Another Update to the Options Backdating Scorecard
Just three weeks ago, we updated the options backdating numbers. With the settlement last week of litigation involving alleged options backdating at The Children’s Place Retail Stores, Inc., (NASDAQ: PLCE) for $12 million, it's time to crunch the numbers once more.
Of the 39 options backdating cases that have been filed as securities class actions, 28 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 19 have settled. This is in line with historical trends, where settlements outnumber dismissals by approximately 2 to 1.
The nineteen settlements total $1.49 billion, for an average of $78.8 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $33.45 million.
As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The eighteen cases have settled in an average of 609 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 17 cases to 569 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.
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Tuesday, April 7, 2009 |
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Another Look at the SCAS 50
Last month, we released our annual SCAS 50 list of the top 50 plaintiffs' law firms, ranked by the total dollar amount of securities class action settlements that the firm achieved in 2008 as lead or co-lead counsel.
A loyal reader asked us to run the numbers again, this time focusing on the MEDIAN settlement value, instead of the total or average.
Always eager to please, we slipped on our green eyeshade and hit the adding machine.
The results were not altogether surprising.
Without further ado...
2008's Top 5 - Median settlement value:
1. Grant & Eisenhofer
2. Nix, Patterson, & Roach
3. Bernstein Litowitz Berger & Grossmann
4. Bernstein Liebhard
5. Labaton Sucharow
And for comparison, here are the high achievers from the previously released average category:
2008's Top 5 - Average settlement value:
1. Grant & Eisenhofer
2. Nix, Patterson, & Roach
3. Bernstein Litowitz Berger & Grossmann
4. Chitwood Harley Harnes
5. Glancy Binkow & Goldberg
As you can see, only the #4 and #5 firms differed.
Chitwood Harley had made the "average" list largely on the size of the $137.5 million Coca Cola settlement, while Glancy Binkow was in the Top 5 due largely to the $117.5 million settlement in the Mercury Interactive options backdating case.
The Chitwood firm falls to #14 in our median analysis, while the Glancy firm drops only two places to #7.
UPDATE: In response to reader inquiries, we realized that we failed to disclose the threshold for inclusion of a firm in the "median" analysis. It was the same standard that we use for inclusion in the "average" analysis - a firm must have a minimum of three settlements.
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Wednesday, March 25, 2009 |
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The SCAS 50 for 2008
Today we released our sixth annual "SCAS 50" report.
Based on data from the SCAS database, the SCAS 50 lists the top 50 plaintiffs' law firms ranked by the total dollar amount of final securities class action settlements occurring in 2008 in which the law firm served as lead or co-lead counsel.
As always, we look at the data in three main ways for each firm - total settlement dollars, total number of settlements, and average value per settlement. I have listed the top five firms in each category below.
The full report is available here.
2008's Top 5 - Total settlement value:
1. Bernstein Litowitz Berger & Grossmann
2. Barroway Topaz Kessler Meltzer & Check
3. Coughlin Stoia Geller Rudman & Robbins
4. Labaton Sucharow
5. Grant & Eisenhofer
2008's Top 5 - Average settlement value:
1. Grant & Eisenhofer
2. Nix, Patterson, & Roach
3. Bernstein Litowitz Berger & Grossmann
4. Chitwood Harley Harnes
5. Glancy Binkow & Goldberg
2008's Top 5 - Number of settlements:
1. Coughlin Stoia Geller Rudman & Robbins
2. Barroway Topaz Kessler Meltzer & Check
3. Milberg
4. Labaton Sucharow
5. Bernstein Litowitz Berger & Grossmann
A few observations.
1. This is the since we started compiling the SCAS 50 that no single firm had more than $1 billion in total settlements.
2. Bernstein Litowitz again placed first in our overall rankings. The firm has been in the top five each year we have compiled the SCAS 50 rankings and they are the only firm to achieve that distinction.
3. Nix, Patterson, & Roach makes their SCAS 50 debut this year. A firm that was traditionally known more for their toxic tort and product liability work, they have been quietly making inroads in the securities class action world. Oh yeah, and they have three jets too!
4. Each year we seem to have at least one firm that has changed names from the prior year, just in the Top 5 tables. This year we have two, Barroway Topaz and Milberg.
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Friday, August 15, 2008 |
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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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Friday, August 1, 2008 |
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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 8, 2008 |
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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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Thursday, May 15, 2008 |
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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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Thursday, May 1, 2008 |
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First Filed Tyco Opt-out Case Partially Settles
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.
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Thursday, April 10, 2008 |
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Bootstrapping Chutzpah and the Missing Checkbook
So an aggrieved shareholder comes to you and wants to file a securities class action.
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.
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Tuesday, March 11, 2008 |
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The SCAS 50 for 2007
Today we released our fifth annual "SCAS 50" report.
Based on data from the SCAS database, the SCAS 50 lists the top 50 plaintiffs' law firms ranked by the total dollar amount of final securities class action settlements occurring in 2007 in which the law firm served as lead or co-lead counsel.
We look at the data in three main ways for each firm - total settlement dollars, total number of settlements, and average value per settlement. I have listed the top five firms in each category below.
The full report is available here.
2007's Top 5 - Total settlement value:
1. Milberg Weiss
2. Grant & Eisenhofer
3. Schiffrin Barroway Topaz & Kessler
4. Coughlin Stoia Geller Rudman & Robbins
5. Bernstein Litowitz Berger & Grossmann
2007's Top 5 - Average settlement value:
1. Grant & Eisenhofer
2. Milberg Weiss
3. Labaton Sucharow
4. Schiffrin Barroway Topaz & Kessler
5. Bernstein Litowitz Berger & Grossmann
2007's Top 5 - Number of settlements:
1. Coughlin Stoia Geller Rudman & Robbins
2. Schiffrin Barroway Topaz & Kessler
3. Milberg Weiss
4. Bernstein Litowitz Berger & Grossmann
5. Weiss & Lurie
5. Cohen Milstein Hausfeld & Toll
A few observations.
