Vivendi SA was found liable on all 57 counts, but former Chief Executive Jean-Marie Messier and former Chief Financial Officer Guillaume Hannezo were found not liable.

Damages have not been finalized yet, but news reports suggest a range up to $11 billion depending on how many investors are ultimately included.

Vivendi has already issued a statement, noting that it intends to "pursue all available paths of action to overturn the verdict."

Among the complaints that Vivendi lists with the verdict:

• the Court’s decision to include French shareholders in the class
• rulings on jurisdiction (remember this is an F-cubed case)
• the plaintiffs’ method of proving and calculating damages

Stay tuned for more details and an update to our presentation on all 23 securities class action cases that have gone to trial since 1996.

Those cases fall into three categories:

1.Securities Class Action Trials Based on Post-Reform Act Conduct Resulting in a Verdict at Trial (nine)

2. Securities Class Action Trials Based on Post-PSLRA Conduct Resulting in a Settlement or Summary or Default Judgment During Trial (seven)

3. Securities Class Action Trials Based on Pre-PSLRA Conduct Resulting in a Verdict at Trial (seven)

The presentation is available here, and will be updated shortly to reflect the Vivendi verdict.

Today NERA Economic Consulting released the 2009 update to their study, Trends in Canadian Securities Class Actions.

According to the report, securities class action filings in Canada in 2009 continued to stay above historical average filings. The report notes that eight securities class actions were filed in 2009, compared with ten filings in 2008. As with recent reports discussing trends in US securities class action case filings, the "drop" from one year to the next is not the whole story, as 2009 is the second most active year ever for Canadian securities class action case filings.

Six new cases were filed in 2009 involving allegations of misrepresentations and/or omissions by issuers, including claims brought under the new continuous disclosure provisions. This is a new high both in absolute terms and in percentage terms (75%).

The report also notes a steep drop in the overall value of settlements achieved in 2009, with six cases settling 2009 for approximately $51 million versus eight cases totaling $890 million in settlements in 2008. According to the report, the average settlement for 2009 was $8.5 million and the median settlement was $9 million.

Of interest - the majority of cases filed in 2009 were brought in relation to securities issued by companies in the minerals and financial sectors. The report notes that this is both reflective of the composition of the Canadian economy and consistent with filing trends in prior years.

The trend of "belatedly filed" cases that has been discussed with respect to US cases also appears to have permeated north of the border, with 2 of the 8 cases (25% for you non-math majors) filed in 2009 having been filed nearly two years after the end of the proposed class period.

The full report can be downloaded here.

Much ink is spilled (particularly by self-laudatory securities litigators) on the potential upside of the process of opting out of securities class actions and filing individual or group actions over the same alleged misstatements or omissions.

Someone in the plaintiffs bar (perhaps with a PR background) even created a new term to describe these cases - direct actions.

It seems that virtually all of what has been written on the issue has focused on the allegedly larger recoveries that opt-out plaintiffs have received in their own cases as compared to what they would have received if they had remained in the class action and filed a claim for their pro-rata share of the settlement fund.

Well most upsides also have a downside, and a recent state court trial of an opt-out case provides a nice case study for us.

Back in 2004, Aspen Technology, Inc. (OTC: AZPN) and several of Aspen's officers and directors were hit with a securities class action alleging that from October 1999 through October 2004, the defendants had failed to disclose and misrepresented that:

(i) the Company had improperly and prematurely recognized revenue for certain software license and service agreement transactions entered into with certain alliance partners and other customers during fiscal years 2000-2002 and possibly other periods;

(ii) the Company lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and

(iii) as a result, the values of the Company’s revenues, earnings, assets and/or liabilities for fiscal years 2000-2002 and possibly other periods were materially overstated and might have to be restated.

During the class period, Aspen had acquired ICARUS Corporation, a company that produced computer software used by the process manufacturing industries to estimate plant capital costs and evaluate project economics, for about $25 million. The payment was a combination of cash, a promissory note, and Aspen stock with a market value of $12.4 million.

In November 2005 the defendants settled the class action litigation for $5.6 million.

Certain class members representing 1.4 million shares of common stock (or less than 1% of the shares purchased during the class period) opted out of the class action settlement.

Three separate actions were filed on behalf of the holders of approximately 1.1 million of the opt-out shares. One of the actions settled, another is still pending, and a third (you guessed it - on behalf of the former owners of ICARUS) went to trial before the Business Litigation Session of the Massachusetts Superior Court for Suffolk County in November 2009.

