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

KPMG’s settlement of the claims against it in the Rite Aid litigation has given rise to an interesting battle over attorneys’ fees. In an opinion that came out two months ago, the U.S. Court of Appeals for the Third Circuit held that the district court should reconsider its fee award of $31 million (25% of the settlement). The Third Circuit found that although the district court correctly applied the percentage-of-recovery approach, it erred in its application of a lodestar ‘crosscheck’ by focusing only on the hourly rates for the top lawyers handling the case, making the fee award appear more reasonable.

On remand, however, the district court has once again awarded plaintiffs’ counsel $31 million in fees. See In re Rite Aid Corp. Sec. Litig., 2005 WL 697461 (E.D. Pa. March 24, 2005). Although the district court conceded that the new calculation increased the lodestar mutliplier from 4.07 to 6.96 (i.e., plaintiffs’ counsel will receive nearly 7 times the amount that they would have been paid if they had worked on an hourly basis), it nevertheless found that the award was still reasonable. In its decision, the district court noted that the “case appears to involve the largest class recovery on record against an auditor in a 10b-5 action, a fact no one at the hearing contested.” Moreover, the settlement was achieved “without relying on the fruits of any official investigation.”

The Legal Intelligencer has an article (via law.com – free regist. req’d) on the decision.

Texas Lawyer has an article (via law.com – free regist. req’d) on the U.S. Court of Appeals for the Fifth Circuit’s recent decision rejecting the use of “statistical” tracing to establish standing for Section 11 claims. The 10b-5 Daily posted about the case last week.

The Los Angeles Times has an article today on how disclosure issues can trigger shareholder litigation and SEC actions. The article focuses on the recent difficulties faced by many biotech companies. (The 10b-5 Daily has posted frequently on this topic.)

Quote of note: “Public demands that companies scale back secrecy have escalated since recent corporate scandals, and the SEC has supported more meaningful disclosure for public companies. Yet the pressures may raise particular issues in biotechnology because of the importance of test results and the profound effect that new products may have on the bottom line.”

Securities class actions rarely go to trial, but that does not mean they never go to trial. The Recorder reports (via law.com – free regist. req’d) that Ernst & Young has achieved a trial victory in a securities class action brought in the N.D. of Cal. and based on the accounting firm’s work for Clarent Corp. The plaintiffs filed the class action after accounting irregularities at Clarent came to light in 2001. Although the jury found no liability for Ernst & Young, Clarent’s former CEO was found liable for an accounting misrepresentation. Plaintiffs’ counsel has issued a press release stating that the trial was only the third trial of a securities class action in the last ten years.

As expected, the U.S. House of Representatives approved the Class Action Fairness Act today. Bloomberg reports that the final vote was 279 to 149. President Bush has said he will sign the legislation.

The February issue of the Securities Reform Act Litigation Reporter includes The 10b-5 Daily’s summary of the Supreme Court argument in the Dura case. A pdf of the issue, which also contains an article on the PSLRA, detailed case summaries.

Disclosure and an Offer: The author of The 10b-5 Daily is on the Board of Advisors for the Securities Reform Act Litigation Reporter. The publisher has authorized a 33% discount on initial subscriptions to this useful periodical for readers of this weblog. For subscription information and to obtain the discounted price, call (202) 462-5755.

By a surprisingly large margin, the Senate passed the Class Action Fairness Act yesterday. The legislation applies some of the reform concepts in the PSLRA and SLUSA to all class actions. Notably, class actions meeting certain jurisdictional criteria would have to be heard in federal court. The Associated Press reports that the final vote in the Senate was 72-26. The House of Representatives, which had previously passed its own version of the legislation, is expected to take up the matter next week.

National Underwriter has an interesting article on remarks made at a directors and officers liability insurance conference by two prominent members of the plaintiffs’ securities litigation bar. The topics included private actions vs. class actions, derivative cases, holding corporate officers accountable, and what industry is likely to see a flurry of new suits (hint: insurance).

The PSLRA states that securities class action plaintiffs, within 20 days of filing a complaint, “shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class.” Although the standard practice is for the notice to be put out on a wire service, some plaintiffs/counsel have chosen to publish their notice in the print edition of a single publication (with the express intention, it has been argued, of limiting the number of lead plaintiff candidates).

A minor court split has developed over whether publishing notice in the print edition of a single publication is sufficient. Last year, a D. of Md. court found that the publication of a notice in the New York Times did not meet the PSLRA’s requirements. A recent decision from the E.D. of Pa., however, has held that the publication of a notice in the Investor’s Business Daily was sufficient.

Securities Litigation Watch has posted extensively on the subject and the Legal Intelligencer has an article on the E.D. of Pa. decision (which also found that the notice does not need to contain an extensive description of the case).