1. Comparing the 2007 numbers to last year's rankings, we see that settlement values do indeed seem to be rising. The cutoff for the Top 20 last year - $94.1 million; For this year - $148.5 million. The increase cascades all the way to the end of the list, where last year $8.5 million would get you on the list, but this year, the price of admission is $17.5 million.
2. It is somewhat surprising to see Bernstein Litowitz in the top 5 for the number of settlements (as opposed to dollar value or average) as the firm is known to be very selective in choosing cases, and thus is potentially involved in fewer cases at any given time.
3. This is the first time that both Cohen Milstein and Weiss & Lurie have been ranked in the top 5 for one of our categories. One might ordinarily say that it is nice to see some fresh faces at the top, but both firms (or their predecessor firms) are old stalwarts in the plaintiffs bar. We have yet to see any of the truly new faces in securities litigation (Motley Rice, Kahn Gauthier, etc.) high up on these rankings.
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Tuesday, February 12, 2008 |
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Holder-Seller Conflicts and Exploding Class Periods
For some time now, a small, but vocal group of judges have written about the theoretical conflict inherent in many securities class actions - namely that when a case settles, current shareholders are paying damages to a class that includes former shareholders. See e.g. In re Seagate II Technology Sec. Litig., 843 F.Supp. 1341, 1362-64 (N.D.Cal.1994); In re Party City Sec. Litig., 189 F.R.D. 91, 108-10 (D.N.J.1999).
We will leave the legitimacy of the holder-seller conflict theory aside for now.
The $20.1 million tentative settlement in the Lumenis Ltd. securities class action announced yesterday has the ability to test whether investors care about this theoretical conflict, particularly when, as noted in the press release announcing the settlement, "the major portion would be paid on behalf of the defendants by the Company's insurers."
As noted in the press release, the company:
has scheduled a special general meeting of shareholders to seek approval and authorization, in accordance with the Israeli Companies Law, of a proposed settlement of the securities class action litigation that has been pending against the Company in the federal court in New York since 2002.
Though I am not licensed to practice law in Israel, and I did not stay at a Holiday Inn Express last night, it appears that the Israeli Companies Law requires shareholder approval of the settlement as it is considered an "extraordinary transaction."
A quick perusal of the 6-K filed by the company this week breaks the settlement down to a more granular level:
The Company has entered into separate confidential settlement agreements with its primary D&O Insurer, Genesis Insurance Company (“Genesis”), and the two excess D&O Insurers whose policies are immediately above the Genesis policy, Zurich American Insurance Company (“Zurich”) and Lumbermens Mutual Casualty Company (“Lumbermens”), as a result of which it is expected that Lumenis itself will directly contribute $2,736,000 toward the settlement of the Securities Class Action and the above-named D&O Insurers will collectively contribute the remaining $17,364,000, for a total of $20,100,000.
Thus the company will contribute about 13% of the total settlement.
Another interesting provision of the settlement, as detailed in the 6-K is the following:
After the filing of the Stipulation of Settlement, Lead Plaintiffs will file a Third Amended and Consolidated Class Action Complaint (“TAC”) naming the same defendants as are named in the SAC and which will incorporate additional allegations and claims based on those alleged in the SEC Civil Action. The TAC will amend and enlarge the class definition to include persons who purchased Lumenis securities at any time between October 2, 2000 and March 7, 2006 (the “Settlement Class Period”). Lumenis and the other defendants will not be required to respond to the TAC, by answer or by motion, unless and until the Court fails to give final approval to the settlement or it is otherwise terminated, and the Company and the individual defendants retain all of their defenses with respect to the TAC.
Thus, the class has grown quite a bit, having started at a mere seven weeks in the initial complaints, morphed to eight months or so in the amended complaints and now stretching nearly five and a half years, beyond even what the extended statute of limitations found in Sarbanes-Oxley would allow.
This poses an interesting philosophical question - is it reasonable to allow a settlement to extinguish claims that have yet to become time-barred - as the end of the enlarged class period is less than two years old. We'll save that one for another day as well.
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Thursday, March 8, 2007 |
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The "Mother" of all Search Engines
Mamma.com Inc. (NASDAQ: MAMA), the company behind the self-proclaimed "Mother of All Search Engines®" announced today that the settlement of the securities class action lawsuit pending against the company and certain officers and directors has received tentative approval.
The Mamma.com class action is pending in the United States District Court for the Southern District of New York before Judge Harold Baer, Jr.
The settlement is valued at $3.15 million, $2.5 million of which will be paid by the company's insurance carrier and $650,000 from the company.
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Tuesday, March 6, 2007 |
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The SCAS 50 for 2006
For the fourth year, my company (ISS' Securities Class Action Services) has issued its "SCAS 50" report.
Based on data from the SCAS database, the SCAS 50 lists the top 50 plaintiffs' law firms ranked by the total dollar amount of final securities class action settlements occurring in 2006 in which the law firm served as lead or co-lead counsel.
The full report is available here.
