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Securities Blog Digest |
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January 30, 2012
A Small Step Toward Curbing the Follow-On Derivative Suit Curse
Posted by
The D&O Diary
One feature of the recent changing mix of corporate and securities litigation has been the rise in the filing of follow-on derivative lawsuits in the wake of securities class action lawsuit filings. As Wilson Sonsini partner Boris Feldman recently noted, “like a moth drawn to a candle,” the derivative bar watches class action filings and “just cannot resist cribbing the class action complaints, even though the company’s setback does not suggest any breach of fiduciary duty.” View full post: http://www.dandodiary.com/2012/01/articles/shareholders-derivative-litiga/a-small-step-toward-curbing-the-followon-derivative-suit-curse/
January 27, 2012
SEC Drops Use of “Neither Admit Nor Deny” Settlement Language, in Some Cases
Posted by
Pom Talk
Reversing a long standing corporate-friendly practice, the Securities and Exchange Commission (SEC) will no longer allow corporate fraudsters to settle civil fraud charges by paying a fine without admitting wrongdoing. More specifically, the SEC will no longer allow defendants to say they neither admit nor deny civil fraud or insider trading charges when, at the same time, they admit to or have been convicted of criminal violations. However, the SEC will still use the “neither admit nor deny” settlement language when the SEC alone reaches a civil settlement, absent related criminal charges, which accounts for a large majority of SEC settlements. Recently, in November, a Federal District Court judge in New York specifically and sharply criticized the SEC’s… View full post: http://www.pomtalk.com/pomtalk/2012/01/sec-drops-use-of-neither-admit-nor-deny-settlement-language-in-some-cases.html
The Little Birdy Sings a Different Tune
Posted by
The 10b-5 Daily
The use (and sometimes abuse) of confidential witnesses in securities cases is a contentious issue. Prior to full discovery, what remedy does the defendant have if a confidential witness was misquoted in the complaint? One possibility, recently approved by the Second Circuit, is to allow the witness to be deposed prior to the filing of a motion to dismiss. A recent decision from the D. of Minn. suggests another possible tactic, although the defendants were ultimately unsuccessful. In Minneapolis Firefighters Relief Assoc. v. Medtronic, Inc., 2011 WL 6962826 (D. Minn. Dec. 12, 2011), the court considered the issue of class certification prior to the completion of discovery. In opposition to certification, the defendants argued that the plaintiffs could not adequately… View full post: http://www.the10b-5daily.com/archives/001166.html
Carlyle Readies an Unfriendly I.P.O. for Shareholders – NYTimes.com
Posted by
Securities Docket
It is quite possible that the Carlyle Group, the private equity firm that is preparing to go public, is proposing the most shareholder-unfriendly corporate governance structure in modern history. Via Carlyle Readies an Unfriendly I.P.O. for Shareholders – NYTimes.com. View full post: http://www.securitiesdocket.com/2012/01/27/carlyle-readies-an-unfriendly-i-p-o-for-shareholders-nytimes-com/
January 26, 2012
Changes in the Plaintiffs’ Class Action Bar and the Changing World of Shareholder Litigation
Posted by
The D&O Diary
The changing mix of corporate and securities litigation is a recent phenomenon on which I have frequently commented on this blog. While identifying the fact of the change is relatively straightforward, explaining it is more challenging. According to a January 11, 2012 article in The Review of Securities & Commodities Regulation entitled “Shareholder Litigation After the Fall of an Iron Curtain” (here), written by Boris Feldman of the Wilson Sonsini law firm, the changing pattern in corporate and securities litigation filings is a result of changes in the plaintiffs’ securities litigation bar – particularly, the elimination of a dominant plaintiffs’ firm. These changes, according to Feldman, have resulted in the five recent securities litigation trends he identifies in… View full post: http://www.dandodiary.com/2012/01/articles/plaintiffs-bar/changes-in-the-plaintiffs-class-action-bar-and-the-changing-world-of-shareholder-litigation/
