July 17, 2003 · 4:19 pm

Panel Discussion On Lead Plaintiff/Lead Counsel Selection

The May 2003 edition of the Fordham Law Review contains a transcript of an interesting, if slightly dated, panel discussion on the selection of lead plaintiff/lead counsel in securities class actions. See 71 Fordham L. Rev. 2363 (panel discussion took place on Feb. 5, 2002). The panel participants included Judge Edward Becker (3rd Cir.), Judge Milton Shadur (N.D. Ill.), Jill Fisch (Professor – Fordham), Gregory Joseph (private attorney), and Mel Weiss (private attorney).

Quote of note (Judge Becker): “Congress originally thought that institutions in this new client-driven, as opposed to lawyer-driven, regime that it was creating would be the lead plaintiffs, but it really has not turned out that way. The only institutions that have agreed to be lead plaintiffs are public pension funds and a few union-related institutions. By and large, the mutual funds was the group that I think Congress had in mind–because they’ve got more stock than anybody in any of these corporations that go sour–but the mutual funds won’t touch it. Doing a cost/benefit analysis, they think that it just ain’t worth it for them to get involved. So the mutual funds have not come forth as lead plaintiffs. The private pension funds have not.”

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July 17, 2003 · 3:32 pm

The Enron Watch V

Mark your calendars. The judge in the Enron securities class action has laid out the case schedule. According to an article in the Houston Chronicle, the trial will commence on Oct. 17, 2005, provided, of course, that the case ever gets to that stage.

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July 16, 2003 · 7:46 pm

The PSLRA: Much Ado About Nothing?

NERA, an economics consulting firm, has released its latest study on securities class actions entitled “Recent Trends in Securities Class Action Litigation: Will Enron and Sarbanes-Oxley Change The Tides?” The study reached the following conclusions about the trends in securities litigation since the passage of Sarbanes-Oxley in June 2002:

1) Securities class action filings have not increased dramatically (annual rate of 214 filings, compared to average annual rate of 208 filings from 1996-2001).

2) Dismissals have fallen sharply (half as many dismissals as in the previous 11 month period).

3) Average settlement values have fallen modestly ($22.7 million per settled case, compared to $25.5 million from 1996-2002).

These short-term trends are not nearly as interesting, however, as NERA’s findings suggesting that the PSLRA (enacted in 1995) has not achieved Congress’ goal of reducing meritless securities litigation. Indeed, the chances of a publicly-traded company being sued in a securities class action has increased (by 40.5%), while the percentage of cases dismissed (12-13%) or settled for nuisance value (24%) have remained roughly the same. These results lead to one question: has all of the controversy over the PLSRA (presidential veto, periodic calls for its repeal, etc.) been much ado about nothing?

Congress may want to take a hard look at the lessons of the PSLRA as it considers the Class Action Fairness Act and other tort reforms.

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Filed under Lies, Damn Lies, And Statistics

July 15, 2003 · 7:16 pm

Motion To Dismiss Filed In The AOL Time Warner Case

The New York Times is keeping on top of the AOL Time Warner securities class action. In a followup to its July 7 overview of the case (posted on The 10b-5 Daily), the paper has an article on the recently filed motion to dismiss. Among other things, AOL Time Warner argues that its restatement of $190 million is just 1% of its revenue over the period in question and that it disclosed all of its two-way deals with customers.

Quote of note: “The company’s motion to dismiss the suit is an expected part of the proceedings, and legal scholars consider it unlikely to succeed. But the relative strength of AOL Time Warner’s legal defense will help determine how costly it is for the company to resolve the suit, most likely through a settlement payment.”

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July 15, 2003 · 12:25 pm

Using Sarbanes-Oxley In Securities Litigation

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.”

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July 14, 2003 · 10:00 pm

Double Down On Winnick

Gary Winnick, the former Global Crossing executive, was not amused to find that his likeness appears on the “Shareholders’ Most Wanted” playing cards and sent a cease-and-desist letter directly to the distributers. The distributers, however, claim in this Reuters article that the letter was inappropriate because they are plaintiffs in the Global Crossing securities class action.

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Filed under Curiouser and Curiouser

July 14, 2003 · 7:16 pm

IPO Settlement Examined

The San Jose Mercury News ran a story yesterday on the proposed settlement by the issuer defendants in the IPO allocation cases. The author states that investors should not expect a quick or large recovery. The 10b-5 Daily has an earlier post on the settlement terms.

Quote of note: “Like many average IPO investors, Gallagher is hazy on exactly what iBeam or its investment bank was alleged to have done wrong. But he feels he deserves a cut of the settlement anyway. ‘I feel I deserve it because, well, I’m not certain why,’ Gallagher said sheepishly. ‘Nobody talked me into it, that’s for sure. The opportunity was there, and I decided to go for it.'”

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Filed under IPO Allocation Cases, Settlement

July 14, 2003 · 6:54 pm

Employees vs. Executives

The Atlanta Business Chronicle (via MSNBC News) has an article on the proliferation of ERISA class actions by employees being filed in the wake of similar securities class actions by shareholders. BellSouth and Scientific-Atlanta are two companies facing this situation. The 10b-5 Daily has commented on the issues raised by these parallel ERISA suits.

Quote of note: “The lawsuits are among the first in what could be many by members of company retirement plans, who, under federal law, can sue their employers more easily than average shareholders. Such lawsuits have already prompted some companies to extricate themselves from the process of overseeing their retirement plans.”

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Filed under ERISA Litigation

July 10, 2003 · 11:07 pm

The Enron Watch IV

According to a Reuters article, the trial in the securities class action against Enron is now scheduled to begin in October 2005 (nearly four years after the company’s bankruptcy).

Quote of note: “Kathy Patrick, a lawyer who represents Enron’s outside directors, told the judge that discovery could produce more than 100 million pages of documents. She likened the case to ‘the Bataan death march.'”

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July 10, 2003 · 12:41 am

Sarbanes-Oxley And The Statute Of Limitations

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).”

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