2006's Top 10:
| RANK | LAW FIRM | SETTLEMENT TOTAL | # OF SETTLEMENTS | AVERAGE |
| 1 | Lerach Coughlin Stoia Geller Rudman & Robbins | $7,307,050,000 |
30 |
$243,568,333 |
| 2 | Bernstein Litowitz Berger & Grossmann | $2,634,765,298 |
9 |
$292,751,700 |
| 3 | Heins Mills & Olson | $2,500,000,000 |
1 |
$2,500,000,000 |
| 4 | Milberg Weiss & Bershad | $1,604,608,808 |
22 |
$72,936,764 |
| 5 | Entwistle & Cappucci | $1,100,000,000 |
1 |
$1,100,000,000 |
| 6 | Barrack, Rodos & Bacine | $960,000,000 |
1 |
$960,000,000 |
| 7 | Kirby McInerney & Squire | $650,900,000 |
5 |
$130,180,000 |
| 8 | Abbey Spanier Rodd Abrams & Paradis | $590,295,000 |
8 |
$73,865,625 |
| 9 | Barrett & Weber | $410,000,000 |
1 |
$410,000,000 |
| 9 | Waite, Schneider, Bayless & Chesley | $410,000,000 |
1 |
$410,000,000 |
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Monday, March 5, 2007 |
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First BanCorp Settles Securities Class Action
Today, First BanCorp (NYSE: FBP) announced that it had reached an agreement in principle to settle the securities class action pending against the company and certain officers and directors in the United States District Court for the District of Puerto Rico for $74,250,000.
The Plumbers & Pipefitters Local 51 Pension Fund and two individuals are lead plaintiffs and Lerach Coughlin Stoia Geller Rudman & Robbins LLP and Zwerling Schachter & Zwerling are co-lead counsel in the First BanCorp securities class action.
A quick search of the SCAS database reveals that this is the largest securities class action settlement ever in the District of Puerto Rico.
It also appears that the the First BanCorp litigation is one of only two securities class actions filed in the District of Puerto Rico since the PSLRA was enacted. The other case, on behalf of shareholders in Pepsi-Cola Puerto Rico Bottling Co. (n/k/a PepsiAmericas, Inc. (NYSE: PAS)) was settled in 1997.
The District of Puerto Rico can now be added back to the list of Federal courts without an active securities class action.
Thanks to Werner Kranenburg (With Vigour and Zeal) for the tip.
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Wednesday, July 19, 2006 |
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Hatfields and McCoys Announce Proposed Settlement
OK, it's not exactly the Hatfields and McCoys (the Hatfield clan is shown here, circa 1897), but in this press release dated June 29, 2006, Milberg Weiss and Lerach Coughlin announced a proposed settlement of the securities class action against Imperial Chemical Industries, PLC. In an odd twist, the now-divided Milberg Weiss and Lerach Coughlin law firms somehow ended up as co-lead counsel in this case. According to the SCAS database, however, these firms serving as co-lead counsel is not as rare as one might assume: our database shows that this has occurred in 10 cases (8 settled, 1 dismissed, 1 still active).
The amount of the proposed settlement in the Imperial Chemical case?
[Drum roll...]
$3.8 million, less 1/3 for attorneys' fees and $100,000 in expenses.
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Wednesday, March 1, 2006 |
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Enron Settlement Recovery Update: $7.89/Share and Counting
On February 22, a federal judge in Texas gave preliminary approval to a partial settlement of the Enron securities class action with three investment banks (Citigroup, JPMorgan Chase and CIBC) that will pay a combined $6.6 billion (see AP article here).
An article in the February 27 Texas Lawyer reports that this partial settlement alone will result in some sizeable recoveries for investors. According to the article, a class notice filed with the court states that the partial settlement, before fees and expenses, will provide about $7.89 for each common share of Enron stock. With banks such as Merrill Lynch & Co., Barclays PLC, Toronto-Dominion Bank, Royal Bank of Canada, Deutsche Bank AG and the Royal Bank of Scotland Group PLC still remaining as defendants in the case, this per share recovery figures to keep rising.
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Thursday, February 9, 2006 |
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Interesting Twist to Nortel Settlement
As widely discussed in articles such as this one, Nortel has agreed to pay $2.4 billion to settle securities class action lawsuits concerning accounting irregularities. According to the SCAS database, the settlement will be the 5th largest ever, behind only Enron ($7.14B), WorldCom ($6.15B), Cendant ($3.18B) and AOL Time Warner ($2.65B).
According to Nortel's press release on the settlement and published reports, the settlement will also include an interesting (especially if you work at ISS) corporate governance-related term. In its press release, Nortel states that
The proposed settlement is also conditioned on Nortel and the lead plaintiffs reaching agreement on corporate governance related matters and the resolution of insurance related issues.
Nortel is committed to benchmarking its corporate governance practices to those of companies ranked in the top quartile by Institutional Shareholder Services. "The Board of Directors strongly believes that sound and responsible corporate governance is integral to Nortel's future," said Harry Pearce.
While it is not completely clear from the quote above that the benchmarking to ISS' ranking is a term of the settlement, articles such as this one in the E-Commerce Times suggest that this is the case:
In addition to the payments, the agreement will likely include some requirements that Nortel adhere to certain corporate governance standards going forward....
***
Nortel said while details were still being hammered out on the corporate governance terms of the agreement, it was comfortable being compared to the top-ranked publicly traded companies in terms of corporate governance as measured by Institutional Shareholder Services.
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Thursday, February 2, 2006 |
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"Clearing Up Class-Action Settlements"
Chris Kentouris of Securities Industry News has this article entitled "Clearing Up Class-Action Settlements" that discusses my company (ISS' Securities Class Action Services) and the work we do for institutional investors to help them recover settlement funds. As discussed in the article,
With ISS's outsourced service, investment advisers and custodian banks just have to provide a list of their clients' positions in an affected security; ISS will take care of all the paperwork necessary to retrieve funds--no small task considering the dozens of pages that must be filled out and sent to claims administrators. Multiply that by the several dozen lawsuits that a large fund or custodian bank needs to keep track of each year, and one could end up buried in a mountain of paper. And funds are not recovered automatically. It can take two to five years to retrieve funds, if at all. "Some firms do the work through corporate actions departments, others have specialized units and yet others cobble together staff from different departments each time they need to process proof-of-claim paperwork," says Bruce Carton, vice president at ISS. "That work doesn't even take into account the need to maintain a database on pending settlements." Carton estimates that outsourcing to a firm such as ISS often saves the annual salaries of at least two full-time operations executives. Mellon Bank has a dedicated staff of 12 working within a specialized securities class-action lawsuit unit.