Carlyle Curbing Shareholder Rights Irritates Lawmakers Who See Precedent
Posted by
Securities Docket
The buyout firm this month amended a regulatory filing to require future shareholders to resolve claims against it through arbitration. The U.S. Securities and Exchange Commission, which blocked an initial public offering with a less-restrictive arbitration clause more than 20 years ago, must decide whether to allow Washington-based Carlyle’s offering to proceed. Via Carlyle Curbing Shareholder Rights Irritates Lawmakers Who See Precedent – Bloomberg. View full post: http://www.securitiesdocket.com/2012/01/26/carlyle-curbing-shareholder-rights-irritates-lawmakers-who-see-precedent-bloomberg/
January 23, 2012
FDIC’s Latest Failed Bank Lawsuit Includes D&O Insurer Defendant
Posted by
The D&O Diary
In the FDIC’s latest lawsuit filed in its role as receiver of a failed bank, the FDIC not only named as defendants nineteen former directors and officers of the failed bank, but also included as defendants seventeen of their spouses and the failed bank’s D&O insurer. A copy of the FDIC’s January 18, 2012 complaint, filed in the agency’s capacity of receiver of the failed R-G Premier Bank of Puerto Rico, can be found here. UPDATE: See also the note below regarding the separate actoin filed in the District of Puerto Rico, involving the directors and officers of teh failed Westernbank Puerto Rico, which also involves D&O insurer defendants. As discussed here, R-G Premier Bank failed on April 30, 2010. According to the FDIC’s complaint, its closure represented “one of the largest bank failures in Puerto… View full post: http://www.dandodiary.com/2012/01/articles/failed-banks/fdics-latest-failed-bank-lawsuit-includes-do-insurer-defendant/
Stanford/Cornerstone Reports Breaks Down 2011 Securities Class Actions
Posted by
Securities Docket
A report issued today by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research offers a number of interesting findings about securities class action filings in 2011, including a surge in litigation against Chinese issuers. Via Compliance Week. View full post: http://www.securitiesdocket.com/2012/01/20/stanfordcornerstone-reports-breaks-down-2011-securities-class-actions-compliance-week/
January 20, 2012
Compare and Contrast
Posted by
The 10b-5 Daily
NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2011 annual reports on securities class action filings. The findings for 2011 include: (1) Cornerstone finds that there were 188 filings (compared with 176 filings in 2010), while NERA finds that there were 232 filings (compared with 241 filings in 2010). (For some insight on why NERA has a larger total, see footnote 2 of the NERA report, which discusses its counting methodology. Also, NERA's report came out in December, requiring it to use a projected number for December's total filings.) Both reports agree that cases against listed Chinese companies and M&A cases have driven a significant portion of the filing activity. Meanwhile, credit crisis cases have… View full post: http://www.the10b-5daily.com/archives/001165.html
January 19, 2012
Dutch Court Holds Collective Securities Settlement to Be Binding
Posted by
The D&O Diary
On January 17, 2012, in a development with important implications for the evolution of post-Morrison remedies for non-U.S. investors, a Dutch court has held for the first time that a collective securities settlement is legally binding. Of even greater significance, the decision arose in a circumstance where none of the liable parties and few of the claimants were domiciled in the Netherlands. The court’s action suggests the possibility of a potentially important mechanism for aggrieved investors who bought shares outside the U.S. to obtain compensation. A January 18, 2012 memorandum from the De Brauw, Blackstone and Westbroek law firm describing the Dutch court’s ruling can be found here. A January 18, 2012 memo from the Deminor Group about the ruling… View full post: http://www.dandodiary.com/2012/01/articles/securities-litigation/dutch-court-holds-collective-securities-settlement-to-be-binding/
Can Investors Be Required to Arbitrate Their Claims?
