After a brief hiatus, our creative juices are flowing again, and have we got a story for you.

Recall the heady days of 1996. The PSLRA had just become law and a number of plaintiffs started choosing to file their cases in state, instead of federal court. One of the reasons often cited for this move - to avoid the PSLRA's discovery stay. With the passage of SLUSA in 1998, that issue largely faded away, only to be revived in more recent years when parallel derivative or ERISA suits were filed along with a more traditional securities class action. While the cases on allowing securities plaintiffs access to the ERISA or derivative discovery (or even staying discovery in those parallel cases) have had mixed results, there appears to be a new fight on the horizon.

According to a story in The Globe and Mail today, an Ontario Superior Court judge has just dropped a bombshell on the defendants in the securities class action pending there against IMAX Corporation and several directors and officers.

The case was filed under "Bill 198," the revised provincial class action legislation enacted late in 2005. In such cases, the investor plaintiff must obtain leave from the Court to proceed with their suit. The standard as to whether a plaintiff is granted such leave is relatively modest - a reasonable probability that the plaintiff would prevail at trial.

In order to rule on whether a plaintiff has met the standard, the court relies on affidavits filed by the plaintiff and each of the named defendants. These affidavits outline the positions of the parties and the material facts on which they intend to rely if the case goes forward. The parties are then allowed to engage in "cross-examination," a/k/a discovery.

In what appears to be a case of first impression, Madam Justice Katherine van Rensburg ruled on how broad that examination will be.

She held that the test is whether the information sought in cross-examination has a "semblance of relevance" to the allegations. This is the same threshold used in formal discovery in Canadian cases, but that discovery generally comes substantially later in the litigation. And just as in the US courts, the discovery burden is a lower threshold than the burden for introducing evidence at trial.

But, going a step further, Madam Justice van Rensburg also held that anyone being cross-examined would be required to answer questions that are potentially relevant even if it "might also reveal some other potential issues or wrongdoing not currently contemplated by the statutory claim."

This raises a new battleground for cases, such as IMAX, with a cross-border component to them. Recall that in addition to the securities class action pending in Ontario, IMAX is the subject of a securities class action in the Southern District of New York, where a motion to dismiss the latest complaint is currently pending.

Siskinds LLP and Sutts, Strosberg LLP are counsel for the plaintiffs in the Ontario IMAX litigation, and McCarthy Tétrault LLP is counsel for IMAX.

A prior ruling by Madam Justice van Rensburg on a motion to compel in this matter is available here.

Coupled with the international "arms race" we have blogged about before, this raises the specter of cases being filed cooperatively in Canadian and US courts, with discovery in the Canadian action possibly being allowed to be used in the US action.

Very special thanks to Rob Patton at NERA for sending the IMAX story to us.

Tuesday, August 19, 2008

Updates to the Events Calendar

Here is the next round of updates to our securities litigation conferences, webcasts, and other events list.

For the full list, please go here.

As always, readers are encouraged to send information on securities litigation related events to us via the "Contact Us" link on the upper left hand side of this blog.

Securities Litigation & Enforcement Institute 2008
September 15 - 16, 2008
PLI New York Center - New York, NY

Highlights:

• Strategies for prosecuting and defending the securities fraud action
• The implications of Stoneridge’s rejection of “scheme liability”
• Developments in auditor liability
• Update on options backdating claims

The conference brochure is not yet available, but for more details, visit the conference webpage.

The Subprime Mortgage Crisis: From A to Z

September 18-19, 2008
Renaissance Mayflower Hotel, Washington, DC

Highlights:

• A full-scale assessment of the legal fallout and ramifications of the subprime mortgage crisis
• Examination of the receivership of IndyMac Bank
• Discussion of how the legal landscape has been and is being changed

The conference brochure is available here or for more details, visit the conference webpage.