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Tuesday, November 29, 2005 |
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Ahold: At Least We're Not #1, 2, 3 or 4!
As discussed here, Ahold's agreement to settle the securities class action against for $1.1 billion is the 5th largest settlement in history. The company seems to be taking great comfort from the fact that these four other larger settlements exist. As discussed in this article from the Daily Telegraph, Ahold Executive board member Peter Wakkie
said yesterday the settlement was fair to US investors and other shareholders and to the company itself: "It is a substantial compensation for shareholders of between $1 and $1.30 per share. This is not so high that it will bring Ahold into problems.
"Other lawsuits have been settled for well over $2 billion so we are happy we are having to pay an amount that's south of that."
So the new standard has been set for defendants--if any other company has settled any other, unrelated lawsuit for more than you are agreeing to settle for... you should be happy! Plaintiffs' lawyers, I think this should work out just fine for you.
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Monday, November 28, 2005 |
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Ahold: No. 5
According to news reports, Ahold has agreed to settle the securities class action filed against it for $1.1 billion. The SCAS database shows that when it becomes final, this will be the 5th largest settlement in history behind only Enron ($7,144,500,000), WorldCom ($6,156,100,670 ), Cendant ($3,186,500,000) and AOL Time Warner ($2,650,000,000). Indeed, the total settlement amount in this case may still rise further, as the plaintiffs reportedly intend to pursue their claims against Ahold's former accountants, Deloitte & Touche, in the case.
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Thursday, August 4, 2005 |
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Enron Settlements Starting to Line Up, Part II
Following CIBC's $2.4 billion settlement in the Enron case (discussed here), Bill Lerach continues to turn up the heat on the remaining defendants in the case (reported to include Barclays PLC, Credit Suisse First Boston, Merrill Lynch & Co., Toronto Dominion Bank, Royal Bank of Canada, Deutsche Bank AG and the Royal Bank of Scotland Group). In this interview with MarketWatch, Lerach laid down the gauntlet for the remaining defendants:
Q. CIBC was considered a smaller player in this matter. What message does its settlement send to companies that allegedly had larger roles?
Part of the enormous significance of the CIBC settlement is that it came from a bank that's 1/20 the size of Citibank and J.P. Morgan. It is the smallest of all the defendant banks. So while we cannot and will not predict the future, the pattern of escalating settlements is clearly established and is something that we will pursue.
The banks are in a tough spot. Every settlement that occurs puts more pressure on the non-settling banks because they have less banks to share the remaining liability with. So the litigation dynamic and pressure is very negative for the banks.
Q. Still, can you see a defendant going to trial rather than settle?
I don't think any of them will. The case is too dangerous, too large, too risky. And especially the prospect of standing trial along with confessed or convicted felons in Houston in the Enron scandal is a most unappetizing dish for any of these banks to consume.
Lerach is correct that it will take some serious "bet the company" guts for any of the remaining defendants to stay in this case to the end--which is unlikely. So look for a flurry of big settlements soon....
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Enron Settlements Starting to Line Up, Part II
Following CIBC's $2.4 billion settlement in the Enron case (discussed here), Bill Lerach continues to turn up the heat on the remaining defendants in the case (reported to include Barclays PLC, Credit Suisse First Boston, Merrill Lynch & Co., Toronto Dominion Bank, Royal Bank of Canada, Deutsche Bank AG and the Royal Bank of Scotland Group). In this interview with MarketWatch, Lerach laid down the gauntlet for the remaining defendants:
Q. CIBC was considered a smaller player in this matter. What message does its settlement send to companies that allegedly had larger roles?
Part of the enormous significance of the CIBC settlement is that it came from a bank that's 1/20 the size of Citibank and J.P. Morgan. It is the smallest of all the defendant banks. So while we cannot and will not predict the future, the pattern of escalating settlements is clearly established and is something that we will pursue.
The banks are in a tough spot. Every settlement that occurs puts more pressure on the non-settling banks because they have less banks to share the remaining liability with. So the litigation dynamic and pressure is very negative for the banks.
Q. Still, can you see a defendant going to trial rather than settle?
I don't think any of them will. The case is too dangerous, too large, too risky. And especially the prospect of standing trial along with confessed or convicted felons in Houston in the Enron scandal is a most unappetizing dish for any of these banks to consume.
Lerach is correct that it will take some serious "bet the company" guts for any of the remaining defendants to stay in this case to the end--which is unlikely. So look for a series of big settlements soon....
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Wednesday, August 3, 2005 |
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$4.8 Billion in Settlements in Two Days
Between the settlement yesterday by CIBC in the Enron securities litigation for $2.4 billion and the settlement by Time Warner this morning for $2.4 billion with the lead group of shareholders who sued the media company after its merger with AOL we have seen $4.8 billion in settlements in the last two days.
To put that in perspective, the settlements announced in this 48-hour period exceed the total amount of final securities class action settlements in any single year other than 2004.
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Monday, August 1, 2005 |
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Former WorldCom CFO Settles Class Action, Forfeits Sweet House
As widely reported last week, former WorldCom CFO Scott Sullivan agreed to "forfeit his lavish Florida estate and his retirement fund to settle a class-action lawsuit. To settle a case brought by the New York State Common Retirement Fund, Mr. Sullivan will hand over his 30,000-square-foot mansion in Boca Raton, Fla., which is now being offered for sale at $10.9 million."
