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

Should opt-out plaintiffs be forced to contribute to the attorneys fees of the lawyers running the class action? According to a recent article in the Legal Intelligencer (via law.com – free regist. required), a federal judge has ruled that a group of plaintiffs who recently opted out of a class action antitrust case to pursue their own claims must set aside a percentage of any recovery to compensate the class action plaintiff lawyers. The case is Re: Linerboard Antitrust Litigation and is being heard before Senior District Judge Dubois in the E.D. of Pa.

The Linerboard plaintiffs had been litigating the case for five years, and were just about to conclude discovery, when a group of big-name plaintiffs decided to opt out of the class and file their own lawsuits. Judge Dubois “found that the opt-out plaintiffs have benefited from the years of work already done by the lead lawyers on the case and therefore must pay for that benefit.”

Judge Dubois’ opinion may have ripple effects in other areas of class action law. The recent decision by a few public entities to bring separate suits in prominent securities fraud cases, for example, certainly raises the possibility that the class attorneys in the relevant class actions will attempt to achieve a similar recovery of fees. (The 10b-5 Daily has posted about the bringing of separate suits by Ohio and California here and here.) Stay tuned.

Quote of note: “‘This is the rare antitrust case in which major entities and their counsel awaited the development of the case by designated counsel and only filed suit on the eve of the conclusion of discovery,’ DuBois wrote. DuBois ordered the lead lawyers and opt-out lawyers to meet and attempt to reach an agreement on the percentage of funds that should be sequestered from the opt-out plaintiffs’ recoveries.”

At the Council of Institutional Investors fall meeting last week, New York State Comptroller Alan Hevesi proposed the formation of an activist group dedicated to promoting corporate governance reforms, regulation, and legislation. The group will be called the National Coalition of Corporate Reform (NCCR) and there are plans to have an organizing meeting in October. Other public institutions, along with the president of the AFL-CIO, have expressed their support for the proposed group.

Reuters ran an article on the proposal and Hevesi has issued a press release.

Quote of note: NCCR’s agenda, Hevesi announced, includes – “Lobbying efforts will target changes in the Private Securities Litigation Reform Act of 1995, the Sarbanes-Oxley Act of 2002, the Class Action Fairness Act of 2003, SEC regulations, and state laws, where imbalances exist with respect to shareholder rights and corporate obligations.”

With the recent announcement of an investigation by New York’s attorney general into mutual fund trading practices, there is little doubt that money management firms can expect a wave of securities class actions. Indeed, a number of cases have already been filed.

The 10b-5 Daily will be tracking and reporting the developments in these cases. In the meantime, the Los Angeles Times has a solid primer on what has happened so far.

A federal judge has approved Conseco, Inc.’s (OTCBB: CNCEQ) bankruptcy reorganization plan over the objections of counsel in the securities class action against the company. Conseco is an Indiana-based insurance company that has been dogged by finanical difficulties over the last few years. According to a report in the Indianapolis Star, the plan includes broad legal protections for directors and officers.

Quote of note: “[A]t least two parties — including plaintiffs of a yet-to-be-certified class-action suit against Conseco — filed similar last-minute objections. They questioned [Judge] Doyle’s authority to allow such broad releases as well as whether they actually served Conseco’s long-term interest. . . . Doyle countered that federal appeals courts do allow broad legal releases as long as they are consensual to all parties, while Conseco attorneys said the releases will save the company significant costs in time and money that would be spent on legal issues.”

A column by Maggie Mulvihill in yesterday’s Boston Herald concludes that the state government probes into the financial services industry have been a boon for the securities plaintiffs’ bar.

Quote of note: “Bill Galvin. Drew Edmondson. Elliot Spitzer. To big business, they are bloodsucking fiends intent on using corporate finance scandals to advance their own political positions. But to plaintiffs’ lawyers, these guys are a dream come true. Their state probes and lawsuits are already opening the floodgates of hard-to-get corporate data – not to mention emboldening civil litigators to start papering courthouses with lawsuits against the financial services industry.”

The South Korean legislature continues to debate over legislation that would permit investors to bring securities class actions. The Korea Herald reports that South Korea’s major business lobbying groups have urged the government to “think twice” before implementing the change, which “could hamper business activities.”

The 10b-5 Daily has been following this story intently. South Korea is starting with a blank slate, with full knowledge of the pros and cons of the U.S. securities class action system. It will be interesting to see what the final legislation looks like.

Oxford Health Plans Inc. has been in a dispute with its excess insurance carriers over their contribution to the company’s March 2003 settlement of a securities class action for $225 million.

According to an article on the Dow Jones Newswires (suscrip. required), the company has agreed in principle to settle $17.9 million of its claims against the insurers for a total of about $14.3 million, which will be reflected in its third-quarter earnings. An additional claim for $23.9 million against one insurance carrier is still outstanding.

The August 18, 2003 edition of the Legal Times has an article (via law.com – free subscrip. required) on the previously announced breakup of Milberg Weiss Bershad Hynes & Lerach, widely recognized as the leading plaintiffs’ securities class action firm. (The 10b-5 Daily posted extensively on this development back in June, starting with this post.) The front page story by Andrew Longstreth (of The American Lawyer) takes a comprehensive look at the issues that may have led to the split.

The Associated Press reports today that the New York State Comptroller has released a report claiming that corporate scandals have cost New York nearly $13 billion over the last two years in reduced economic performance, tax revenues, and pension fund value. The article also notes that New York’s pension fund is the lead plaintiff in several securities class actions.

The state of Ohio, on behalf of its pension funds, continues to supplement pending securities class actions with its own individual suits. Over the weekend, the Washington Post reported that Ohio has both individually sued Freddie Mac and certain former officers for securities fraud and filed a motion asking that it be named lead plaintiff in the securities class action. The state currently has individual suits pending against AOL Time Warner (discussed in The 10b-5 Daily here), Enron, and WorldCom and is the lead plaintiff in a securities class action against Global Crossing.

Quote of note: “‘I don’t mean be excessively litigious, but I think in terms of what we’ve seen, we need to see more corporate accountability,’ [Ohio Attorney General Jim Petro] said.”