The ICARUS complaint alleged claims against Aspen and certain former officers alleging securities and common law fraud, breach of contract, statutory treble damages, deceptive practices and/or rescissory damages liability. The damages sought by the plaintiffs (which included trebled claims) were estimated to be $30 million.

Earlier this month, Justice Judith Fabricant ruled that "no fraud occurred...defendants are entitled to judgment on all counts of the complaint." A copy of Justice Fabricant's decision can be found here. According to a blurb on Skadden's website (defense counsel for Aspen) - the news is even worse for the former owners of ICARUS, noting that Justice Fabricant ruled that "the defendants recover of the plaintiffs its costs of action, as provided by law."

Those that stayed in the Aspen class action? The settlement fund was disbursed in March 2008.

As an aside, it is worth noting that the phrase "direct action" has another wider usage:

Politically motivated activity undertaken by individuals, groups, or governments to achieve political goals outside of normal social/political channels. Direct action can include nonviolent and violent activities which target persons, groups, or property deemed offensive to the direct action participant.

So, the next time you see an angry group of shareholders, just remember, they are probably only on their way to the courthouse...

Our most recent edition (through Q4 2009) of the SCAS Top 100 was published yesterday, and can be accessed here.

A few interesting observations.

1. More of the Top 100 cases settled in the last 4 years (53) than in the prior ten years.

2. Over the last 4 years, the price of admission to this list has doubled. On the December 31, 2005 version, the 100th largest settlement was the $39 million Washington Group International settlement from 2005. In this version, the 100th largest settlement was the $79.75 million Philip Services Corp. settlement from 2007.

3. The percentage of cases from the Top 100 where an institutional investor is the lead plaintiff continues to creep up. We now have 85% of the cases in the Top 100 with an institutional investor as a lead plaintiff. That compares to 56% 4 years ago.

4. Looking at the firms that serve as claims administrators in these cases, the Top 3 firms have switched places and had the number of settlements on the list move around, but the same three firms make up the Top 3.

A few notes for readers that have not seen a prior version of this report.

1. When a case has multiple settlements, the year listed in the report is for the most recent settlement.

2. The names of the law firms serving as co-lead counsel are left as they were when the case settled.

As always, readers are encouraged to send in any questions or corrections.

Once again, here is the latest 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.

Year End Securities Litigation Review

January 22, 2010
Webinar

Highlights:

• Analysis of newly filed cases and settlements in 2009
• Assessing the larger implications for underwriters, brokers and risk managers.

No brochure is available, but for more details, visit the webinar registration page.

Contests for Corporate Control 2010: Current Offensive & Defensive Strategies in M & A Transactions

February 4, 2010
PLI New York Center - New York, New York

Highlights:

• Director Fiduciary Duties in M&A Transactions
• Director's personal liability in M&A transactions
• Communicating with shareholders in M&A transactions
• Corporate Governance and Its Effect on the Board of Directors in M&A Transactions

No brochure is available, but for more details, visit the conference registration page.

International Jurisdiction Issues Arising from the Madoff Scandal

February 24, 2010
Teleconference

Highlights:

• Status of the cases filed to date against the feeder funds
• Enforcement issues involving investors and feeder funds abroad
• Clawback related issues and new standards for filing claims

No brochure is available, but for more details, visit the teleconference registration page.

Professional Liability Insurance

March 24-25, 2010
The Carlton Hotel - New York, New York

Highlights:

• Evaluating the Impact of the Credit Crisis on the E&O Market
• The State of the Professional Liability Marketplace
• Madoff scandal impact on the E&O landscape now and in the future

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

While some ink has been spilled recently over the Vivendi trial that is wrapping up in New York, little mention was made of another recent (and rare) securities class action trial, until now.

The case, pending against Capital Research and Management Company and American Funds Distributors, Inc., alleged that the advisory and 12b-1 (or distribution) fees which defendants received from the mutual funds they advised, and their investors, were excessive.

In an exhaustive opinion, after a bench trial this past summer, Judge Gary Feess found that "Plaintiffs have failed to sustain their burden of proving that CRMC charged fees that were 'so disproportionately large that [they bore] no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining'" - the so-called Gartenberg standard.

The American Lawyer has a story, here.

Milbank, Tweed, Hadley & McCloy represents the defendants while Milberg and Weiss & Lurie are lead counsel for the plaintiffs.

Our presentation detailing all 22 securities class action cases that have gone to trial since 1996, is available here.

Those cases fall into three categories:

1.Securities Class Action Trials Based on Post-Reform Act Conduct Resulting in a Verdict at Trial (eight)

2. Securities Class Action Trials Based on Post-PSLRA Conduct Resulting in a Settlement or Summary or Default Judgment During Trial (seven)

3. Securities Class Action Trials Based on Pre-PSLRA Conduct Resulting in a Verdict at Trial (seven)

Note that we have not yet added the Vivendi case to the presentation, but will do so when it fits into one of our three categories.

