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

The securities class action against Conseco, Inc. (NYSE: CNO) in the S.D. of Ind. had been stayed pending the completion of the company’s bankruptcy. (See this earlier post about objections to the bankruptcy reorganization plan made by plaintiffs’ counsel for the class action). The Indianapolis Star reports, however, that the case is now back on track and a consolidated complaint has been filed.

When The 10b-5 Daily last posted about the Class Action Fairness Act, it had been left for dead on the U.S. Senate floor – the victim of a Democrat-led filibuster. The Washington Times reports, however, that a compromise has been reached with a few Senate opponents that will revive the bill for a vote early next year.

Quote of note: “Three Democratic senators changed their stances after language was inserted they say better protects consumers while still reining in many frivolous lawsuits and preventing lawyers from “venue shopping” in search of sympathetic judges and juries that award the biggest settlements. Those supporters now include Democratic Sens. Charles E. Schumer of New York, Christopher J. Dodd of Connecticut and Mary L. Landrieu of Louisiana, all of whom opposed the bill last month.”

The Senate Committee Report on the bill can be found here.

The Boca Raton News offers a roundup of Milberg Weiss’ securities class actions, especially those filed in Florida.

Class certification has been granted in the Interpublic Group (“IPG”) securities class action pending in the S.D.N.Y. The case is the result of a restatement IPG announced in August 2002 for the five years from 1997 to 2001, which corrected inter-company charges that had been wrongly declared as income for the European offices of one of IPG’s agencies. The only dispute on class certification was the length of the class period, which the court resolved in favor of the plaintiffs.

The 10b-5 Daily has previously discussed (in a post entitled “The Perfect Storm”), the court’s May 2003 denial of the motion to dismiss in this case.

The summer of loss causation cases has turned into the fall of loss causation articles examining those decisions.
A column in the October 24, 2003 edition of the New York Law Journal focuses on the decisions in Broudo (9th Cir.) and Merrill Lynch (S.D.N.Y.), The authors conclude that the “fraud on the market theory should not be expanded to enable plaintiffs to establish both transaction and loss causation.”
Quote of note: ‘[I]f the fraud on the market theory can serve double duty in this way, then the distinction between these two forms of causation will have collapsed. This is inappropriate. The PSLRA expressly codifies loss causation as a separate, free-standing element of a Section 10(b) claim.”
Not to be outdone, the November 6, 2003 edition of the New Jersey Law Journal has its own article (via law.com – free registration req.) on loss causation. The article discusses the recent Emergent Capital (2d Cir.) decision and finds that the Second Circuit “has now plainly ruled that purchase-time price inflation is not enough and the plaintiff must in all cases plead a causal link between the complained-of omissions and the economic loss that was ultimately suffered.” (For The 10b-5 Daily’s take on Emergent Capital – see here.)
Quote of note: “In many cases, it may be that the same omission or misrepresentation that allegedly caused price inflation at the time of the transaction in fact also caused a subsequent decline in the securities’ market value when the misrepresentation becomes apparent or the undisclosed problem wreaks injury. But the lesson of Emergent Capital (and Semerenko in the 3rd Circuit) is that such a causal link cannot be presumed; it must be pleaded and proved.”

The Wall Street Journal has an article (subscription required) in today’s edition on the record numbers of mutual-fund investors bringing arbitrations against their brokers. The article discusses the recent mutual fund trading scandal but concludes: “Individual investors aren’t likely to bring arbitration claims related to the explosive allegations involving rapid-fire trading from New York Attorney General Eliot Spitzer. That’s because the damage to any one investor is relatively small, and it’s hard to blame your broker for fund-company practices. Instead, these allegations are more likely to provide fodder for class-action lawsuits.” (The WSJ should catch up with current events, the class action suits are already here and more are being brought every day.) The article goes on, however, to describe some of the other mutual-fund practices being investigated by the regulators that may lead to even more individual, and perhaps class action, claims.

The Delaware Law Weekly has an article (via law.com – free regist. required) on the D. of Del.’s recent grant of class certification in the Tyson Foods. Inc. case. The plaintiffs, a group of hedge funds who were seeking to arbitrage a merger between Tyson and IBP, Inc., allege that on March 29, 2001, Tyson falsely stated that it was backing out of the merger with IBP due to a government investigation into accounting discrepancies at one of IBP’s units. (The 10b-5 Daily has previously posted about the class certification decision.)

The article offers a thorough overview of the numerous cases that have been brought as a result of the IBP acquisition. Interestingly, the genesis of the securities class action appears to be some of the findings in the Delaware Chancery Court’s order directing Tyson to perform on its contract and complete the merger.

Quote of note: “The parties ultimately argued their cases before Vice Chancellor Leo E. Strine Jr., who, on June 15, 2001, ordered specific performance of the merger agreement. Strine determined that Tyson tried to back out of the merger due to buyer’s remorse and not the SEC’s inquiries into IBP’s subsidiary. In an opinion dated June 18, 2001, Strine said Tyson wished it had paid less for IBP, particularly in view of both companies’ poor performances in 2001. Strine also called into question Tyson’s claims that it had relied on misleading information about the SEC inquiries, and thereby was inappropriately induced into the merger. Less than 10 days after the Delaware Chancery Court ordered specific performance of the companies’ agreement, Robinson’s opinion states that the first of several class actions was filed in the matter in the Delaware District Court.”

The American Lawyer looks at the future of securities class actions (from the plaintiffs’ perspective) in its Fall 2003 special edition on litigation. [Unfortunately, the website currently does not have the article posted.] The article focuses on the lead plaintiff provisions of the Private Securities Litigation Reform Act of 1995 (“PSLRA”) and discusses, in depth, the growing role of public pension funds in assuming the leadership of large suits. A number of issues are touched upon, including the effectiveness of the PSLRA, how plaintiffs’ firms attract public pension fund clients, and the statistical trends in this area of the law. Simply put, it’s a must-read article.

Quote of note: “Some thought that major mutual funds would consistently serve as lead plaintiff. The haven’t. And some thought that the number of class actions would steadily decline. Wrong again. But eight years after [the PSLRA’s] passage, the act is making good on its promise to involve institutions. Instead of professional institutional investors, however, its primarily public pension funds that are serving as lead plaintiffs in megaclass actions.”

Quote of note II: “What will be the effect of the Sarbanes-Oxley Act of 2002 and the myriad regulatory corporate governance changes? Will they stifle corporate fraud or will the new causes of action spawn more suits? The early indicators don’t suggest much change in any direction. A recent study by NERA Consulting shows little uptick since the blow-up of Enron and the passage of Sarbanes-Oxley. No increase. No decrease. Just a steady stream of suits.”