And just take a look at the sweet pad Sullivan is forfeiting (amazing photos and full Internet listing are on his realtor's website here). As his realtor states on the listing, "This is a once-in-a-lifetime opportunity, embodying the ultimate lifestyle envisaged." Of course, as discussed here, Sullivan soon will be "envisaging" quite a different lifestyle.
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Tuesday, July 19, 2005 |
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Globalstar Securities Litigation Settles for $20 Million
The Globalstar Securities Litigation that went to trial July 6 (discussed in this post) settled late Sunday night, July 17. The case, which was proceeding only against Loral Space Communications CEO Bernard Schwartz (Loral apparently owned part of Globalstar) due to the bankruptcies of the corporate defendants settled for $20 million according to a lawyer from the plaintiffs' law firm, Cohen, Milstein, Hausfeld & Toll. The case settled midway through the defense's case.
The plaintiffs reportedly put on 10 "witnesses": two live witnesses (the lead plaintiff and a damages expert), one by videotape, and seven via deposition transcript. The defense had gotten through two witnesses--the COO and CFO of Loral--when the case settled. CEO Schwartz and a damages expert were also lined up to testify for the defense but did not following the settlement reached over the weekend.
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Thursday, June 16, 2005 |
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Enron Settlements Starting to Line Up
In a span of just three business days, J.P.Morgan and Citigroup settled the claims against them in the Enron securities class action for $2.2 billion and $2.0 billion, respectively. J.P. Morgan's settlement is the third largest of all-time, behind only Cendant's $2.851 billion settlement in 2000 and Citigroup's $2.575 billion settlement in the WorldCom case. Citigroup's $2 billion Enron settlement is the fourth largest settlement ever (tied with J.P. Morgan's $2.0 billion settlement in the WorldCom case).
As discussed in this CNN Money article entitled "The $12 Billion (and Counting) Payback," the total Enron settlement pool has now reached $4.7 billion, and will undoubtedly climb much higher. The $12 billion figure noted in the title of the article is a reference to the ISS Settlement Pipeline, a metric that we created here last year to measure the amounts of all pending or tentatively announced settlements for which the claim deadline has not passed. When we introduced the ISS Settlement Pipeline less than one year ago, the number stood at a then-startling $5.55 billion dollars. In the months since then, however, the ISS Settlement Pipeline has exploded as the result of massive settlements in WorldCom, Enron, McKesson and many other cases.
As for the many quotes from that Carton guy in the CNN Money article, as always you should consider the source.
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Friday, June 10, 2005 |
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Citigroup Settles Enron Case for $2 Billion
Ho hum, another $2 billion securities class action settlement--Citigroup has reportedly agreed to pay $2 billion to settle the claims against it in the Enron litigation.
That makes three such settlements in the last 13 months (the other two being WorldCom/Citigroup for $2.575 billion and WorldCom/JP Morgan for $2 billion). Taken separately, these are the second, third, and fourth largest securities class action settlements in history (behind only the $2.8 billion Cendant settlement).
As noted in this article from Reuters, the Citigroup settlement may only be the beginning of a series of massive settlements totaling "tens of billions" in the Enron case:
Other financial institutions facing claims for their role in Enron's December 2001 collapse include JP Morgan Chase and Co. (JPM.N), Barclays Plc (BARC.L), Credit Suisse First Boston (CSGN.VX), Merrill Lynch (MER.N),
Canadian Imperial Bank of Commerce (CM.TO), Toronto Dominion Bank (TD.TO), Royal Bank of Canada (RY.TO), Deutsche Bank AG (DBKGn.DE) and the Royal Bank of Scotland (RBS.L). ``We are very pleased with the size of the settlement,'' said William Lerach, the lawyer representing the regents of the University of California, which lost millions when Enron collapsed.
``It's particularly significant in that several large, similarly situated banks remain as defendants in the case, so this is a step down the road, not the last step on the road.''
Lerach, who estimates that the recoverable damages for Enron investors are in the ``tens of billions of dollars,'' declined comment on whether he is in settlement discussions with any other banks.
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Tuesday, April 5, 2005 |
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WorldCom Settlement Pie Chart
The following chart plotting the settlements in the WorldCom securities class action appeared in the April 2005 SCAS Alert:
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Tuesday, March 22, 2005 |
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WorldCom Settlement Update, Part IV--$6.061 Billion
The recent settlement by all 12 former WorldCom directors totaling $60.75 million (including $24.75 million out of pocket) bumps the total settlement fund in this case up to $6.061 billion. Now only Arthur Andersen remains as a defendant in the case.