Securities Litigation & Enforcement Institute 2008
October 20 - 21, 2008
PLI California Center - San Francisco, CA

Highlights:

• Latest government enforcement initiatives and how to deal effectively with the government
• What the subprime crisis means for securities litigation
• The latest on corporate governance litigation

The conference brochure is not yet available, but for more details, visit the conference webpage.

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Friday, August 15, 2008

Another Look at the GM Settlement

While the recently announced $303 million settlement of the General Motors securities class action has already garnered a fair amount of attention in the blogosphere (See The 10b5 Daily and The D&O Diary), it is hard to pass up taking our own bite at the apple.

As noted by Kevin LaCroix at The D&O Diary, the lead plaintiffs in the GM case were two international institutional investors, both affiliates of DekaBank.

A reader asked whether that made GM the largest settlement where a non-US institutional investor was the lead plaintiff.

The short answer is no, but the long answer is far more interesting.

According to the most recent Top 100 Securities Class Action Settlements Report (a publication that we put out for clients each quarter), the largest securities class action settlements where a non-US institutional investor was the lead plaintiff would be the two Nortel Networks cases, where the Ontario Public Service Employees’ Union Pension Plan Trust Fund and Ontario Teachers’ Pension Plan Board were among the lead plaintiffs.

But most commentators (this one included) generally look at non-North American parties when we are looking to examine the role of non-US investors in US securities class actions.

The next largest settlement where a non-US institutional investor was the lead plaintiff is the Delphi case, which, with total settlements of just over $322 million is slightly larger than the total settlement in the GM securities class action.

In the Delphi case, Raiffeisen Kapitalanlage-Gesellschaft (Austria’s largest asset manager) and Stichting Pensioenfonds ABP (a pension fund for Dutch government and educational sector employees) were among the co-lead plaintiffs.

The initial reader question raised more questions for us over at SLW World Headquarters - namely who gets to scream "We're #1" with regard to some of the other securities class action settlements over the years.

So without further ado, here is a quick rundown of some of the largest securities class action settlements:

Taft-Hartley fund as Lead Plaintiff - Tyco International, Ltd.

The Plumbers & Pipefitters National Pension Fund, United Association Office Employees Pension Plan, United Association of Local Union Officers & Employees Pension and United Association General Officers Pension Plan were among the lead plaintiffs.

Private Institutional Investor as Lead Plaintiff - Toss Up

Voyageur Asset Management was one of the lead plaintiffs in the Tyco litigation, but at the class certification stage, they were not appointed as a class representative by Judge Barbadoro.

The next largest settlement with a private institutional investor as a lead plaintiff was the Royal Ahold litigation, where Generic Trading of Philadelphia, LLC, was co-lead plaintiff.

Both of these cases (and a host more) should be sufficient ammunition should my quixotic quest ever need to be revived.

And of course, the largest securities class action settlement where there were no institutional investors serving as lead plaintiffs was the Bank of America litigation stemming from the NationsBank / BankAmerica merger in 1998.

And for those that wanted something a little more lighthearted, this article recounts the history of the foam #1 finger.

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Thursday, August 14, 2008

Weil, Gotshal & Manges' Releases "Survey of 2007 Securities Fraud Litigation"

Hot off the presses is The 10b-5 Guide: A Survey of 2007 Securities Fraud Litigation from Weil, Gotshal & Manges.

Just as 2007 saw a substantial increase in the number of new federal securities class actions, the 2007 Weil guide needs more room (253 pages) to discuss all that is brewing in the wide world of securities class actions.

The guide is quite wide-ranging, discussing everything from pleading standards, loss causation and class certification to developments in the lead plaintiff appointment process and that ever popular cocktail party conversation topic, the Securities Litigation Uniform Standards Act of 1998, or SLUSA to the cognoscenti.

The guide, just as with the 2006 version, breaks down these the information by both topic and circuit.

Thanks again to co-author Paul Ferrillo for sending us a copy, which you can download here.

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Friday, August 1, 2008

Options Backdating - Newest Update

Once again, it is time to update the options backdating numbers, with the announcement this week that Monster Worldwide Inc. had agreed to settle an options backdating securities class action for $47.5 million.

