On Monday, June 11, 2012, the Supreme Court granted a Writ of Certiorari in Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085 (U.S. Jun. 11, 2012) to decide whether, in a misrepresentation case under SEC Rule l0b-5, the court must require proof of materiality before certifying a plaintiff class based on the fraud-on-the-market theory (and whether the court must allow the defendants to present evidence rebutting the applicability of the fraud-on-the-market theory before certifying the class).… Continue Reading
On Tuesday, May 22, 2012, the law firm of Glancy Binkow & Goldberg LLP filed a class action complaint against Facebook, Mark Zuckerberg, nine other individuals defendants (Facebook directors and officers) and sixteen underwriters, alleging that Registration Statement for the Facebook IPO was inaccurate and misleading. The Complaint was filed in Superior Court in San Mateo County, California.… Continue Reading
When asked to approve a $90 million settlement (which was to be paid by insurance coverage) between class action plaintiffs and the directors and officers in the In re: Lehman Bros. Sec. and ERISA Litig., Judge Lewis Kaplan issued a May 3, 2012 Memorandum and Order directing certain defendants (five officers), who had already allowed a retired Judge (specially retained to assist in the parties’ discussions) to review information regarding their assets, to provide that same financial information to the Court for an in camera review. Judge Kaplan will review that information in order to make a determination regarding the fairness of the settlement.
UPDATE: After reviewing the information, in a Memorandum and Order on May 24, 2012, Judge Kaplan approved the settlement, holding that, although he was "concerned at the lack of any contribution by the former director and officer defendanst to the settlement, Lead Counsel’s judgment that the $90 million bird in the hand is worth at least as musch as whatever is in the bush, discounted for the risk of an unsuccessful outcome of the case, is rasonable." … Continue Reading
The U.S. Supreme Court ruled today that the two-year time limit for bringing an action under § 16(b) of the Securities Exchange Act of 1934 is not tolled until after the filing of a § 16(a) disclosure statement. The case involves the right of an issuer (or, in this case, a shareholder bringing a derivative suit) to recover short swing profits obtained by a beneficial owner, director, or officer by reason of his relationship to the issuer under Exchange Act 16(b). Under §16(b), a corporation (or shareholder) may bring an action against corporate insiders who realize profits from the purchase and sale of the corporation’s securities within any 6-month period. The Act provides that such suits must be brought within "two years after the date such profit was realized." The Supreme Court vacated a January 2011 decision by the Ninth Circuit that a § 16(b) claim is subject to tolling and remanded the case to the District Court for further proceedings (including consideration of other equitable tolling principles).… Continue Reading
On Thursday, March 1, 2012, the Second Circuit Court of Appeals affirmed in part and reversed in part a District Court decision dismissing a complaint for securities fraud filed by nine Cayman Islands hedge funds against entities and individuals involved in an alleged pump-and-dump scheme. Absolute Activist Value Master Fund Limited v. Ficeto, Docket No. 11-0221-cv, Slip. op (2d Cir. Mar. 1, 2012). The Court, reviewing the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), concluded that plaintiffs had failed to allege the existence of a domestic purchase or sale of securities, but ruled that they should be granted leave to amend their complaint to attempt to do so.… Continue Reading
In an Opinion and Order dated February 23, 2012, Judge Michael Mosman adopted the January 11, 2012 Findings and Recommendations of Magistrate Judge John Acosta to dismiss the derivative lawsuit against the Board of Directors of Umpqua Holdings Corporation ("Umpqua") for breach of fiduciary duty. Magistrate Judge Acosta recommendation to dismiss the say-on-pay" lawsuit was the first of its kind. Judge Mosman agreed that plaintiffs’ failure to make a presuit demand was not excused under the arguments they raised regarding the Board members’ exercise of the business judgment rule or their lack of independence or disinterest. Plaintiffs have until March 26, 2012 to amend their complaint.… Continue Reading
On Wednesday November 2, 2011, several media outlets reported on the details of the settlement in the shareholders derivative action filed against executives of Chesapeake Energy Corporation. The case, which was filed in state court in Oklahoma in April 2009, was on appeal after the claims were dismissed in February 2010. Under the terms of the settlement, CEO Aubrey McClendon, whose compensation in 2008 included a $75 million bonus (following a six-month period where the company’s share price fell from $74 to $16.17 a share), will buy back an art collection which he sold to the company for approximately $12 million in 2008.… Continue Reading
In a September 20, 2011 Opinion, Judge Timothy Black of the Southern District of Ohio ruled that a lawsuit brought against senior executives and directors of Cincinnati Bell, Inc. alleging a breach of fiduciary duty regarding compensation would be allowed to proceed. The lawsuit focuses on the "say-on-pay" provisions of the Dodd-Frank Act: specifically, attacking the Board’s decision to increase 2010 executive compensation in light of the nonbinding vote by 66% of the voting shareholders to reject that increase. Although the defendants argued that they are entitled to rely upon the business judgment rule in proceeding with the increase in compensation, the Court held that the issue of whether defendants properly exercised that judgment or, as plaintiff claimed, acted with deliberate intent to injure the company (or reckless disregard for the company) would be an issue based on the evidence (at trial or summary judgment) and not decided at the pleading stage.… Continue Reading
On Tuesday, July 19, 2011, the Wall Street Journal ran an interesting article by Gina Chon entitled "Judges Making Lawyers Earn It," discussing trends in fee awards in lawsuits challenging mergers and acquisitions in the Delaware Court of Chancery, finding that:
In recent months … the court’s judges have been more discerning, according to plaintiffs and defense lawyers as well as court officials. In several cases, they have been less willing to sign off on standard fees for lawyers who have done relatively little and more willing to grant high payouts when they think lawyers have worked to earn them.