Posted by
The D&O Diary
Investors have a number of rights under federal and state law which they can enforce through litigation, including for example the right to file individual or class actions for damages. But can investors be required to submit these kinds of claims to binding arbitration in lieu of litigation? That is the question posed by a two different initiatives corporate reformers are currently pursuing. One of the basic features of our system of corporate laws is that aggrieved shareholder can enforce their rights or seek damages by filing a lawsuit. But at the same time, our litigation system is costly and court processes can be both time-consuming and burdensome. For that reason, there have been many proposals over the years to provide for the arbitration of… View full post: http://www.dandodiary.com/2012/01/articles/securities-litigation/can-investors-be-required-to-arbitrate-their-claims/
Cornerstone Research Releases 2011 Securities Class Action Litigation Report
Posted by
The D&O Diary
Securities class action filings rise slightly in 2011 compared to the prior year but remained below historical averages according to the annual study of Cornerstone Research, prepared in conjunction with the Stanford Law School Securities Class Action Clearinghouse, which was released today. A copy of the report can be found here, and Cornerstone Research’s January 19, 2012 press release can be found here. My own analysis of the 2011 securities class action lawsuit filings can be found here. According to the report, there were 188 securities class action lawsuit filings in 2011, compared to 176 in 2010, and compared to the 1997 to 2010 average annual average number of filings of 194. The two largest factors in the number of 2011 filings were the heightened number of M&A-related… View full post: http://www.dandodiary.com/2012/01/articles/securities-litigation/cornerstone-research-releases-2011-securities-class-action-litigation-report/
January 18, 2012
Guest Post: The Lloyd’s Claims Transformation Programme
Posted by
The D&O Diary
The Post Co. moved for a dismissal in August, arguing that the complaint lacked any specific allegations of deliberate fraud on the part of the Post Co. or its officers, and that any financial losses were the result of changes in the regulatory environment surrounding Kaplan and other similar companies.On Dec. 23, U.S. District Judge Barbara Rothstein granted the Post Co.’s motion. Via Judge Dismisses Securities Class Action Against Washington Post Co. – The BLT: The Blog of Legal Times. View full post: http://www.dandodiary.com/2012/01/articles/d-o-insurance/guest-post-the-lloyds-claims-transformation-programme/
January 17, 2012
Substantiating the Explosive Growth in M&A-Related Litigation
Posted by
The D&O Diary
American shareholders are suing Britains Lloyds Banking Group and the banks former executives, saying they were misled over its rescue of fellow lender HBOS in the depths of the financial crisis in 2008. Via U.S. investors sue Lloyds chiefs over HBOS deal — Reuters. View full post: http://www.securitiesdocket.com/2012/01/02/u-s-investors-sue-lloyds-chiefs-over-hbos-deal/
January 16, 2012
Dismissal Motion Denied in Part in General Electric Credit Crisis-Related Securities Suit
Posted by
The D&O Diary
In a January 12, 2012 opinion that quotes from (and relies upon) former Treasury Secretary Henry Paulson’s credit crisis memoirs, Southern District of New York Judge Richard Holwell granted in part and denied in part the motion to dismiss in the subprime and credit crisis related securities class action lawsuit that investors had filed against General Electric, certain of its directors and officers, and its offering underwriters. A copy of Judge Holwell’s opinion can be found here. Background: As discussed in greater detail here, the plaintiffs first filed their action in March 2009, alleging that the company had failed to disclose information regarding the company’s health and the health of its financial subsidiary, GE Capital, at the height of the financial crisis. As Judge Holwell summarized it, the plaintiffs allege that… View full post: http://www.dandodiary.com/2012/01/articles/subprime-litigation/dismissal-motion-denied-in-part-in-general-electric-credit-crisisrelated-securities-suit/
January 13, 2012
Ample Assistance
Posted by
The 10b-5 Daily
A few months ago, this blog noted an unusual lead plaintiff decision. A S.D.N.Y. court dismissed the lead plaintiff from a securities class action brought against Smith Barney Fund Management and Citigroup Global Markets because, after six years of litigation, it was revealed that the entity had not actually purchased the securities at issue. So what happened to the case? All is revealed in the court's most recent order (In re Smith Barney Transfer Agent Litig., 2011 WL 6318988 (S.D.N.Y. Dec. 15, 2011)), along with some new twists and turns. The court decided to reopen the lead plaintiff selection process. The applicants included a new proposed lead plaintiff group associated with the former lead counsel for the case, as well as one of the unsuccessful lead plaintiff applicants from back in 2005. As a group, the applicants associated with the former lead counsel had the largest financial interest in… View full post: http://www.the10b-5daily.com/archives/001164.html
Use of Optimistic Language in Public Disclosure Statements and the Risk of Securities Class Action Litigation
Posted by
The D&O Diary
