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.

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.

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.

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.)

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.

The IQPC event, 4th Securities Litigation: Enforcement, Regulation, and Litigation in the Securities Arena will be held May 28 - 30, 2008 at the Millennium Broadway Hotel, in New York City.

Highlights include:

• Discussing the increase in class action filings and civil suits going to trial
• Examining the impact of Stoneridge and other recent decisions on the lower courts and class distinctions
• Determining the effects of the subprime crisis on civil suits and government enforcement
• Reviewing enforcement actions of the SEC, states and SROs concerning broker/dealers and investment banks

Readers are entitled to a 20% discount. Simply use the code "RMSL" during the registration process.

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

As always, for our full list of conferences, webcasts, and events, please go here.

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

According to press reports (here), the seven New Jersey public pension funds that filed the first Tyco opt-out case have settled their claims against Tyco International Ltd., Tyco chief legal officer Mark Belnick and directors Richard Bodman, John Fort III, James Pasman Jr. and Wendy Lane for $73 million.

The settlement does not include claims alleged against former CEO L. Dennis Kozlowski and former CFO Mark Swartz, former director Frank Walsh Jr. and Tyco's outside accounting firm PricewaterhouseCoopers LLP and its Bermuda affiliate, PricewaterhouseCoopers.

The New Jersey public funds were represented by Shalov Stone Bonner & Rocco LLP and Riker Danzig Scherer Hyland & Perretti LLP.

A copy of the 348 page, 1343 paragraph second amended complaint filed by the NJ public funds can be found here.

And of course, an updated scorecard of the Tyco opt-out cases can be found here.

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.

The Subprime Meltdown and Its Impact On The Canadian Landscape
May 6, 2008
The Queen Elizabeth Hotel, Montreal, Quebec

Highlights:

• Impact of claims on the Canadian insurance market
• US and Canadian aspects of the Subprime Meltdown

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

The Subprime Meltdown and Its Impact On The Canadian Landscape
May 15, 2008
The Hilton Toronto, Toronto, Ontario

• U.S. and Canadian contexts of the sub-prime meltdown
• Exploration of the asset backed commercial paper crisis

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

4th Securities Litigation: Enforcement, Regulation, and Litigation in the Securities Arena
May 28 - 30, 2008
Millennium Broadway Hotel, New York, NY

Highlights:

• Discussing the increase in class action filings and civil suits going to trial
• Examining the impact of Stoneridge and other recent decisions on the lower courts and class distinctions
• Determining the effects of the subprime crisis on civil suits and government enforcement
• Reviewing enforcement actions of the SEC, states and SROs concerning broker/dealers and investment banks

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

Mealey's Subprime Mortgage Litigation & Insurance Conference
June 19-20, 2008
The Ritz-Carlton Hotel, Pentagon City, Virginia

Highlights:

• An update on the latest United States Litigation
• Juror Perceptions of the Subprime Mortgage Mess
• Defense Expense and Claims Management Issues Arising from Subprime Litigation

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

Buried notice is how securities litigators describe the practice of "burying" the notice to class members of a new federal securities class action as required under the PSLRA, i.e., publishing it in a place that it is unlikely (or at least less likely) to be seen by class members.

It is a practice that has but two logical explanations:

1. The practitioners of this particular art form are attempting to keep the publicity surrounding their case to a minimum, in an effort to be appointed lead counsel.

2. The lawyer involved is not a member of the traditional plaintiffs' bar and is taking the notice statute ("shall cause to be published, in a widely circulated national business-oriented publication or wire service") at face value.

I am saddened to report that this practice is still alive and well.

Here is a scanned image of Page 18 of the November 23, 2007 issue of the Financial Times. Note at the bottom the "notice" regarding a new securities class action filed on behalf of purchasers of BP, p.l.c. securities.

The titan of the plaintiffs' bar that placed the ad and is going up against BP (market cap as of this afternoon - $218 Billion) - The Law Offices of William F. Salle.

Who?

This guy:

This is not the first time that Mr. Salle has published a notice in this manner.

And yet, he doesn't end up becoming lead counsel in this cases that he is theoretically "hiding" by burying them.

Also, he tends to file cases in the Central District of California, which PACER users may know as perhaps the slowest district court in the land to put complaints online or update their dockets, thus giving an additional advantage to any firm that can both bury a notice and file a case in that district.

Lastly, there is little, if any, valid reason to file a complaint against BP (a UK company) in the Central District of California. The far more obvious choices would be Alaska (where one of the defendants is headquartered) or New York (where the securities exchanges are located and the vast majority of non-US companies are sued for alleged securities law violations).

I am not a firm believer in coincidences.

