Archive for April, 2007

London - New York cross-listings, a study

Monday, April 30th, 2007

Today’s Wall Street Journal (subscription required) refers to a study, published earlier this month, on cross-listings on the New York and London stock exchanges. The name of the paper (not mentioned in the article) is Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time.

From the paper’s abstract:

We find that cross-listings have been falling on U.S. exchanges as well as on the Main Market in London. This decline in cross-listings is explained by changes in firm characteristics rather than by changes in the benefits of cross-listings. […] Our evidence is consistent with the theory that an exchange listing in New York has unique governance benefits for foreign firms. These benefits have not been seriously eroded by SOX and cannot be replicated through a London listing.

Previous research papers by the three authors - Craig Doidge, G. Andrew Karolyi and René M. Stulz, all professors and according to the article ‘authorities on foreign-company listing decisions’ - include Why Do Countries Matter so Much for Corporate Governance? (abstract) and Why are foreign firms listed in the U.S. worth more? (paper).

Paulson’s piffle: “What’s in it for us?”

Friday, April 27th, 2007

Two magazines on ethics and corporations, Ethisphere Magazine (on its blog, here) and Ethical Corporation (here), have earlier this month published articles on class actions in Europe and corporate governance in America, respectively. The Ethisphere blog post, as commented on there by yours truly, elaborates on “class action attorneys’ respon[se] to EU’s plea to sue companies ‘American Style’”.

The latter is far more interesting however, as it picks apart a statement on corporate governance and competitive corporations by US Secretary of the Treasury Henry M. Paulson. A quote:

Correcting lawyer misbehavior has no logical connection to my right as a shareholder or a consumer to seek compensation for corporate misfeasance that harmed me – financially or otherwise. By damning the victim’s agent, the Treasury Secretary gets to blame the innocent victim with impunity.

And the conclusion:

So [Paulson’s plan is to] loosen corporation regulation, at least on securities issues, and protect companies from punishing shareholder lawsuits. Then corporations will show that they’ve earned these privileges. It’s rewards first, performance later. […] What’s on offer, then, to shareholders and consumers is piffle in exchange for the right to protect themselves. That is Secretary Paulson’s “principles-based” play here.

Webcast: non-US investors in US actions

Thursday, April 26th, 2007

This is one for the diary: on Wednesday 9 May at 2.30pm BST (9.30am EDT), Adam T. Savett, of proxy agent Institutional Shareholder Services and its Securities Litigation Watch blog, will moderate a panel session, entitled Accountability Goes Global: International Investors and US Securities Class Actions. It’s one of a continuous series of ISS Governance Forum webcasts.

The two panelists are Mark S. Willis, a partner at Cohen Milstein Hausfeld & Toll PLLC, and an as of yet unnamed ‘European institutional investor’. Register here for the live webcast (or to access the archive later).

The webcast will be followed by the publication of a white paper by Savett of the same title.

Wish me luck

Sunday, April 22nd, 2007

Posting will be lighter than usual over the next three months: I have applied to sit the New York State Bar examination in July. (Subscribe to WV&Z here.) Days to the exam: 93. Wish me luck…

ABN Amro: New York internal affairs

Sunday, April 22nd, 2007

Last month, District Judge Cote (SDNY) dismissed the derivative action brought against ABN Amro Holdings NV (Euronext, NYSE: ABN) of the Netherlands and members of its Managing and Supervisory Boards, which was brought by an American holder of its American Depository Receipts. The Court applied the New York internal affairs doctrine and concluded that the plaintiff lacked standing to bring such a suit on behalf of the bank. (opinion and order)

Plaintiff’s Counsel: Weiss & Lurie; Defendants’ Counsel: Milbank Tweed Hadley & McCloy LLP and NautaDutilh NV

Under New York law, the law of the state of incorporation adjudicates “a corporation’s internal affairs, including questions as to the relationship between the corporation’s shareholders and its directors.” “[O]nly one State should have the authority to regulate a corporation’s internal affairs.” (citing Galef v Alexander and Edgar v MITE Corp, respectively, p.15) And so, as agreed by the parties, Dutch law would apply to this action.