Of the 39 options backdating cases that have been filed as securities class actions, 24 have now reached a resolution. Of the resolved cases, 10 of those cases have been dismissed and 14 have settled.

The fourteen settlements total $1.36 billion, for an average of $97.7 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $36.41 million.

As always, our complete analysis can be accessed in this presentation.

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Tuesday, July 15, 2008

Updates to the Events Calendar

Here is the next round of updates to our securities litigation conferences, webcasts, and other events list.

For the full list, please go here.

As always, readers are encouraged to send information on securities litigation related events to us via the "Contact Us" link on the upper left hand side of this blog.

35th Annual Advanced Postgraduate Course in Federal Securities Law
July 24-25, 2008, Omni Hotel, San Francisco, CA

Highlights:

• Developments in Securities Litigation
• Handling an Enforcement Investigation
• Accounting, Auditing, and Internal Control Developments

The conference brochure is available here or for more details, visit the conference webpage.

Securities Class Actions From a Former Practitioner’s Perspective and Experience
July 31, 2008
The Waldorf-Astoria Hotel, New York, New York

Highlights:

• Insider's view of the field of securities class action litigation
• Examination of the "predictable" defenses utilized by major law firms
• Suggestions of viable defenses that have not routinely been employed

The conference brochure is available here or for more details, visit the conference webpage.

MELTDOWN! The Impact of the Subprime Crisis on Professional & General Liability
August 13, 2008
The PLI California Conference Center, San Francisco, CA

Highlights:

• Overview of the subprime mortgage industry
• Professional and general liability claims that are likely to be brought
• How regulators are addressing these problems

The conference brochure is available here or for more details, visit the conference webpage.

D&O Liability Insurance
October 7-8, 2008
InterContinental, Cologne, Germany

Highlights:

• Impact of US Style Class Actions on the European D&O Liability Market
• Changes to the European D&O Market as a Result of the Sub-Prime Crisis & Credit Crunch

The conference brochure is available here or for more details, visit the conference webpage.

SLW's author is speaking at the C5 event. Readers using priority service code "780I09.S" will receive a 10% discount.

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Tuesday, July 8, 2008

Options Backdating - More Updates to the Scorecard

Once again, it is time to update the numbers.

Of the 38 options backdating cases that have been filed as securities class actions, 23 have now reached a resolution. Of the resolved cases, 10 of those cases have been dismissed and 13 have settled.

The thirteen settlements total $1.32 billion, for an average of $101 million.

However, removing the newest (and largest) kid on the options backdating settlement block (UnitedHealth Group) lowers the average back to $35.48 million.

As kindly pointed out by representatives from Coughlin Stoia, lead counsel in the UnitedHealth case, that settlement is:

- more than double the previous total recoveries

- more than 20 times the average recovery in other settled cases

- more than 5 times the previous largest settlement

As we noted earlier, the options backdating cases have settled much more quickly on average, than other cases. The thirteen cases have settled in an average of 567 days. Removing the two outliers, Mercury Interactive, and Brocade, which were filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 11 cases to 498 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

With this group of cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, just over 26% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 47.6% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

Our complete analysis can be accessed in this presentation.

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Friday, June 20, 2008

Options Backdating - Updating the Scorecard

Back in May, we took a fresh look at the scorecard in the options backdating litigation, tallying up the settlements and dismissals, among other things.

It is time to update the analysis for a few reasons. One, there have been some new settlements, notably Brocade Communications which at $160 million, topped the largest prior options backdating related class action settlement, Mercury Interactive. Second, our research (and some gentle prompting from The D&O Diary) has led us to revise our count of cases.

Of the 38 options backdating cases that have been filed as securities class actions, 10 of those cases have now been dismissed and 11 have now settled.

The eleven settlements total $418 million, for an average of $38 million.