On Monday, June 27, 2011, the Supreme Court granted Certiorari in Credit Suisse Securities (USA) LLC v. Simmonds, Case No. 10-1261. The case involves the right of an issuer (or, in this case, a shareholder bringing a derivative suit) to recover short swing profits obtained by a beneficial owner, director, or officer by reason of his relationship to the issuer under Exchange Act 16(b).… Continue Reading
Today, the Supreme Court ruled that a mutual fund investment adviser cannot be held liable for the statements in a prospectus made by the adviser’s client (the mutual fund itself). Janus Capital Group, Inc. v. First Derivative Traders, No. 09-525, slip op. (Jun. 13, 2011). In doing so, the Court rejected the argument of the Government in an amicus brief that a private plaintiffs should be permitted to sue a person who provides false or misleading information to another person, who then includes that information in a statement. A copy of the opinion is available on the Supreme Court’s website.… Continue Reading
In order to prevail in a private securities fraud action, a plaintiff must demonstrate that defendants’ deceptive conduct caused his or her economic loss – a concept known as "loss causation." Today, the Supreme Court unanimously ruled that class action plaintiffs do not need to prove loss causation in order to obtain class certification. Erica P. John Fund, Inc. v. Halliburton, Inc., No. 09-1403, slip op. (Jun. 6, 2011). A copy of the opinion is available on the Supreme Court’s website.… Continue Reading
On May 2, 2011, a derivative complaint was filed against eleven members of the Board of Directors of Johnson & Johnson alleging breach of fiduciary duty, mismanagement and violations of the federal securities laws based on the company’s recent settlements with the Department of Justice and the Securities Exchange Commission regarding violations of the Foreign Corrupt Practices Act. As Kevin LaCroix’s blog, The D & O Diary, pointed out, this was the "the first civil lawsuit relating to" the Government’s investigations into "whether drug companies paid bribes overseas to increase sales and to obtain regulatory approvals."
On April 8, 2011, DOJ announced that Johnson & Johnson had agreed to pay a $21.4 million criminal penalty as part of a deferred prosecution agreement to resolve improper payments by its subsidiaries to government officials in Greece, Poland and Romania and kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program in violation of the FCPA. The same day, the SEC announced that it had charged Johnson & Johnson with violating the FCPA based on same conduct. The company settled with the SEC by consenting to a court order permanently enjoining it from future violations of … Continue Reading
On March 10, 2011, Cornerstone Research announced the results of its latest study: "Securities Class Action Settlements – 2010 Review and Analysis." The Annual Report, which provides detail on settlement summary statistics and an analysis of case characteristics, reviewed the 86 court-approved settlements in 2010, finding that the number of settlements fell to its lowest in ten years and that the total dollar value of settlements fell 17%. However, the median settlement amount increased over 40% in 2010.
One of the co-authors of the report, Professor Laura Simmons of the College of William & Mary, stated in the Press Release: "I don’t expect the sharp drop in the number of settlements to reoccur in the near future; however, the broad-based shift toward higher settlement amounts may persist in upcoming years."
Additional findings announced by Cornerstone include:
• settled cases where there was a corresponding SEC action prior to the class action settlement increased to 30% in 2010 (compared to 20% in 2009), and those cases tend to result in higher settlement amounts;
• the number of class actions involving companion derivative actions fell slightly in 2010 when compared to 2009, but still remain higher than the average number of … Continue Reading