As always, readers are encouraged to send in any updates, additions, or corrections.

It seems like we just updated the options backdating numbers, because we did. But, with the settlement announced yesterday involving alleged options backdating at Broadcom Corporation (NASDAQ: BRCM) for $160.5 million, it's time to crunch the numbers once more.

Of the 39 options backdating cases that have been filed as securities class actions, 32 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 23 have settled.

The twenty three settlements total $1.94 billion, for an average of $84.67 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $46.45 million. While we previously noted that the averages had been slowly creeping down over time, the two settlements this month, Broadcom and Comverse, have bumped the average up by nearly 15%.

As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The twenty three cases have settled in an average of 695 days. While the numbers have been slowly creeping up as the remaining cases linger, the average time from filing to settlement is still below historical levels.

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

Kevin LaCroix over at The D&O Diary also has a post on the Broadcom settlement, here.

It has been just over one month since we last updated the options backdating numbers. With the settlement announced yesterday involving alleged options backdating at Comverse Technology, Inc. (Pink Sheets: CMVT) for $225 million, it's time to crunch the numbers once more.

Of the 39 options backdating cases that have been filed as securities class actions, 31 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 22 have settled. This is starting to push the boundaries of historical trends, where settlements outnumber dismissals by approximately 2 to 1.

The twenty two settlements total $1.78 billion, for an average of $81.22 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $41.02 million. While we previously noted that the averages had been slowly creeping down over time, the Comverse settlement bumps the average up again by more than 10%.

As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The twenty two cases have settled in an average of 670 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 20 cases to 627 days. The numbers have been slowly creeping up as the remaining cases linger, but the average is still below historical levels.

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

Kevin LaCroix over at The D&O Diary also has a post on the Comverse settlement, here.

An online article from Responsible Investor is causing waves for suggesting that a number of UK pension funds and other institutional investors excluded from a US class action against RBS might file a class action in the High Court in London.

Interesting as the article may be, there is a subtle, but important distinction between this potential UK action and a true class action.

The article notes that "a group of 25-30 institutional investors could 'co-ordinate' their legal actions," and also notes "that in contrast to the US class action system, each plaintiff in the UK would maintain autonomy and control over their individual legal case."

The proposed action, as spelled out in the article, is more aptly described as a "mass" or "group" action, and is not a true class action. Indeed, most US securities class actions are brought with the express disclaimer that the true identities of the majority of class members are unknown to counsel at the outset. These are generally known as "absent class members," and the identities of all members of the defined class may never be known. Only those class members that file a claim will become "known," whereas in the proposed action, there is no ambiguity about the identity of the group.

Also, in a class action, the named or lead plaintiffs certainly have some control over their individual claims, but every other absent class member has little control over the overall litigation strategy, and certainly not "autonomy and control over their individual legal case," unless they opt out of the class action.

The potential UK action would be brought by Coughlin Stoia Geller Rudman & Robbins and two UK based partners - Bates Wells & Braithwaite and UK barrister Christopher Brown. One feature of US class action litigation will be incorporated into the potential claim - according to the article, the law firms have said that they will represent "the UK pension funds on a no-win, no fee basis and insure the funds against any potential costs if the legal action is unsuccessful," taking 25% of any compensation paid to the funds if the case is successful.

Stay tuned for more developments...

Longtime readers may recall that back in 2005, more than 40 mutual fund managers were sued for allegedly failing to file claim forms in settled securities class actions where the fund had eligible transactions. That began our long running series of posts "File Those Claims ... Or Else."

In general, what little litigation there has been over securities class action settlements has been in a fairly similar vein - that is that an entity that had a legal or contractual duty to file claims on behalf of another failed to do so, or did so improperly.

A case filed earlier this month against several Wachovia and Wells Fargo entities attempts to take that line of cases to an entirely different level (Hat Tip: Courthouse News Service).

The allegation is pretty straightforward, and potentially far-reaching. Essentially, a securities class action was filed in 2001 on behalf of purchasers of various securities issued by Asia Pulp & Paper. That case settled in 2006 for $46 million, and in May 2007 a distribution was made to investors that had filed claims.

Here's where Wachovia and Wells Fargo come into the picture, or not as the case alleges.