Citigroup: $2.575 billion
J.P. Morgan: $2.0 billion
Bank of America: $460.5 million
Deutsche Bank Securities: $325 million
ABN Amro: $278.3 million
West LB AG: $75 million
Tokyo Mitsubishi: $75 million
Lehman Brothers: $62.7 million
Former WorldCom directors: $60.75 million
Caboto Holding SIM: $37.5 million
BNP Paribas: $37.5 million
Mizuho Int’l: $37.5 million
CS First Boston: $12.54 million
Goldman Sachs: $12.54 million
UBS AG: $12.54 million
TOTAL: $6.061 billion
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Thursday, March 10, 2005 |
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WorldCom Settlement Update, Part II: $4.001 Billion and Counting
Another day, another $437.5 million in settlements in the WorldCom case. Today, settlements were announced with Deutsche Bank ($325 million), as well as WestLB AG ($75 million) and Caboto Holding SIM ($37.5 million). The full list is now as follows:
Citigroup: $2.575 billion
Bank of America: $460.5 million
Deutsche Bank Securities: $325 million
ABN Amro: $268.3 million$278.3 million
West LB AG: $75 million
Tokyo Mitsubishi: $75 million
Lehman Brothers: $62.7 million
Caboto Holding SIM: $37.5 million
BNP Paribas: $37.5 million
Mizuho Int’l: $37.5 million
CS First Boston: $12.54 million
Goldman Sachs: $12.54 million
UBS AG: $12.54 million
TOTAL: $3.991 billion $4.001 billion
[UPDATE: ABN Amro settlement actually was for $278.3 million]
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WorldCom Settlement Update
A total of ten banks have now agreed to settle the claims against them in the WorldCom securities class action litigation. To summarize, they are:
Citigroup: $2.575 billion
Bank of America: $460.5 million
ABN Amro: $268.3 million $278.3 million
Tokyo Mitsubishi: $75 million
Lehman Brothers: $62.7 million
BNP Paribas: $37.5 million
Mizuho Int’l: $37.5 million
CS First Boston: $12.54 million
Goldman Sachs: $12.54 million
UBS AG: $12.54 million
TOTAL: $3.554 billion$3.564
[UPDATE: ABN Amro settlement actually was for $278.3 million]
Jury selection in the trial of the remaining defendants, which include JP Morgan, Deutsche Bank Securities, Arthur Andersen and the WorldCom directors, is scheduled to begin one week from today, on March 17.
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Monday, February 7, 2005 |
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WorldCom Directors' Settlement Falls Apart, Part II
ISS' Ted Allen, Managing Editor of The Friday Report, has written this insightful article on the collapse of the WorldCom director settlement. The article states that
Professor Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said he doesn't expect that the collapse of the WorldCom settlement will deter other investors from seeking personal payments from board members. "The theory of getting some sort of payment from directors seems to be well established," Elson told The Friday Report.
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Friday, February 4, 2005 |
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SCAS Data: Top 100 Securities Class Action Settlements By Year
The following chart, derived from the upcoming SCAS Top 100 Securities Class Action Settlements report, provides an interesting breakdown of the Top 100 settlements by year:
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Wednesday, February 2, 2005 |
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WorldCom Directors' Settlement Falls Apart
The high-profile settlement in which many of the WorldCom directors agreed to pay a combined $18 million out of their own pockets has reportedly fallen apart, meaning that at least for now, these directors are again defendants in the trial scheduled for February 28. According to this article by the Associated Press, New York State Comptroller Alan Hevesi announced that the plaintiffs were pulling out of the deal after U.S. District Judge Denise Cote struck down a key component of the agreement. Hevesi said the settlement was scuttled because the judge ruled that any jury award resulting from a Feb. 28 trial against other defendants would be reduced as a result of the prior deal with the directors. The article also quoted Sean Coffey, a lawyer for the plaintiffs, as stating that "Regrettably, we have no choice but to terminate the settlement, as historic as it is, because we cannot take the risk that a jury verdict against the investment banks might be reduced by an amount substantially higher than the settling director's ability to pay. We look forward to trying the case against all the defendants starting at the end of this month."
"The settlement is being terminated solely because of the potential impact on the amount other defendants might pay if the suit is successful," Hevesi said.
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Thursday, January 6, 2005 |
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10 Former WorldCom Directors Agree to Personally Pay Millions in Settlement
Although the $2.575 billion settlement finalized late last year with Citigroup in the In re: WorldCom Securities Litigation was of historic proportions, the tentative $54 million settlement reached January 5 with 10 former members of WorldCom’s board may have far greater repercussions.
In its amended complaint in the massive securities class action attacking the financial fraud at WorldCom, lead plaintiff New York State Common Retirement Fund alleged that WorldCom’s board of directors had been “utterly derelict in carrying out its most basic functions,” provided “no internal checks and balances on WorldCom management,” and was “completely beholden to management.” For the 10 settling former members of WorldCom’s board, the trial on those charges set for February 28, 2004, will no longer occur following their agreement to pay $54 million collectively, including $18 million out of their own pockets, to settle the case. Two former members of the board have not settled. The settlement agreement is subject to the approval of the federal court handling the case.
Although $54 million is not itself an extraordinary amount in the context of the hundreds of billions of dollars lost in the WorldCom case, the fact that $18 million will be paid by the directors themselves is a watershed event in the securities class action world. It is virtually unheard of for directors to be personally responsible in class action settlements, as such settlements are routinely covered by the company’s D&O insurance. In a highly unusual move, however, the New York State Common Retirement Fund reportedly insisted from the beginning of negotiations that there would be no settlement with the WorldCom directors without their agreement to personally pay a significant portion of the proceeds. Indeed, the $18 million dollars reportedly will come in varying amounts from the directors, with each individual payment accounting for a full 20 percent of that director’s aggregate net worth excluding their primary residences and retirement accounts.
Particularly coming on the heels of the SEC’s recent proclamations that the penalties it imposes must be paid by individual wrongdoers rather than their employer or insurance company, this settlement with members of the WorldCom board will likely have a jarring effect on anyone serving, or considering serving, on the board of a public company. Never before has it been so apparent that the consequences of failing in your duties as a board member may well include a significant loss of your own personal wealth. In the WorldCom case, for instance, directors who were compensated approximately $35,000 per year are now responsible, due to their alleged failings, for the payment of millions of dollars.
We expect that this most recent development in the WorldCom case will serve as an important deterrent to fraud for officers and directors who run public companies. It has been a common and long-standing complaint that class action settlements paid solely by public companies and/or their insurers do little to deter the individuals who actually commit such fraud. We hope that the emerging prospect of multi-million dollar hits to individuals’ bank accounts will be enough to give would-be fraudsters pause. We also hope, however, that worthy directors will not look at this settlement and conclude that service on a board of directors simply is not worth the risk.
