Broadcom Corp. (Nasdaq: BRCM), a California-based fabless semiconductor company, has announced the preliminary settlement of the securities class action pending against the company in the C.D. of Cal. The case was originally filed in 2001 and alleges that Broadcom improperly accounted for warrants given to customers who bought certain amounts of the company’s products. The settlement is for $150 million. Broadcom “expects that approximately $40 million of that amount will be paid by its insurance carriers.”
Reverse Auction
The Wall Street Journal has extensive coverage (subscrip. req’d) this week of an unusual turn of events in the class action pending against KPMG in the D. of Ark. The case was filed by the law firm of Bernstein Litowitz and alleges fraud in connection with the sale of certain tax shelters. In a recent motion, Bernstein Litowitz claims that another plaintiffs’ firm, Milberg Weiss, is “colluding” with KPMG to put together a new suit with a “pre-packaged settlement … presumably on terms less favorable to the class.”
The motion describes the situation as a “reverse auction,” with KPMG attempting to negotiate a weak settlement that will preclude other settlements. Bernstein Litowitz is seeking to halt any settlement negotitations, be designated interim class counsel, and prevent Milberg Weiss from filing its own suit. In today’s follow-up article, the paper reports that Bernstein Litowitz apparently has obtained confirmation that the talks between KPMG and Milberg Weiss are ongoing.
Filed under Lead Plaintiff/Lead Counsel
Shot Across The Bow
The PSLRA states that securities class action plaintiffs, within 20 days of filing a complaint, “shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class.” After the publication of this notice, it is not uncommon for other plaintiffs’ firms (who have not filed complaints) to publish similar notices in the hopes of attracting a client who can be put forward as a lead plaintiff candidate. The initial plaintiffs’ firms do not usually react to this practice in public, but that may be changing. In a recent case, the firms who filed the first complaint have issued a press release “cautioning investors” about these notices and stating that because they conducted an investigation prior to filing the complaint “they are in a superior position to answer questions about the claims alleged.” A link to the press release can be found here.
Filed under Lead Plaintiff/Lead Counsel
The Discovery Stay, Class Action Trials, And More On Enron
Some miscellaneous items that have been piling up in The 10b-5 Daily’s mailbox and around the web:
1) There is an interesting commentary, entitled “The Incoherent Jurisprudence of the PLSRA Discovery Stay,” in the May 18, 2005 issue of the Andrews Securities Litigation and Regulation Reporter (Westlaw cite: 11 No. 1 ANSLRR 2). The author (Jesse Weiss) examines the applicability of the stay where: (a) defendants have produced documents to government agencies; (b) plaintiffs have brought state law claims in addition to federal securities fraud claims; or (c) there are parallel proceedings in state or federal court.
(2) Securities Litigation Watch tries to track down the elusive answer to the following question: exactly how many securities class actions have gone to trial since the passage of the PSLRA? (As The 10b-5 Daily recently noted, everyone has a different number.)
3) The Christian Science Monitor has a feature article on the relative value of the recent Enron settlements.
Filed under All The News That's Fit To Blog, Discovery Stay
CVS Settles
In the wake of the billion dollar settlements in the Enron and WorldCom cases, it is easy to forget that a hundred million dollar settlement used to be considered very significant. CVS Corp. (NYSE: CVS), the country’s largest pharmacy chain, recently announced the preliminary settlement of the securities class action pending against the company in the D. of Mass. The case, originally filed in 2001, was scheduled to go to trial last month. The plaintiffs alleged that CVS failed to properly account for marked down items.
The settlement is for $110 million and will be paid “primarily” by the company’s insurance carriers. The Boston Globe had this report.
Filed under Settlement
Article Roundup
It was a busy week for news articles related to securities class actions. Here is a quick roundup:
(1) There were three noteworthy articles related to the Enron settlements. Forbes had a column on the potential attorneys’ fees. The Associated Press discussed the pressure on the other bank defendants to settle. Finally, CNN/Money offered an overview of the settlement landscape.
(2) The New Jersey Law Journal published a “practice paper” (via law.com – free regist. req’d) on the Third Circuit’s Chubb decision. (The 10b-5 Daily’s summary of the decision can be found here.)
(3) The June 2005 SCAS Alert contains an interesting survey of foreign legislative efforts to permit U.S.-style securities class actions.
Filed under All The News That's Fit To Blog
Sixth Circuit Applies Dura
In the first circuit court decision to apply the Supreme Court’s holding in the Dura case, the Sixth Circuit has affirmed the dismissal of a securities class action based on the plaintiffs’ failure to adequately plead loss causation. The case was brought against several former Kmart executives and PricewaterhouseCoopers. The plaintiffs alleged that the defendants misled Kmart’s investors in 2000 and 2001 prior to the company’s bankruptcy.
In D.E. & J. Limited Partnership v. Conaway, 2005 WL 1386448 (6th Cir. June 10, 2005) (unpublished), the Sixth Circuit found that the plaintiffs “did not plead that the alleged fraud became known to the market on any particular day, did not estimate the damages that the alleged fraud caused, and did not connect the alleged fraud with the ultimate disclosure or loss.” In the end, the plaintiffs relied entirely on allegations that they had paid artificially inflated prices for their Kmart stock and that Kmart’s stock price declined after the company announced its bankruptcy. The Sixth Circuit held that price inflation had been expressly rejected by the Supreme Court as an adequate basis for pleading loss causation. As for the bankruptcy filing, the plaintiffs “never alleged that Kmart’s bankruptcy announcement disclosed any prior misrepresentations to the market.”
Holding: Dismissal affirmed.
Filed under Appellate Monitor
J.P. Morgan Settles Enron-Related Claims
The dominos are beginning to fall. On the heels of Citibank’s settlement, JPMorgan Chase & Co.(NYSE: JPM) has announced a preliminary settlement of the claims brought against it as part of the Enron securities class action pending in the S.D. of Texas. The settlement is for $2.2 billion, bringing the total settlements in the case to $4.7 billion and counting. The Washington Post has this article.
Filed under Enron, Settlement
The Verdict
As previously noted in The 10b-5 Daily, securities class actions rarely go to trial – making trial verdicts big news. Thane International, Inc., a California-based direct marketing company, has announced a trial victory in a securities class action brought in the S.D. of Cal. and based on the company’s 2002 acquisition of Reliant Interactive Media Corp. in a stock swap. Reliant shareholders alleged that Thane had promised it would list the combined company on the Nasdaq National Market, but failed to do so. According to the press release, only six securities class actions have made it all the way to a trial verdict since 1996 (note that different sources have different numbers, but everyone appears to agree that the total is less than ten).
Thanks to Dave Tabak for the link.
Filed under All The News That's Fit To Blog
Reviewing The Second Circuit
The National Law Journal has a review (via law.com – free regist. req’d) of the Second Circuit’s major securities law cases over the past year. Click on the case name for The 10b-5 Daily’s take on the featured decisions – Dabit, Rombach, and Enterprise Mortgage.
Filed under Appellate Monitor
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