Dutch law however (see pp.8-11), “affords shareholders no right to bring a claim on behalf of a corporation against members of its Managing or Supervisory Boards for breach of duties owed to shareholders since, under Dutch law, members of these boards do not owe fiduciary duties directly to shareholders,” according to an expert declaration submitted by the defendants and plaintiff concedes so.

The Court, in holding that “Dutch law provides different avenues for shareholders to address malfeasance by members of corporate Managing and Supervisory Boards than does New York law,” (original emphasis, p.19) it rejects that in casu the public policy exception to the doctrine should apply and grants the motion to dismiss.

AGM: BP, DaimlerChrsyler

Monday, April 16th, 2007

Further to the annotations to the BP Plc 20-F and DaimlerChrysler AG 20-F, the AGMs have now taken place and the results are in.

To start with the latter, the Wenger/Knoll motions did not survive: ‘more than 90%’ of shares voted against the motions, according to a DaimlerChrysler spokesperson. Dropping the Chrysler name to go back to Daimler AG and the pending disposal entirely of the unit may have generated more headlines and copy, it would have been interesting to see if or how the audit of the merger, if the motion for it were approved, would have an influence in the courts where litigation relating to that transaction is pending.

As an aside, you may be interested to take note of two papers in which DaimlerChrysler plays a prominent role: DaimlerChrysler AG, the First Truly Global Share (abstract), which uses the trading and settlement of the DCX single global registered share as an “interesting test of different hypotheses about multi-market trading, global competition for order flow and liquidity”, and The Saga of Daimler Chrysler (subtitle, abstract), which uses “the DaimlerChrysler events to generate unique evidence on the extent to which two methods - disclosure requirements and corporate governance standards - can substitute for one another in protecting minority shareholders from expropriation.”

BP’s management too saw off ‘dissident’ shareholders; subject of contention there (as it is in the derivative action pending against it; see previous post) was the pay package awarded to Lord Browne. As reported in the Financial Times (subscription required), ‘more than a fifth of votes cast failed to back [BP’s] executive pay plan’. Michael McKersie, Assistant Director of Investment Affairs at the Association of British Insurers is quoted in the same article: “This was certainly a larger number voting against than you would normally see.”

A (second) note on the Shell Settlement

Friday, April 13th, 2007

(See the first note here) Today, as announced at Wednesday’s press conference, Shell released a number of documents via the Investor Centre section of its website. They include, among others, the petition to the Amsterdam Court of Appeals (in Dutch), the Settlement Agreement and the current list of investors that have participated in the settlement.

See here for the audiocast of the press conference (via Cantos, no transcript available), worth the 45 minutes as Shell, the special purpose entity Shell Reserves Foundation and several representatives of the investors discuss not only this particular settlement but also comment on class actions in general. More to follow.

A note on the Shell Settlement

Thursday, April 12th, 2007

Yesterday, Royal Dutch Shell Plc’s (Euronext, LSE, NYSE: RDSA, RDSB) announcement that it had reached a settlement with non-US investors in relation to its recent oil reserves overstatements had hit the wires and headlines. (press release) An extensive post on the settlement will follow, for now just a brief note.

The settlement reached is unlike that of a US class action; technically there is no such thing as a Dutch class action procedure, but one party or several parties collectively may sue, or enter into talks without a suit having been filed, on behalf of itself or themselves and once a settlement has been reached, the Court is asked to declare the settlement binding on a class.

That is the case here too: Shell, on behalf of its two predecessor entities, had not been sued by a class outside the US (as it has been within it) but had held talks with a group of investors and investor associations. On the day of the announcement, the parties filed an application with the Amsterdam Court of Appeals to request such declaration to bind the proposed class. As it currently stands, the settlement agreement’s validity is thus contingent upon the Dutch Court confirming the agreement and the US Court, before which the class action is pending, declining jurisdiction over these non-US claims.

The settlement amount as well deserves greater scrutiny: the most widely reported figure of $352.6 million is not the whole settlement amount and it itself consists of two separate amounts. Elements of the total recovery, including previously paid sums, may cover both non-US and US shareholders.