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Monday, November 15, 2004 |
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Breaking Down the Settlement Timeline
The law firm Barrack, Rodos & Bacine has published this excellent "Barrack Brief" breaking down the securities class action settlement process "from handshake to cash in hand." It also contains the following timeline for a typical case, which estimates that it will takes 560 days from the initial tentative "handshake" settlement until the settlement funds:
Day 1: The handshake settles the case.
Day 10: The lawyers sign the MOU.
Day 45: The lawyers complete the Settlement Agreement and accompanying documents and submit them to the court for preliminary approval.
Day 50: The court grants preliminary approval to the settlement.
Day 55: Notice of the settlement is published and mailed.
Day 105: Fairness hearing.
Day 135: Claim forms due to be mailed.
Day 500: Claims administration completed.
Day 530: Lawyers for the class request permission to distribute the settlement fund based on the report of the claims administrator.
Day 545: Court grants permission to distribute.
Day 560: Settlement fund distributed.
This timeline appears to be quite accurate based on data from the SCAS database. In particular, a survey of a group of approximately 750 settlements in the SCAS database showed that the average number of days between the claim deadline and the disbursement date was 435 days, closely in line with the 425 day estimate in the Barrack timeline.
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Wednesday, November 10, 2004 |
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The Top 100 Settlements List
SCAS maintains a "Top 100 Settlements" list of the 100 largest securities class action settlements. The list is dynamic, obviously, as new, larger settlements periodically bump smaller settlements from the Top 100.
Beginning today, we will provide updates here when a new settlement cracks the Top 100 (we wait until a settlement notice and claim form have been issued before adding a case to our list). Two new settlements already have joined our list this week:
- The $100,000,000 AT&T settlement, previously discussed here, enters the Top 100 at number 37.
- The $75,000,000 Elan settlement has cracked the Top 100 at number 53.
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Monday, November 8, 2004 |
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WorldCom/Citigroup Settlement Finalized, Reduced Slightly
The WSJ reports that U.S. District Judge Denise Cote approved Citigroup's massive settlement with investors in the former WorldCom. According to the article, the settlement, which had been announced at $2.65 billion, was reduced to $2.58 billion to compensate for investors who elected to opt out of the court-approved settlement class. To put the size of this settlement (the second largest securities class action settlement in history) in context, the SCAS Database shows this relatively small reduction of $75 million would itself be in the top 60 securities class action settlements of all time.
The article further notes that Judge Cote awarded $141.5 million in attorneys' fees (5.5% of the settlement amount, which will be split among 10 law firms), and that plaintiffs' lawyers claim to have logged 200,000 hours on the case. That's $707 per hour, by my math.
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Tuesday, August 3, 2004 |
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Details on WorldCom/Citigroup Settlement
The settlement notice in the massive settlement by the Citigroup Defendants in the WorldCom class action is now available. A copy is available here. The highlights:
--As previously announced, the Settlement Fund is $2.65 billion
--The average recovery per share is estimated at 48 cents, and the average recovery per $1,000 face amount of bonds issued in May 2000 and May 2001 is $95.26
--Lead counsel will be seeking fees not to exceed $144.5 million (5.45% of the Settlement Fund), plus $16 million in expenses
--A settlement hearing has been set for November 5, 2004
--The entire settlement amount (after deduction of Court-approved costs, expenses and attorneys’ fees),
plus interest, will be distributed to Class Members who submit timely, valid Proofs of Claim. There will not be any reversion to the Citigroup Defendants of any portion of the settlement amount.
--The notice states that "based on Lead Counsel’s experience and survey of claims administrators, it is reasonable to assume that 25-30% of potential claimants will not file claims for a distribution from the Settlement Fund...." If so, this will increase the recovery for Class Members who do file claims.
--Proof of Claim forms must be submitted by March 4, 2005
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Tuesday, October 14, 2003 |
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Cylink: The Mechanics of a Securities Litigation Settlement
On July 23, 2003, the U.S. District Court for the Northern District of California approved a $6.2 million settlement in In re: Cylink Securities Litigation, 274 F.Supp. 2d 1109 (N.D. Cal. 2003). The Court's written opinion provides an interesting window into several angles of the settlement process.
1. The money for the settlement came exclusively from Cylink's directors and officers liability insurance policies. Cylink carried three such policies--one primary and two excess policies, each providing up to $5 million in coverage for claims and claim-related expenses. All of the policies were so-called "wasting policies," i.e., defense costs are deducted from coverage. As a result, the more protracted and expensive the litigation, the less coverage is available. Defense costs at the time of settlement stood at $1.8 million, meaning that total available coverage was $13.2 million.
2. The layered nature of the three policies of coverage means that the first excess carrier has no incentive to contribute to the settlement fund except to the extent that liability (and defense) costs will break through the first layer and the second excess carrier only to the extent there is a threat that liability (and defense) costs will break through the second layer. The Court observed that this feature complicates any negotiated resolution as it requires the negotiator (and the three carriers involved) to play off against one another to achieve a mutually beneficial allocation.
3. To obtain court approval of the settlement, plaintiffs' counsel was obliged to assume the "awkward posture" of showing "the weaknesses of their case, its improbability of success and the barriers to their clients' recovery in order to make the negotiated settlement appear attractive." As the Court noted, "throwing one's case into question before the judge and opposing counsel without undermining it is, to say the least, a delicate exercise." To do so, plaintiffs' counsel was forced to demonstrate that they would face significant obstacles in establishing liability and damages--they must establish materiality together with actual knowledge of falsity or reckless disregard for the truth and hence defendants' actual intent to deceive or reckless disregard of the truth. Moreover, plaintiffs' counsel demonstrated that even if they were to prevail at trial on behalf of the class, the available source of recovery might well disappear as the source of the settlement fund was Cylink's directors and officers liability policies. Given the precarious state of Cylink's finances, there was considerable uncertainty whether Cylink could pay any significant amount in satisfaction of the judgment.
