October 29, 2010 · 9:28 pm
A few items from around the web.
(1) Section 929Y of the Dodd-Frank Act directs the SEC to solicit public comments and thereafter conduct a study to determine the extent to which private rights of action under the antifraud provisions of the federal securities laws should be extended to cover transnational securities fraud. In other words, to what extent is the Supreme Court’s National Australia Bank decision a problem and what, if anything, should Congress do about it? The SEC has issued its request for comments, which are due by February 18, 2011.
(2) The New York Law Journal has a column (Oct. 27 – subscrip. req’d) on a recent Second Circuit securities decision. In MF Global, the court evaluated the scope of the bespeaks caution and loss causation defenses. The 10b-5 Daily’s summary of the decision can be found here.
(3) Good news – the plaintiffs firms in the Gildan Activewear case are sufficiently diverse to settle the matter. Last month, the judge issued an unusual order (after a preliminary settlement had already been reached) requesting that the firms make every effort to assign a diverse team to the case. The WSJ Law Blog reports that the judge has issued a new order clarifying that he “did not mean to be critical of the firmsâ€™ diversity efforts or staffing of the case.”
September 24, 2010 · 10:10 pm
A couple of items from around the web.
(1) Professor John Coffee has a New York Law Journal column (Sept. 17 – subscrip. req’d) on the impact of the National Australia Bank (NAB) decision on SEC and private actions. The column discusses a factual scenario in which a U.S.-based stock promoter defrauds U.S. investors in a transaction that is consummated overseas. Post-NAB, the U.S. investors cannot bring an action under Section 10(b)/Rule 10b-5, but “they could sue in the United States based on a cause of action under foreign law.”
(2) The American Lawyer has an article on an unusual order (to say the least) issued in the Gildan Activewear securities class action. Although lead counsel was appointed two years ago and the parties have entered into a preliminary settlement, the court instructs the two plaintiffs firms to “make every effort” to assign at least one minority and one woman to the case. The order states that this is warranted because the class has thousands of members “arguably from diverse backgrounds” and it is “therefore important to all concerned” that lead counsel also be diverse.
September 9, 2010 · 6:14 pm
Do you have some availability on Tuesday, Sept. 21 in New York? It is not too late to sign up for PLI’s Securities Litigation & Enforcement Institute 2010. All of the details can be found here.
Lyle Roberts of Dewey & LeBoeuf (the author of The 10b-5 Daily) is co-chairing the program. The outstanding faculty will cover a wide range of topics, including financial crisis litigation, the latest corporate governance litigation issues, case management and settlement techniques, SEC and DOJ trends, and practical advice on handling government investigations.
Hope to see you there.
August 6, 2010 · 11:16 pm
A couple of interesting items from around the web.
(1) A former Grant & Eisenhofer (“G&E”) attorney has sued the firm on behalf of Tyco investors. The suit alleges that G&E collected excessive fees for its role as lead counsel in the Tyco securities class action. Tyco settled for nearly $3 billion. G&E subsequently requested and received (over the objections of three institutional investors) an attorneys’ fees award of $464 million. The new suit alleges that G&E actually had a contract with the Teachers Retirement System of Louisiana, one of the co-lead plaintiffs, to limit its fee request to $210 million and to oppose anything higher. Bloomberg has an article on the suit, while Am Law Daily raises some questions about its validity.
(2) In the wake of the National Australia Bank (“NAB“) decision, plaintiffs have argued that the Court’s limitation on the extraterritorial reach of Section 10(b) does not apply to U.S. purchasers who purchase foreign securities on foreign exchanges. The early returns, however, favor the defendants. In the Credit Suisse securities class action, the court found that NAB precludes these “f-squared” claims. Meanwhile, according to a National Law Journal article, the judge in the Toyota securities class action has indicated that any “f-squared” claims may not be allowed to proceed. In light of that determination, the judge appointed a lead plaintiff based on which applicant had the greatest loss associated with trading in Toyota’s American Depositary Shares (i.e., ignoring any trading in Toyota securities that did not take place on a U.S. exchange).
July 8, 2010 · 3:51 pm
The author of The 10b-5 Daily, Lyle Roberts (Dewey & LeBoeuf), is moderating a Practicing Law Institute audio webcast on the U.S. Supreme Court’s recent National Australia Bank decision. The webcast will take place on Friday, July 9 at 1 p.m. ET and CLE credit is available. Click here to register.
May 27, 2010 · 11:32 pm
A couple of items from around the web.
(1) The D&O Diary has a helpful summary of the Senate Financial Reform Bill. For securities litigators, however, the bill is probably more notable for what it does not include. A proposed amendment that would have restored aiding-and-abetting liability for private securities fraud actions failed to make it to a vote. Moreover, a provision in the related House bill that addressed the extraterritorial application of the federal securities laws was not included in the Senate version (but could turn up in the reconciled legislation).
(2) Law.com has a column on the Second Circuit’s recent Pacific Investment decision. (The 10b-5 Daily’s write-up on the case can be found here.) The authors argue that Pacific Investment confirms how difficult it is for plaintiffs to charge “secondary actors with securities fraud liability when no allegedly misleading statements were attributed to those persons at the time the statements in question were made.”
May 14, 2010 · 11:49 pm
Two items about inaccurate complaints in securities class actions.
(1) The Harvard Law School Forum on Corporate Governance and Financial Regulation has a post on a recent Second Circuit decision concerning confidential witnesses. In Campo v. Sears Holdings Corp., 2010 WL 1292329 (2d Cir. Apr. 6, 2010) (summary order), the district court permitted the defendants, as part of the motion to dismiss, to depose the plaintiffs’ confidential witnesses to determine if they had made the statements attributed to them in the complaint. On appeal, the Second Circuit approved of the district court’s use of the deposition testimony, in which the witnesses disowned or contradicted many of their alleged statements.