As noted earlier, these cases have settled much more quickly on average, than other cases. The eleven cases have settled in an average of 531 days. Removing the two outliers, Mercury Interactive, and Brocade, which were filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 9 cases to 439 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

With this group of cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, just over 26% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 47.6% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

Our complete analysis can be accessed in this presentation.

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Tuesday, May 20, 2008

Top 10 Corporate and Securities Articles of 2007

West's Corporate Practice Commentator has named the "Top 10 Corporate and Securities Articles of 2007," and the list is quite heavy with securities litigation related articles.

The full list (hat tip - Conglomerate) in alphabetical order of the initial author is below along with links to the articles.

Baker, Tom and Sean J. Griffith. The Missing Monitor in Corporate Governance: The Directors’ & Officers’ Liability Insurer. 95 Geo. L.J. 1795-1842 (2007).

Bebchuk, Lucian A. The Myth of the Shareholder Franchise. 93 Va. L. Rev. 675-732 (2007).

Choi, Stephen J. and Robert B. Thompson. Securities Litigation and Its Lawyers: Changes During the First Decade After the PSLRA. 106 Colum. L. Rev. 1489-1533 (2006).

Coffee, John C., Jr. Reforming the Securities Class Action: An Essay on Deterrence and Its Implementation. 106 Colum. L. Rev. 1534-1586 (2006).

Cox, James D. and Randall S. Thomas. Does the Plaintiff Matter? An Empirical Analysis of Lead Plaintiffs in Securities Class Actions. 106 Colum. L. Rev. 1587-1640 (2006).

Eisenberg, Theodore and Geoffrey Miller. Ex Ante Choice of Law and Forum: An Empirical Analysis of Corporate Merger Agreements. 59 Vand. L. Rev. 1975-2013 (2006).

Gordon, Jeffrey N. The Rise of Independent Directors in the United States, 1950-2005: Of Shareholder Value and Stock Market Prices. 59 Stan. L. Rev. 1465-1568 (2007).

Kahan, Marcel and Edward B. Rock. Hedge Funds in Corporate Governance and Corporate Control. 155 U. Pa. L. Rev. 1021-1093 (2007).

Langevoort, Donald C. The Social Construction of Sarbanes-Oxley. 105 Mich. L. Rev. 1817-1855 (2007).

Roe, Mark J. Legal Origins, Politics, and Modern Stock Markets. 120 Harv. L. Rev. 460-527 (2006).

Subramanian, Guhan. Post-Siliconix Freeze-outs: Theory and Evidence. 36 J. Legal Stud. 1-26 (2007). (NOTE: This is an earlier working draft. The published article is not freely available, and at SLW we generally respect the intellectual property rights of others.)

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Thursday, May 15, 2008

What A Difference A Few Months Makes

Back in February, we took a quick look at the scorecard in the options backdating litigation, tallying up the settlements and dismissals, among other things.

In our earlier review, of the 36 options backdating cases that have been filed as securities class actions, 7 had settled and 3 had been dismissed.

Run the clock for a few months, and 9 of those cases have now been dismissed and 9 have now settled.

The nine settlements total $255.58 million, for an average of $28.4 million.

As noted earlier, these cases have settled much more quickly on average, than other cases. The nine cases have settled in an average of just 440 days. Removing the outlier, Mercury Interactive, which was filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 8 cases to 397 days.

And the ratio of settlements to dismissals is somewhat out of line with historical averages as well. Most studies (and a quick check of our database) indicate that the percentage of new securities class actions that are dismissed is between 33-40 percent.

With this group of cases, we can look at the data two ways. Dismissals as a percentage of total cases or dismissals as a percentage of cases that have reached a final, or quasi-final resolution.

Under the former analysis, exactly 25% of these cases have been dismissed. That number is artificially low, as not all of the cases have yet had a ruling on the motion to dismiss.

Under the latter method, 50% of these cases have been dismissed. This number is artificially high, as a number of these cases have already survived a motion to dismiss.

In any event, things remain interesting in the sometimes long-forgotten world of options backdating.

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