As with most securities, the majority of Asia Pulp & Paper investors had their securities held in "street name," or the name of a nominee, typically a bank, broker or custodian. Thus, as is customary in most securities class action settlements, the court overseeing the Asia Pulp & Paper litigation ordered these nominee (record, but not beneficial owner) purchasers to either notify their clients of their eligibility to participate in the Asia Pulp & Paper litigation, or to provide the claims administrator with a list of those clients so that the claims administrator could undertake the notification.

The newly filed complaint alleges that Wachovia and Wells Fargo failed to do so, and as a result, their clients were not informed of the Asia Pulp & Paper settlement, did not submit claims forms, and thus did not collect their pro-rata share of the settlement.

Now, the complaint was just filed, and we have no idea how it will shake out, but it should give any institution that holds securities in their own name on behalf of their clients pause. This was a relatively small case, with the net distribution to the class of just under $35 million. That isn't even halfway to being on our SCAS 100 list of the largest securities class action settlements, and a far cry from many of the mega-settlements that have been reached in the last few years. The potential exposure in the larger cases, such as Enron, WorldCom, Adelphia, Tyco, and Nortel is dramatically larger.

I recently chatted with Bruce Carton over at Securities Docket regarding the case. You can see our discussion here.

Readers may recall that Cauley was one of the lead counsel in the BISYS securities litigation that settled in 2006 for $65.8 million. Cauley was the sole signatory of the escrow fund in the BISYS litigation, and revealed in April that he was unable to produce the $9.3 million in remaining settlement funds from the BISYS litigation.

Following this disclosure, Cauley resigned from his firm, surrendered his law license, and agreed to plead guilty to one count each of wire fraud and criminal contempt for “failing to safely hold” the settlement funds. His sentencing is scheduled for next week.

Last month, one of Cauley's creditors, Centennial Bank, sued Cauley's former law firm (n/k/a Carney Williams Bates Bozeman & Pulliam, PLLC) and his former partners. According to an article in the Arkansas Business Journal, Centennial is operating under a power of attorney, in the name of Cauley.

According to the article, the firm's defense to the suit is essentially that Cauley forfeited his contingency fee rights when he surrendered his law license in May. The firm's lawyer, Skip Henry, notes that "[b]ecause he is no longer a lawyer, we cannot pay him any contingency fees."

A follow up article from the Arkansas Business Journal also notes that Cauley is a former director of Centennial Bank's holding company, Home BancShares, Inc. (NASDAQ - HOMB) and that Cauley and his various entities (listed here) owe Centennial more $41 million.

More bad news for Cauley - his Gulfstream G450 was repossessed by Wachovia in June.

It has been just one week since we last updated the options backdating numbers. With the recently noticed (hey we're not perfect) settlement last month of litigation involving alleged options backdating at Sonic Solutions, Inc., (NASDAQ: SNIC) for $5 million, it's time to crunch the numbers once more.

Of the 39 options backdating cases that have been filed as securities class actions, 30 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 21 have settled. This is still in line with historical trends, where settlements outnumber dismissals by approximately 2 to 1.

The twenty one settlements total $1.56 billion, for an average of $74.38 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $31.82 million. As could have been expected the averages are slowly creeping down over time, as the UnitedHealth settlement can now be viewed as a fairly clear example of an outlier in terms of the size of the settlement.

As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The twenty one cases have settled in an average of 639 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 19 cases to 606 days. The numbers have been slowly creeping up as the remaining cases linger, but the average is still below historical levels.

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

Oh, and in our defense, the plaintiffs did not issues a press release on the settlement and the company only disclosed it in their recently filed 10-Q.

Thanks to Kevin LaCroix over at The D&O Diary for pointing out the Sonic settlement to us.

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.

15th Annual Advanced Forum on D&O Liability

November 30 - December 1, 2009
The Carlton - New York, New York

Highlights:

• Newest trends and developments arising from the wave of securities litigation and how they are impacting D&O coverage and claims
• Harmonizing your company’s D&O policies with SEC regulations to avoid conflict
• Assessing how the recent credit crisis is affecting the D&O landscape, and preparing for the rising tide of litigation and class actions

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

Madoff Class, Derivative & Insurance Litigation Conference

December 2, 2009
Conference Center - New York, New York

Highlights:

• Ponzi Schemes – Causes of Action and Claims Alleged
• Financial Institutions and Crime Policies - Who is being sued? Who might be sued?
• Financial Institutions & Fidelity bonds

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

New Developments in Securitization 2009

December 3 - 4, 2009
PLI New York Center-New York, NY

Highlights:

• Developments in CDO and other RMBS-related litigation and forecasts of future CDO litigation trends
• Issues affecting trustees in RMBS loan repurchase obligations
• Resolving disputes between CDO tranches

No brochure is available, but for more details, visit the conference registration page.