In my humble opinion, Mr. Salle is acting in concert with another firm or firms who don't wish to sully their reputations by directly engaging in this practice themselves.

And because of this ridiculous refusal to follow the established practice of the remainder of the profession, I have to have members of my research team comb through, everyday, page by page, copies of Investors Business Daily, the Wall Street Journal, and the Financial Times, among other publications.

Buried notice practitioners - you have been warned.

We won't get into details, but it piqued our interest, so we set to work slicing and dicing the list.

A few interesting details.

The 100 lawyers graduated from 43 different law schools, with an average graduation year of 1981. Willis H. Riccio is the elder statesmen of the group (Georgetown '58), and as gently pointed out by this alleged friend, I am the new kid on the block (Villanova '00).

Harvard was the clear leader, with 16 graduates on the list. NYU, Yale, Georgetown, and Columbia rounded out the Top 5.

But just because a school is in the Ivy League doesn't mean that its graduates fair better than other law school graduates. Penn only has one graduate on the list, while local competitors Temple and Villanova each have two graduates on the list.

And being on the "Top 10" lists of law schools doesn't guarantee admission to the club, as UC Berkeley has not a single graduate on the list, but a Golden Gate University graduate, from just across the San Francisco Bay, snagged a spot on the list.

As far as ideological breakdown goes (a/k/a Drinking the Kool Aid):

16 lawyers on the list clearly sit on the left side of the "v" - that is they primarily represent plaintiffs.

75 clearly sit on the right side of the "v" - that is they primarily represent defendants.

7 are switch hitters, representing a mix of plaintiffs and defendants.

2 (me and Commissioner Grundfest) aren't representing people in private practice these days, though I am a former plaintiff's attorney.

The Dura Pharmaceuticals litigation has found its way on remand back to the District Court and a lot has changed in the securities class action world in the nine years since the case was first filed.

A lot of ink (well pixels mostly - see The 10b5 Daily and The D&O Diary) has been spilled talking about Tellabs, one of the other high profile securities class action Supreme Court cases from the last decade, but the remand of Dura has received, little if any attention.

The reason may be quite simple - Judge Janis L. Sammartino's opinion partially denying and partially granting the motion to dismiss is relatively unremarkable, save for one thing - there is no mention of loss causation (the main issue before the Supreme Court in Dura) - as that issue was decided in a prior motion to dismiss in June 2006. Judge Sammartino's opinion largely addresses the Tellabs issue - whether the facts as plead by plaintiffs give rise to a “strong” inference of scienter after taking into account "plausible opposing inferences.”

The Court found the inference of scienter offered by plaintiffs to be “cogent and compelling,” supported by

the length of time that defendants knew about the problems in the inhaler’s development, the apparent inability of Dura’s product development team to obtain any meaningful improvement in the inhaler performance, the gravity of the problems with the inhaler (including an early return rate more than thirty times the industry standard), the frequency of the product development meetings, Garner’s specific inquiry about the inhaler’s reliability during one such meeting, and the NDA’s failure for the very reasons identified in the Eisele List and discussed during the product development meetings.

But the adequacy of the scienter allegations did not extend to all of the allegations against all of the individual defendants, and certain claims were dismissed.

A copy of Judge Sammartino's opinion can be found here.

Side note - though Dura has actually disappeared, having been swallowed up by Elan Pharmaceuticals, Inc. back in 2000, the Court has chosen not to rename the case, unlike Judge Cote in the Converium litigation, which has been renamed to reflect the change in corporate name and control.

Full disclosure: Once upon a time, the author worked on the Dura Pharmaceuticals litigation, suggesting at least two non-substantive changes to the plaintiffs' opposition to the cert petition.

You file a complaint and then an amended complaint.

The case proceeds in a somewhat normal course of action and at some later date the parties reach a settlement.

The settlement is outlined in a carefully crafted 34 page document.

The parties notify the court that the case has settled and ask for preliminary approval, so notice can be sent to the class.

The court grants the motion to preliminarily approve the settlement, and sets a date for a final approval hearing.

So far, everything is going fine.

And then the defendants forget to pay the amount that they agreed to pay to settle the case.

I don't mean they got out the checkbook and couldn't remember if it was $425,000 (which it was) or $427,000.

I mean the defendants decide to simply not pay.

So, the plaintiffs ask nicely.

And the defendants still don't pay.

So the plaintiffs file a "Motion to Enforce the Class Action Settlement Agreement."

And then, in a great display of bootstrapping chutzpah (one of the better unused names for a rock band), the defendants suggest:

that, by virtue of their nonpayment of the Settlement Amount, the Stipulation has terminated in accordance with its express terms.

and that:

As Lead Plaintiffs note, Defendants essentially argue that they “can cancel the Settlement by breaching their obligation to pay.”Reply at p. 9. Put quite simply, Defendants' interpretation of the Stipulation did not obligate them to do anything: under their reading, Defendants could decide, on a whim, not to pay the Settlement Amount.

