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

Over the weekend, the Associated Press reported that state public employee pension funds in Ohio and California have declined to join the federal securities class action against AOL. Instead, they have sued AOL separately in state court based on the same conduct. Note that this is part of a trend for the Ohio funds, which have also sued Enron and WorldCom in state court.

Quote of note: “‘The class-action lawsuit, you get peanuts at the end of it,’ Ohio Attorney General Jim Petro said.”

The National Law Journal (July 21, 2003 edition) has a breakout of “The Plaintiffs’ Hot List” of law firms. A number of plaintiffs firms that focus on securities class actions have made the list.

The July 11, 2003 edition of the New York Law Journal contains an article (via law.com – regist. required) on the potential impact of the Sarbanes-Oxley Act of 2002 on securities litigation. The authors, Robert Jossen and Neil Steiner, discuss three issues: (1) the statute of limitations; (2) the advancement of legal fees for individual defendants; and (3) possible attempts to bootstrap violations of the act into Rule 10b-5 claims.

Quote of note: “One area that can be anticipated to be a field for imaginative claims concerns the new certification requirements of the act. Indeed, class action plaintiffs in at least two recent cases have included allegations that the company and its top executives filed the certifications required by Sarbanes-Oxley, but the underlying financial data nevertheless was incorrect. While those complaints do not take the next step and allege that the incorrect certification itself constituted a violation of the securities laws, it may be only a matter of time before defendants see class action complaints make such allegations.”

The June 27, 2003 edition of the National Law Journal contains a column (via law.com – subscrip. required) analyzing the case law on the statute of limitations for securities fraud cases. Sarbanes-Oxley has extended the statute of limitations “to the earlier of two years after the discovery of the facts constituting the violation or five years after such violation.”

Quote of note: Sarbanes-Oxley “clearly provides that this amendment ‘shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act [July 30, 2002].’ Left unresolved is whether the amendment salvages expired claims or extends the limitations period for pending claims. Compare Roberts v. Dean Witter Reynolds Inc., 2003 WL 1936116 (M.D. Fla. March 31, 2003) (holding that the amendment revives expired claims) with De La Fuente v. DCI Telecommunications Inc., 2003 WL 832009 (S.D.N.Y. March 4, 2003) (holding that the amendment does not apply to claims pending at time of enactment).”

The Baltimore Business Journal has an article on the litigation pending against Ahold NV based on alleged accounting fraud at U.S. Foodservice, its Columbia, MD subsidiary. The Judicial Panel on Multidistrict Litigation has consolidated the shareholder and employee suits in the D. of Md. before Judge Catherine C. Blake. The 10b-5 Daily has previously posted about the large number of suits that have been filed in this case.

There is an interesting Reuters article on the nascent, but perhaps growing, movement to override the U.S. Supreme Court’s decision in the Central Bank case and restore aiding and abetting liability in private Rule 10b-5 cases. While the absence of aiding and abetting liability does not completely shield a company’s lawyers, accountants, and bankers from litigation risk, it does make it more difficult for investors to bring claims against them.

Legislation to restore aiding and abetting liability has been proposed in the House of Representatives (see this earlier post). Meanwhile, courts (notably in the Enron case) have begun to chip away at Central Bank’s holding by creating a broad definition of “primary violator.”

Quote of note: “Rolling back Central Bank of Denver to expose corporate advisers to more liability is favored by plaintiffs’ lawyers who bring suits on behalf of shareholders. ‘This rule is important … Many, if not, most frauds involve participation of a whole network of assistors,’ said Jon Cuneo, spokesman for the National Association of Shareholder and Consumer Attorneys.”

An article in the Financial Times examines the recent “Mass Torts Made Perfect” seminar held in Chicago. The trial lawyers in attendance appear to agree that Wall Street is a ripe target, with the $1.4 billion settlement by the investment banks for analyst fraud merely the beginning.

Quote of note: “Mike Papantonio, the head of the mass tort department at Florida law firm Levin, Papantonio who has a record of securing million-dollar awards, said: ‘The money from Spitzer is a drop in the bucket. [Investment bank] reserves need to be in line with the major pharmaceutical companies.'”

The Associated Press has an article discussing the financial costs associated with the problems at Rite-Aid Corp. The 10b-5 Daily has previously posted about the related securities class action here. Interestingly, both plaintiffs’ counsel and an independent expert appear to agree that it is very difficult to determine the actual damages suffered by Rite-Aid’s shareholders as a result of the alleged fraud.

The Wall Street Journal (subscription required) reports today that Tyco International Ltd. will “restate its financial results back to 1998 to correct $696.1 million that it mistakenly classified as pretax charges in recent quarters.” It is the fifth time in seven months that Tyco has announced accounting problems. The restatement will not change the overall financial results for the Company during the period in question.

Tyco is a defendant in a securities class action in the D. of N.H.

Quote of note: “The restatements also complicate Tyco’s legal situation in shareholder lawsuits it is facing over scandals that have battered its share price. Once companies restate, plaintiffs no longer have to prove past financial statements were wrong.”

The Los Angeles Daily Journal has an article on the Milberg Weiss split, including further speculation on the causes. (Thanks to Corp Law Blog for the link.)