Quote of note (opinion): “The anonymity of the sources of plaintiffs’ factual allegations concerning scienter frustrates the requirement, announced in Tellabs, [Inc. v. Makor Issues and Rights, Ltd., 551 U.S. 308, 314 (2007),] that a court weigh competing inferences to determine whether a complaint gives rise to an inference of scienter that is ‘cogent and at least as compelling as any opposing inference of nonfraudulent intent.’ . . . Because Fed. R. Civ. P. 11 requires that there be a good faith basis for the factual and legal contentions contained in a pleading, the district court’s use of the confidential witnesses’ testimony to test the good faith basis of plaintiffs’ compliance with Tellabs was permissible.”
(2) The New York Law Journal has an article on a recent sanctions decision. In the Australia and New Zealand Banking Group case, a key scienter allegation concerned a set of internal e-mails that supposedly were sent in March 2007. The consolidated complaint dropped the allegation and, upon later examination by the court, plaintiffs’ counsel admitted that the March 2007 date had been based on a misreading of a news article about the company. Judge Cote (S.D.N.Y.) found that the allegation “was not an isolated misstatement concerning a collateral or trivial fact, but rather, a material allegation central to the viability of the entire pleading” and ordered plaintiffs’ counsel to pay sanctions.
Quote of note (opinion): “Such indifference to the truth of the pleading’s single most important factual allegation — coming, ironically, in the context of initiating a lawsuit that accuses another party of making reckless misstatements of material fact — is the sort of conduct that Rule 11 and the PSLRA seek to deter.”
March 12, 2010 · 9:42 pm
(1) The “group pleading” doctrine allows plaintiffs to rely on a presumption that statements in corporate documents are the collective work of individuals with direct involvement in the everyday business of the company. In its Tellabs decision, the U.S. Supreme Court declined to address whether this presumption is permissible under the PSLRA’s heightened pleading standards, but noted that there is “a disagreement among the circuits” on the issue. The New York Law Journal has a column (March 12 – subscrip. req’d) discussing the circuit split and recent “group pleading” decisions.
Quote of note: “Ultimately, as is clear from Tellabs, [the issue] is likely to be resolved by the Supreme Court. As suggested by Tellabs, the odds are the Supreme Court will conclude that a generalized assumption based on a defendant’s ‘title’ with no supporting evidence cannot constitute the particularity required by the PSLRA.”
(2) While the U.S. Supreme Court considers the National Australia Bank case, decisions in foreign-cubed cases are still being issued. In Copeland v. Fortis, 2010 WL 569865 (S.D.N.Y. Feb. 18, 2010), the plaintiffs alleged that Fortis, a Belgium-based provider of banking and insurance services, mislead investors concerning its financial condition. The primary markets for Fortis securities, however, were overseas (the only alleged trading in the U.S. was American Depository Shares on the over-the-counter market). In apply the “conduct” and “effects” tests for subject matter jurisdiction, the court found: (a) that any U.S. conduct was “ancillary to the fraud committed in Belgium,” and (b) the plaintiffs had failed to provide sufficient allegations about the number and percentage of U.S. investors to establish that the effect of the fraud on the U.S. was substantial. The court dismissed the complaint.
Quote of note: “I have no doubt that some Fortis investors are U.S. residents, and that Fortis’s alleged fraud had some effect upon U.S. investors and the U.S. securities market. From the allegations in the complaint, however, I cannot determine that the effect was ‘substantial.’ Plaintiffs bear the burden of demonstrating that subject matter jurisdiction exists, and these plaintiffs have not met that burden.”
January 29, 2010 · 6:19 pm
The big news today is the plaintiffs’ victory in the Vivendi trial. A few key points about the verdict have already emerged:
(1) The jury agreed with the plaintiffs that Vivendi made 57 false or misleading statements concerning its financial status. As to damages, however, it found that the company’s fraud was only responsible for half of the daily stock price inflation that plaintiffs had proposed.
(2) Counsel for the plaintiffs has stated that the overall damages in the case, depending on the number of shareholders who make claims and the amount of pre-judgement interest, could reach $9.3 billion.
(3) Perhaps surprisingly, the jury found that Vivendi’s former CEO and CFO (i.e., the individual defendants) were not liable.
(4) Vivendi already has announced that it plans to appeal the jury’s decision. Moreover, the release sets forth some of the proposed grounds, including “the Court’s decision to include French shareholders in the class, its rulings on jurisdiction and the plaintiffs’ erroneous method of proving and calculating damages, as well as the numerous incorrect rulings made during the course of the trial.”
Additional coverage can be found in Reuters, the Associated Press, and the WSJ Law Blog.
January 15, 2010 · 8:01 pm
A few items of interest from around the web.
(1) CFO.com examines whether the new year will bring regulatory reforms that could reverse the recent drop in securities class action filings.
(2) One entity that may have an effect on the world of securities litigation is the Financial Crisis Inquiry Commission, which started its work this week. The Wall Street Journal has an article (and related blog post) on the close ties between some of the Commission’s members and the securities plaintiffs’ bar.
(3) But the real action relating to the securities plaintiffs’ bar was in Florida, where the State Board of Administration selected five firms for its securities class action panel. It was a hard fought contest, with the St. Petersburg Times reporting that “[i]n the previous 14 months, lawyers and others tied to 51 firms interested in representing the SBA have spent at least $850,000 on Florida politics.” Moreover, the American Lawyer has obtained a number of the firms’ responses to the SBA’s detailed request for proposals. The responses include, among other things, information on billing, fees, settlements, portfolio monitoring, and disciplinary actions.
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