Fortunately, the Court decided that:

Such a reading is not tenable, as it would render the Stipulation to be nothing more than an illusory contract.

So, the defendants get another shot at ponying up. Indeed, the judge orders them to pay up within 10 days.

At this point, what do you think the defendants chose to do?

You guessed it, checkbook went missing again, so the Court entered judgment yesterday against the defendants for the full amount, plus interest.

The case is Huttenstine v. Mast, et al., No. 4:05-CV-0015 -F(3) (E.D.N.C.), and we will keep you posted on the efforts to collect the money.

The first report, Credit Crisis and Corporate Governance Implications, identifies the corporate governance factors involved in the credit crisis, how stronger provisions might have mitigated investor risk, and the ways investors are evaluating boards’ risk management and disclosure practices.

The second report, The Subprime Meltdown Heads to Court, follows the consequences of weak risk oversight, providing an overview of the wave of securities litigation and regulatory enforcement actions beginning to swell.

A major finding from both reports is that shareholder activism and litigation has increased as a result of the credit crisis.

Both reports are available in our educational resource center, here.

We will also share the findings from both reports in a special forum, Subprime Litigation and Liability, on April 11, 2008 at 11 a.m. EDT.

Joining me on the webcast will be:

• Darryl P. Rains, a partner with Morrison & Foerster and co-chair of the firm's Securities Litigation Group. Mr. Rains has represented hundreds of companies, officers, directors and other institutions in class actions, derivative actions and enforcement proceedings.

• Kevin LaCroix, a Director at OakBridge Insurance Services and author of The D&O Diary.

• Mark Lebovitch, a partner with Bernstein Litowitz Berger & Grossmann, and a member of the firm's subprime litigation team, "which focuses on vindicating shareholder and consumer rights arising from the mortgage and mortgage-based security debt crisis."

You can register for the webcast, here.

The complete list is available here, and I am told it will be the subject of a more in depth story in the next issue of the magazine, which should be out shortly.

With a nod to fellow blogger Francis G.X. Pileggi, I have to stop briefly in the Self-Adulation Department, and note that I am on the list, and by my quick review, one of only two lawyers not currently in private practice on the list.

Given that the other member of the sub-list is Professor Joseph Grundfest from Stanford who happens to also be a former SEC commissioner, combined with the gravitas of the other members of the Top 100 list, I am in a word, humbled.

But then we saw that a trial has started in Germany over a share offering in in June 2000 by Deutsche Telekom, the former state owned telecommunications concern.

While the US securities class action settled in 2005 for $120 million, this case is the first test of Gesetz über Musterverfahren in kapitalmarktrechtlichen Streitigkeiten or KapMug which loosely translates to "statute governing representative legal actions on the grounds of capital markets disputes." KapMug was introduced in Germany to deal with mass claims in cases concerning the capital markets.

The Deutsche Telekom matter has generated enough interest and has enough participants that the court hearing the matter was "forced the court to rent a civic hall that provides room for 600 people." Indeed, according to an article from Spiegel Online, approximately 900 lawyers are representing the shareholders.

Though press reports are a bit inconsistent, a few things are clear:

1. The class numbers between 16-17,000.
2. The plaintiffs are seeking approximately $126 million in damages.
3. The German plaintiffs had to wait substantially longer than the US plaintiffs for their day in court.

Spiegel Online, Bloomberg, and the AP all have stories on the Deutsche Telekom case.

For the record, Omnicom Group and Oracle Corp were the two cases scheduled to go to trial that we alluded to earlier.

According to Omnicom's 10-Q for the period ended September 30, 2007, "a trial on any remaining portion of plaintiff’s claim is currently scheduled for the first quarter of 2008."

But, in January, Judge Pauley granted the defendants motion for summary judgment. So that was strike one for our securities class action trial predictor (the 7940 Series).

We did not despair, as we had already found a pre-trial order in the Oracle litigation that set the jury trial for March 24, 2008.

But then we saw this motion, seeking an order vacating the March 24, 2008 trial date and reassignment of the case to another district court judge, as Judge Jenkins had been nominated to a seat on the California Court of Appeal, First District.

And finally we saw this notice, vacating all pretrial deadlines and the trial date. Interestingly enough though, Judge Jenkins intends to "resolve the submitted Motions For Summary Judgment before reassigning the case."

Of course, none of this requires us to update our presentation (here) of the 20 federal securities class action cases that have gone to trial since 1996.