Harvey Greenfield was a plaintiffs’ securities class action lawyer who passed away in 2002. A proud alumnus of Harvard Law School, Greenfield indicated to people that he planned to leave the bulk of his $35 million estate to the school. But a year after Greenfield’s death, his will cannot be located and there is an ongoing battle between Harvard and his sole living heir over who will receive the money. The August 20, 2003 edition of the New York Law Journal contains an article (via law.com – free registration required) discussing Greenfield (including his famously abrasive dealings with other lawyers) and the legal contest over his estate.
PricewaterhouseCoopers 2002 Securities Litigation Study
PricewaterhouseCoopers LLP has issued a study on private securities litigation trends in 2002 and the first part of 2003. Notable findings for the period from January 1, 2003 to July 31, 2003 include:
(1) 60 securities class actions were settled with a total settlement value of $1.5 billion ($25.1 million average).
(2) The total number of securities class action filings in 2003 is on track to be approximately 190 (down from 217 in 2002).
(3) The number of securities class actions involving health services and pharmaceutical companies is rising, while the number of cases against telecommunications and utlilities companies has dropped dramatically.
Quote of note (from the related press release): “In 2002, approximately one out of every five shareholder class actions involved either a Department of Justice investigation, or a federal indictment, conviction or guilty plea/conviction, a 200 percent increase over 2001, and a 290 percent increase over the average for the years 1996 through 2000.”
Filed under Lies, Damn Lies, And Statistics
Analysis Of The Milberg Weiss Breakup
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.
Filed under All The News That's Fit To Blog
New York Pursues Claims
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.
Filed under All The News That's Fit To Blog
“Bounty On Directors and Officers”
According to the Recorder (via law.com), a prominent securities class action plaintiffs’ attorney stated at a recent ABA seminar that “he has been offered 50 percent of any judgment that comes directly from the pocketbooks of individual directors and officers.” Moreover, his institutional clients are committed to defending this type of fee arrangement in court.
Note, however, that this is not really a new revelation. An article in the January 2003 issue of the Corporate Legal Times (only available online via Westlaw or LexisNexis) discussed the use of premium fee arrangements to target the personal assets of alleged corporate wrongdoers under the sub-headline “Institutional Investors Place a Bounty on Directors and Officers.” Just something else to keep corporate executives up at night.
Filed under Curiouser and Curiouser
Medi-Hut Settles
Medi-Hut Co., Inc., a New Jersey pharmaceutical and medical device maker, has announced the settlement of the securities class action filed against it in the D. of N.J. The suit was based on alleged accounting fraud. If approved by the court, the settlement will pay investors $400,000 in cash and 861,990 shares of stock (currently trading at about 15 cents a share).
Addition: The August 20, 2003 edition of the Newark Star-Ledger has an article on Medi-Hut and the settlement.
Filed under Settlement
Qwest Cites Merrill Lynch Decision (And So It Begins)
There is little doubt that Judge Pollack’s decision in the Merrill Lynch research class actions is destined to be widely cited by securities litigation defendants — it certainly has caused attorneys to give more consideration to loss causation as a defense. Exhibit A: Qwest Communications International, Inc.
The Rocky Mountain News reported over the weekend that Qwest has filed a motion to dismiss the securities class action against the company citing the Merrill Lynch decision and arguing that plaintiffs have not adequately alleged that the supposed misconduct, rather than a general market decline, caused their losses. Predictably (especially if you regularly read The 10b-5 Daily), plaintiffs have responded that the Merrill Lynch case isn’t relevant, in part, because none of the plaintiffs in that case bought their stock from Merrill Lynch. The Qwest suit is before the U.S. District Court for the District of Colorado.
Quote of note: “In its court brief, Qwest cited the Merrill Lynch decision this summer. The class-action claim was dismissed, Qwest said, because the plaintiffs didn’t adequately prove that the conduct of the analysts, rather than a general market decline, caused their losses. Qwest attorneys argue that Qwest’s stock price too ‘generally rose and fell’ in a pattern corresponding to the broader Nasdaq telecommunications index.”
Filed under Motion To Dismiss Monitor
Man’s Attempt To Bite Dog Rejected
The McKesson HBOC securities fraud cases have generated a number of interesting legal developments over the years. The cases are based on the 1999 merger between McKesson and HBO & Co. After the merger was closed, McKesson announced that HBOC had improperly recorded certain software sales as revenues and that HBOC’s financial results would have to be restated. Several securities class actions were filed and the New York State Common Retirement Fund was eventually selected as the lead plaintiff.
In January 2001, McKesson filed a complaint and compulsory counterclaim against the Fund and former HBOC shareholders who exchanged more than 20,000 shares of HBOC stock for McKesson stock. The theory was that the investors were unjustly enriched by trading inflated HBOC shares for properly-valued McKesson shares. The district court dismissed the claim.
On Wednesday, the U.S. Court of Appeals for the Ninth Circuit weighed in on the case, holding that McKesson cannot sue its own investors on an unjust enrichment theory. First, the court held that an equitable remedy for McKesson was unnecessary given that there are legal remedies available to the company for the same alleged wrong. “McKesson has potential legal claims against any number of parties who, unlike the former shareholders, actually played a substantial role in the decision to enter the Merger Agreement; the former HBOC shareholders are not the only targets for recovery.” Second, the court declined to pierce the corporate veil to create liability for HBOC’s shareholders, noting that “there is no allegation that the HBOC shareholders exercised – or even had the ability to exercise – domination or control over HBOC.” Finally, the court concluded that the expansion of liability to the shareholders, who were unaware of the risk that they could be personally liable for corporate acts, would be unjust.
The Recorder has a story on the case (via law.com) and the decision can be found here. The case certainly highlights the difficulties in determining the winners and losers in securities fraud.
Filed under Appellate Monitor
Q2 2003 Review of Securities Class Actions
Veritas, an Atlanta corporation that provides securities litigation data and services, has released some of the results from its review of class action activity from April 1, 2003 to June 30, 2003. Notable findings include:
(1) 59 securities class actions were filed during the second quarter of 2003, a slight decline from the 65 securities class actions filed during the first quarter of 2003.
(2) Milberg Weiss was bumped out of its historically commanding position for lead counsel appointments by Schiffrin & Barroway, who garnered 27% of lead counsel appointments in the second quarter (Milberg came in second with 23% of the appointments).
(3) Milberg Weiss continued to dominate the settlement arena, with 30% of the settlements that were approved in the second quarter for a total of 68% of the total funds recovered.
Filed under Lies, Damn Lies, And Statistics
Alliant Energy Case Dismissed
The Milwaukee Business Journal reports that the securities class action against Alliant Energy, filed in the U.S. District Court for the Western District of Wisconsin, has been dismissed without prejudice. The case was based on Alliant’s alleged misrepresentations concerning its expected financial performance.
Filed under Motion To Dismiss Monitor
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