4. Plaintiffs' counsel offered a declaration from an economic expert comparing the amount of the settlement to others of its kind. The expert stated that the proposed settlement constituted 13.6% of potential losses, compared to a median percentage of 7.0% in cases analyzed in a study by Cornerstone Research. Using a different "market drop" approach developed by Mukesh Bajaj, the proposed settlement was 2.1% of the market drop as compared to a median drop of 2.95%.
5. The court selected plaintiffs' counsel after soliciting "bids" from law firms interested in representing the class. The resulting counsel's fee agreement provided for plaintiffs' counsel to receive 25% of the first $500,000 of recovery, 17.5% of the next $500,000, 15% of the next $4 million and 10% of the remaining $1.2 million. Based on that sliding fee scale, plaintiffs' counsel requested and was awarded $932,500 in fees, roughly 15% of the gross settlement amount.
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Tuesday, September 16, 2003 |
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Nuance Communications Case Settles for $11 Million
The securities class actions pending against Nuance Communications in the U.S. District Court for the Northern District of California have tentatively settled for $11 million. The Stipulation of Settlement, dated July 9, 2003, came shortly after Judge James Ware's April 16, 2003 Order denying the majority of Nuance and the individual defendants' Motion to Dismiss the Second Amended Complaint. A copy of the Settlement Notice dated August 25, 2003 is available here.
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Wednesday, September 3, 2003 |
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Class Action Against Infonet Dismissed Without Prejudice (C.D. Cal.); Derivative Action Settled With Governance Reforms
Infonet Services Corporation (NYSE:IN) announced yesterday that the securities class action filed against it in the U.S. District Court for the Central District of California in December 2001 has been dismissed as to Infonet and its directors and officers without prejudice. The Court dismissed all claims against Infonet's Class A stockholders and underwriters with prejudice.
Separately, Infonet announced that, subject to final court approval, a derivative lawsuit brought against certain of its directors and officers in a California state court in March 2002 has been settled. The company said that the claims dismissed in the federal class action were similar to the claims made in the settled state lawsuit.
Continuing the string of "governance reform" settlements Securities Litigation Watch has been following,the settlement in the derivative action includes the adoption of some changes to the company's corporate governance policies and practice. The reforms appear to include increasing the total number of directors to 11 from 9; increasing the total number of directors who are not employees and are not nominated for election by Infonet's Class A stockholders to four from two; and enhancements to committee structure and membership qualifications.
If anyone can send me a copy of the Order dismissing the class action, I would be happy to post it here.
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Friday, August 29, 2003 |
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The New Settlement Bargaining Chip: Corporate Governance Reform
We are seeing a stream of settlements recently where a key component is the issuer's agreement to undertake corporate governance reform. There are not enough data points yet to reach conclusions, but this apparent trend raises the issue of whether these reforms offer meaningful benefits to the members of the settling class, many of whom may no longer be shareholders in the settling company. Will governance reforms reduce the dollar amounts of settlements? Will we see settlements of weak cases via governance reforms and little or no money paid by the issuer, but with plaintiffs' attorneys collecting substantial fees? Time will tell. A summary of many of the recent "reform" cases is available here as part of the ISS Friday report.
I invite your comments (as always) on this issue.
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Tuesday, August 26, 2003 |
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Computer Associates Litigation Settles
Computer Associates announced an agreement to settle all outstanding litigation related to claims about past accounting issues, including shareholder and ERISA class action suits and related derivative litigation. As part of the settlement, the company will issue the shareholder classes up to 5.7 million shares of its common stock, currently valued at approximately $144 million. The company added that under the settlement agreement, if its share price is below $23.43 per share at the time of distribution, up to 2.2 million of the 5.7 million shares will be paid in cash at that price – or a maximum of $51.546 million in cash. In that case, the stock portion of the settlement will be reduced to no less than 3.5 million shares.
The company also confirmed that investigations by the SEC and the US Attorney’s Office for the Eastern District of New York remain ongoing.
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Friday, August 22, 2003 |
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DaimlerChrysler Announces $300 Million Settlement
Reuters reports that DaimlerChrysler has announced a $300 million settlement of a securities class action lawsuit relating to Daimler-Benz's 1998 takeover of Chrysler. The case is pending in the U.S. District Court for the District of Delaware. The article quotes the company as stating that "Although DaimlerChrysler believes that the class action is completely without merit, the company has agreed to a settlement, since a local jury could have reached a different conclusion."
According to a report in South Florida's Business Journal, Florida's public pension fund, one of the lead plaintiffs, believes the settlement is "possibly the largest settlement ever for non-accounting securities fraud litigation." Excluding the IPO Securities Litigation, the $300 million tentative settlement matches the June 2003 settlement of the Oxford Health Plans Inc. case as the largest securities class action settlement in 2003. (Source: Securities Class Action Services data).
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Friday, August 15, 2003 |
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MidAmerican Energy Case Settles on Eve of Trial
The Sioux City Journal reports that a shareholder's lawsuit against officials of MidAmerican Energy Holdings Co. scheduled to go trial on Monday has been settled. The lawsuit contended that an executive of MidAmerican tricked company directors into approving the 1999 sale of the company to Berkshire Hathaway.
This continues this week's trend of class actions cases settling on the eve of, or during, trial (see the August 12 report on the First Union lawsuit settled after two days of testimony during a federal jury trial in Fort Lauderdale).
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