The tone public companies use in their disclosure statements can affect the companies’ susceptibility to securities class action litigation, according to a recent academic study. The authors found that firms hit with securities litigation generally used more optimistic language in their disclosure statements than did firms that were not sued. Based on these findings, the authors conclude that managing “disclosure tone” could provide “a straightforward means of reducing litigation risk.” In their November 2011 paper “Disclosure Tone and Shareholder Litigation” (here), University of Chicago Business School Professors Jonathan Rogers and Sarah L.C. Zechman and Ohio State Business School Professor Andrew Van Buskirk set out to determine whether or not corporate managers’ use of… View full post: http://www.dandodiary.com/2012/01/articles/securities-litigation/use-of-optimistic-language-in-public-disclosure-statements-and-the-risk-of-securities-class-action-litigation/
January 12, 2012
Public Company Bankruptcies Declined in 2011
Posted by
The D&O Diary
The number of publicly traded companies that filed for bankruptcy protection under either Chapter 7 or Chapter 11 declined in 2011, compared to the year prior, although the 2011 bankrupt companies collectively listed greater amounts of pre-petition assets than 2010 bankrupt public companies did, according to data recently released by BankruptcyData.com (here). According to the report, 86 publicly traded companies filed for bankruptcy protection in 2011, compared to 106 in 2010, and compared to 211 in 2009. The number of 2011 filings represents a 17% decline from the prior year, and nearly a 60% decline from 2009. Though the number of public companies filing for bankruptcy declined in 2011, the 2011 public company bankruptcies represented aggregate pre-petition assets of… View full post: http://www.dandodiary.com/2012/01/articles/d-o-insurance/public-company-bankruptcies-declined-in-2011/
SEC Brings Securities Enforcement Action Against Private Company, Former Chairman/CEO
Posted by
The D&O Diary
The SEC has commenced an enforcement action against a private company and its former Chairman and CEO in connection with the company’s repurchase of company shares from company employees and others prior to the company’s acquisition. The action involves Stiefel Laboratories, which prior to its April 2009 acquisition by GlaxoSmithKline for $68,000 a share, was, according to the SEC “the world’s largest private manufacturer of dermatology products.” On December 12, 2011, the SEC filed a complaint (here) in the Southern District of Florida alleging that the company and Charles Stiefel, its former chairman and CEO, defrauded shareholders by buying back their stock at “severely undervalued prices” between November 2006 and April 2009. The SEC’s December 12, 2011 press release about the enforcement… View full post: http://www.dandodiary.com/2012/01/articles/securities-litigation/sec-brings-securities-enforcement-action-against-private-company-former-chairmanceo/
January 10, 2012
An Early Look at Cornerstone Research’s Analysis of Current M&A-Related Litigation Trends
Posted by
The D&O Diary
In several recent posts (most recently here), I have written about the problems associated with the growing wave of M&A related litigation. In writing about this topic, I have tried to marshal the evidence supporting my position, but for many reasons my analysis has been more descriptive than statistical. However, I have been provided with advance access to some of the data from a forthcoming Cornerstone Research publication to be entitled “Recent Developments in Shareholder Litigation Involving Mergers and Acquisitions.” The data provide interesting additional statistical perspective on the recent M&A-related litigation trends. In their preparation of the report, Cornerstone Research reviewed SEC filings related to acquisitions of U.S. public companies valued at $100 million or greater and… View full post: http://www.dandodiary.com/2012/01/articles/securities-litigation/an-early-look-at-cornerstone-researchs-analysis-of-current-marelated-litigation-trends/
January 9, 2012
A Status Update on the Subprime and Credit Crisis-Related Litigation
Posted by
The D&O Diary
Back in February 2007, when investors in New Century Financial Corporation filed a securities class action lawsuit against the company and certain of its directors and officers, there was little reason to suspect at the time that problems at the company represented the leading edge of a looming financial crisis or that the case itself was the first lawsuit in what ultimately grew to become a mountain of subprime and credit crisis-related litigation. But even now, five years later, the litigation wave continues to churn through the system, though we are now mercifully well past the depths of the financial crisis. As reflected below, though many of the cases have now been resolved, many more remain pending, and the likelihood is that the litigation will continue for years to come. In the five years since the first of the credit crisis lawsuits was first filed, there have been nearly... View full post: http://www.dandodiary.com/2012/01/articles/subprime-litigation/a-status-update-on-the-subprime-and-credit-crisisrelated-litigation/
January 6, 2012
Improper Use
Posted by
The 10b-5 Daily
Does the fact that an individual defendant's stock trading took place pursuant to a pre-determined Rule 10b5-1 trading plan undermine any inference that the trades were "suspicious"? Courts continue to grapple with this issue in evaluating the existence of scienter (i.e., fraudulent intent) in securities fraud cases. (1) In In re Novatel Wireless Sec. Litig,, 2011 WL 5873113 (S.D. Cal. Nov. 23, 2011), the court reviewed insider trading claims brought as a part of a securities class action. Defendants argued that several of the challenged trades were inactionable because they had been made pursuant to Rule 10b5-1 trading plans. The court noted, however, that "each defendant entered new or amended 10b5-1 plans . . . that contained accelerator clauses that called for immediate sales." Because the "improper use of 10b5-1 trading is evidence of... View full post: http://www.the10b-5daily.com/archives/001163.html |