative litigation surrounding alleged insider trading by Larry Ellison, the CEO of Oracle, has taken a surprising turn. (The 10b-5 Daily has previously discussed the contradictory judicial decisions over this trading in a post entitled “Is A Billion Dollars In Stock Sales Significant?”) The New York Times reports that Mr. Ellison will pay $100 million to charity to resolve one of the two derivative cases pending in California state court. The attorneys for the derivative plaintiff will receive a separate payment of $22.5 million.
Quote of note: “‘I’ve never heard of anything, structured from the beginning as a settlement this large, going to a charity,’ said Michael A. Perino, a law professor at St. John’s University School of Law. Typically, Mr. Perino said, a derivative action results in a payment to the company.”
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