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

The Class Action Fairness Act 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. It is believed that Republicans have enough votes in the Senate to pass the bill, but Reuters reports that there is a disagreement over when it will reach the floor. The House passed its own version of the legislation almost a year ago.

Quote of note: “Republicans seeking curbs on what they call runaway litigation against business want to start debating the class action measure on June 1, when Senate Majority Leader Bill Frist has scheduled a vote on a motion to bring up the bill. . . . But Democratic aides predict Frist will not be able to get the 60 votes he needs to bring up the bill next Tuesday, because of the desire to resume debate on defense.”

The Associated Press has an article discussing whether the market should expect another set of corporate scandals in the future. Although human nature is unlikely to change, the article reviews the legal environment and concludes “[i]n sheer numbers, the legal activity of recent years – both government action and investor litigation – should be enough to give any would-be wrongdoer some immediate cause for pause.”

Quote of note: “‘I don’t think there’s a clear connection’ between legal risks and improper behavior, said Bruce Carton, executive director for Securities Class Action Services at ISS. ‘When the misdeeds are going on, people aren’t thinking years down the road, ‘Will this cost me in a class action suit?’ My sense is that (the legal risk) generally won’t deter the bad guys, but it may spur the bad guys’ employers to put safeguards in place that may catch or deter somebody down the line.'”

In a feature article this past weekend, the Washington Post addressed the issue of investor restitution for securities fraud. The article discusses some of the recent enormous settlements with regulators (e.g. the $1.4 billion settlement with the New York Attorney General over biased research reports) and concludes that the “problems with investor restitution are simple — there is never enough money to go around — and complicated — it can be difficult to determine who should get what little money there is.” The article also touches on another difficult problem, how to reconcile the SEC’s new powers to collect settlement funds for allocation to investors with private securities litigation.

Quote of note: “The SEC is asking Congress for the power to seize more assets from wrongdoers who otherwise might shelter them under the protection of state bankruptcy laws and for the ability to hire outside law firms to help it collect payments. A House bill [the Securities Fraud Deterrence and Investor Restitution Act] that would give the SEC that authority is pending before the Judiciary Committee. Former SEC staffer [Mercer E.] Bullard said the public shouldn’t demand that the agency invest a substantial portion of its resources into collecting penalties from wrongdoers. He said that is a task better suited to plaintiff lawyers.”

The 11th Circuit (Florida, Georgia, Alabama) is a tough place to bring a successful securities class action. That appears to be the conclusion of a Miami Daily Business Review feature article (via law.com – regist. req’d) on the topic. The article notes that a recent NERA report found that 10 percent of the securities class actions filed in the 11th Circuit since the passage of the PSLRA have been dismissed within two years – tied for second place among all circuits. The article also profiles some prominent cases.

Quote of note: A plaintiffs’ attorney in Florida contended “that the 11th Circuit’s standard for inferring intent to defraud — as set out in the 11th Circuit’s 1999 decision Bryant v. Avado — has ‘heightened the pleading requirements beyond the intent of Congress. Motive and opportunity and damages are not enough [in the 11th Circuit],’ [the plaintiffs’ attorney] said. ‘What do you have to have? Pictures? You almost need an insider to get to discovery.'”

According to a Reuters article, the CFO of Royal Ahold has told a Dutch newspaper that the U.S. securities class actions brought against the company in the aftermath of its recent accounting scandal could “‘last long, even 10 years is possible.'” Complicating the situation, Royal Ahold’s D&O insurance carrier has served the company with a court summons in an attempt “to terminate the Directors, Officers and Corporate Liability policy of $100 million for Ahold’s U.S. Foodservice subsidiary where much of the profit overstatements took place in 2002.” (The 10b-5 Daily has posted about this case before, most recently concerning the court’s discovery decision issued last March.)

The Milberg Weiss split has generated press coverage, including articles in the New York Law Journal (via law.com – free regist. req’d), Reuters, Bloomberg, and the San Diego Union-Tribune.

Quote of note (Reuters): “[T]he two firms agreed on a structure in which lawyers already working on a case would continue to work on it, even if that meant having attorneys from both firms on a case. A committee has been set up to deal with any spats.”

Not to be outdone, Cauley Geller Bowman & Rudman, another well-known plaintiffs’ securities class action firm, also has announced a split. Cauley Bowman Carney & Williams PLLC is based in Little Rock and Geller Rudman PLLC is based in New York. Each new firm has around 15 attorneys.

Addition: The official press release was issued on May 6.

Initially announced last June, the breakup of Milberg Weiss Bershad Hynes & Lerach, widely recognized as the leading plaintiffs’ securities class action firm, is finally complete. With little fanfare, the firm has split as of May 1 into Milberg Weiss Bershad & Schulman LLP (headquartered in New York) and Lerach Coughlin Stoia & Robbins LLP (headquartered in San Diego).

Although the split generally follows geographical lines, it will not stay that way for long. An article in today’s Financial Times states that one of the name partners of Lerach Coughlin sees “the new firm growing to more than 150 lawyers by the end of the year and opening new offices in New York, Florida, Philadelphia and Washington, DC.” Indeed, the websites already show both firms as having offices in Los Angeles and Washington, D.C. (but only Lerach Coughlin has attorneys listed in those locations).

Addition: The new firms have issued a joint statement. Of course, they also have separate thoughts on the matter (click here for Lerach Coughlin’s press release).

The Rocky Mountain News has an article on the mutual fund trading practices cases. (The 10b-5 Daily recently posted about the opening hearing in the cases, which have been consolidated in the D. of Md.) The article quotes an expert speculating that the settlements of the cases could total $1 billion.

Quote of note: “‘It’s hard to figure what a judge may grant in compensation, and that leaves a pretty dark cloud over the entire industry,’ [a Morningstar equity analyst] said. ‘What will happen in the class-action lawsuits is going to be a problem for any company involved in market timing and late trading.'”