The 10b-5 Daily

The February issue of the Securities Reform Act Litigation Reporter includes The 10b-5 Daily’s summary of the Supreme Court argument in the Dura case. A pdf of the issue, which also contains an article on the PSLRA, detailed case summaries.

Disclosure and an Offer: The author of The 10b-5 Daily is on the Board of Advisors for the Securities Reform Act Litigation Reporter. The publisher has authorized a 33% discount on initial subscriptions to this useful periodical for readers of this weblog. For subscription information and to obtain the discounted price, call (202) 462-5755.

By a surprisingly large margin, the Senate passed the Class Action Fairness Act yesterday. The legislation applies some of the reform concepts in the PSLRA and SLUSA to all class actions. Notably, class actions meeting certain jurisdictional criteria would have to be heard in federal court. The Associated Press reports that the final vote in the Senate was 72-26. The House of Representatives, which had previously passed its own version of the legislation, is expected to take up the matter next week.

National Underwriter has an interesting article on remarks made at a directors and officers liability insurance conference by two prominent members of the plaintiffs’ securities litigation bar. The topics included private actions vs. class actions, derivative cases, holding corporate officers accountable, and what industry is likely to see a flurry of new suits (hint: insurance).

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.” Although the standard practice is for the notice to be put out on a wire service, some plaintiffs/counsel have chosen to publish their notice in the print edition of a single publication (with the express intention, it has been argued, of limiting the number of lead plaintiff candidates).

A minor court split has developed over whether publishing notice in the print edition of a single publication is sufficient. Last year, a D. of Md. court found that the publication of a notice in the New York Times did not meet the PSLRA’s requirements. A recent decision from the E.D. of Pa., however, has held that the publication of a notice in the Investor’s Business Daily was sufficient.

Securities Litigation Watch has posted extensively on the subject and the Legal Intelligencer has an article on the E.D. of Pa. decision (which also found that the notice does not need to contain an extensive description of the case).

In 2003, KPMG settled the claims against it in the Rite Aid securities litigation for $125 million. As reported in The 10b-5 Daily, a class member objected to the payment of 25% of that sum (i.e., $31 million) in attorneys’ fees. The district court approved the settlement terms despite the objection and an appeal followed.

According to an article (via law.com – free regist. req’d) in the Legal Intelligencer, the U.S. Court of Appeals for the Third Circuit has held that the district court should reconsider its fee award. The district court correctly applied the percentage-of-recovery approach, but erred in its application of a lodestar ‘crosscheck’ by focusing only on the hourly rates for the top lawyers handling the case, making the fee award appear more reasonable. The court found: “Had the hourly rates been properly blended, taking into account the approximate hourly billing rates of the partners and associates who worked on the case, the multiplier would have been a higher figure, alerting the trial court to reconsider the propriety of its fee award.”

It is important to note, however, that the court also rejected the argument that courts should be required to apply a sliding scale and reduce the percentage of a settlement going to attorneys’ fees based on the size of the fund. The opinion can be found here.