While the Bloomberg story describing it may have been painfully short, the actual report released by Hong Kong’s Law Reform Commission to propose allowing multiparty litigation, is shall we say, thorough.

If adopted, the 300+ page consultation paper released last week, would add Hong Kong to the growing list of non-US jurisdictions that allow class actions.

There are a number of differences that would set Hong Kong's proposed class action procedure apart from many of the recently enacted class action statutes in other countries.

Most notably, would be the hybrid approach to determining who will be included in the class. The report recommends that the new class action regime generally would operate under an "opt-out" approach, similar to that used in most US class actions. But, and this is a big one, "[w]here the proceedings involve parties from outside Hong Kong, an 'opt-in' procedure should be the default position (that is, persons will not be included in the class litigation unless they take active steps to 'opt in' to the litigation), with a discretion given to the court to adopt an 'opt-out' procedure if the particular circumstances of the case warrant it."

To the best of our knowledge, this two track model is unique among jurisdictions allowing class actions. It may be an attempt to avoid some of the "f-cubed" issues that we are seeing in US cases, as well as allow most cases to avoid having to undertake an in-depth, country-by-country analysis of comity and other international law issues.

Also of interest, the report suggests allowing contingency fees, third-party litigation funders, and public financing, hitting all three of the major regimes that we have already seen implemented to deal with the funding of class actions.

We would be remiss if we did not note for readers that the

[R]ecommendations in the consultation paper are intended to facilitate discussion and do not represent the sub-committee's final conclusions. The sub-committee would welcome views, comments and suggestions on any issues discussed in the consultation paper, and in particular on the questions set out in Chapter 10. The consultation period will last until 4 February 2010.

Comments should be sent to:

The Secretary
The Class Actions Sub-committee
The Law Reform Commission
20th Floor, Harcourt House
39 Gloucester Road
Wanchai
Hong Kong
Telephone: (852) 2528 0472
Fax: (852) 2865 2902
E-mail: hklrc@hkreform.gov.hk

And for those readers that are still scratching their heads over the title of this post, Hong Kong Phooey was a 16-episode Hanna-Barbera animated series that first aired on ABC in September 1974.

What to do when a federal judge appoints you as lead plaintiff, but another lead plaintiff movant's attorney as lead counsel?

You ask the Court of Appeals for a writ of mandamus, of course.

Nearly 11 months ago, Judge James Ware, appointed two separate movants (Roberto Cohen and New Jersey Carpenters Pension and Annuity Funds) as co-lead plaintiffs in the NVIDIA Corporation (Nasdaq: NVDA) securities litigation, and Milberg LLP and Girard Gibbs LLP as co-lead counsel. Only one problem - Girard Gibbs was counsel for one of the unsuccessful movants, and Mr. Cohen's chosen counsel, Kahn Gauthier Swick, LLC (n/k/a Kahn Swick & Foti) was left out in the cold.

Cohen, and his original counsel, filed a motion, asking Judge Ware to reconsider his decision, and Judge Ware denied the motion. Cohen then filed a petition for a writ of mandamus with the Ninth Circuit, which was granted.

The Court of Appeals, in a surprisingly sharped worded opinion, reversed Judge Ware's selection of lead counsel, ordering him to vacate his order appointing Girard Gibbs as co-lead counsel. The Court did not go as far as Cohen and Kahn Swick desired, leaving it up to Judge Ware solely to approve or disapprove of Cohen's selection of counsel.

Citing extensively to the Ninth Circuit's prior opinion in In re Cavanaugh, 306 F.3d 726 (9th Cir. 2002), the Court noted that while "the PSLRA's provisions on selection of lead plaintiff and lead counsel, although containing many requirements, are 'neither overly complex nor ambiguous," and notes that the most adequate plaintiff (or, the putative lead plaintiff) is "the actor that 'select[s] and retain[s]' class counsel. Although this power is subject to court approval and is therefore not absolute, it plainly belongs to the lead plaintiff."

The Court goes on to note:

Nor does the statute, framed in mandatory language, designate any other actor as authorized to select lead counsel or suggest that the district court may appropriate this authority. It would be difficult for the statute to be more clear that it is the lead plaintiff who selects lead counsel, not the district court.

The Court did not go as far as Kahn Gauthier asked, but instead, remanded the case to Judge Ware, and asking him "to consider, using appropriate deference, whether [Kahn Swick] was an unreasonable choice of lead counsel under the circumstances."

Here at SLW we continue to find humor in the somewhat mundane parts of the PSLRA that continue to generate judicial opinions 14 years after the statute went into effect.