The above and more, including how to participate in this settlement, will be discussed in-depth in a follow-up post. (In order not to miss any future posts on cases such as this one, please subscribe.)

Wolverhampton v Dell, case update ii

Wednesday, April 11th, 2007

(See previous posts, here and here.) Wolverhampton didn’t get it, but it is another foreigner who was appointed to be sole lead plaintiff in the Dell Inc. securities action, namely Union Asset Management Holding AG of Germany, represented by Lead Counsel Motley Rice LLC (on its own and notably not with Sturman LLC). Liaison Counsel is Byrd Davis Furman LLP.

Of particular interest here is that part of the opinion and order (with thanks to Adam Savett of Securities Litigation Watch), in which the Court, after presuming and rebutting ABP being the most adequate plaintiff, presumes Union to be the most adequate (from p.13). (Union claims the next largest financial interest in the case, satisfies the typicality and adequacy requirements of FRCP 23 and had timely filed its motion to be appointed Lead Plaintiff.)

Referring to In re NPS Pharms Inc. Sec. Lit. and In re Molson Coors Brewing Co Sec. Lit., the Court states that “[t]here is neither a bar nor a presumption against appointing foreign entities to serve as lead plaintiff, particularly where, as here, the defendant is a U.S. company and the foreign entities bought their shares in the United States”, in effect dismissing the res judicata concerns raised by other movants in relation to the appointment of a foreign entity as lead plaintiff.

Perhaps as telling, the Court does not refer to In re Discovery Labs Sec. Lit. which was cited in a competing motion (as follows) as having established ‘a rule against appointing foreign investors as lead plaintiff’:

[I]n Discovery Labs, the court rejected another foreign asset manager represented by the same counsel for Union Asset management here – Motley Rice – reasoning that as “a foreign investor, OPAM ‘is subject to unique defenses that render [it] incapable of adequately representing the class.”

In addition, it does quote from Newman v Eagle Bldg Techs in relation to the relevance of a lead plaintiff’s location: “In light of today’s travel and communication methods, the geographical location of the [foreign lead plaintiff movants] is irrelevant.” (Original edit)

The Court, beyond nationality or geography, confirms its assessment of Union’s adequacy to represent the class thus:

It seems clear from the affidavit of Union’s in-house counsel that Union is firmly in the drivers’ seat with regard to this litigation. Appointing this institutional investor as Lead Plaintiff and approving its choice of Lead Counsel will serve the PSLRA’s goal of encouraging shareholders to protect their interests via securities class actions while discouraging “lawyer-driven” litigation.

What’s more: Union is another example for Adam Savett (see here at SLW and Kevin LaCroix at The D & O Diary) to add to his list of private institutional investor lead plaintiffs. Union itself is a fund manager and member of a cooperative of financial institutions, consisting almost entirely of banks (see here, in German) and two of its main shareholders are banks, namely DZ Bank AG and WGZ Bank AG.

Wrapping it up, 6 April 2007

Friday, April 6th, 2007

The Financial Times and Legal Week yesterday published five interesting articles altogether, all relating to capital markets competitiveness. Two of the three FT ones deal with the Financial Services Authority and the ‘light touch’ regulatory regime (here and here), the third (here) is based on an interview with Sullivan & Cromwell LLP Chairman H. Rodgin Cohen; the ten-minute interview itself is available online (here, with full transcript).

The (WV&Z edited) answer to the question whether Cohen ‘is concerned that New York is losing its place as the premier global financial centre’:

I am concerned. It still is the premier centre but if you look at the enormous strides that London has made and you look at the two lines, if you extend them out, sooner or later they are likely to cross… [T]here are problems with New York which deal, largely, more with the litigation atmosphere than even the legislative atmosphere that ultimately do threaten and you could reach a tipping point.

The first Legal Week article (here) reports on New York lawyers calling for further changes to follow the SEC’s rule change regarding de-listing; the second (here) discusses ‘recent developments [that] have brought class actions a step closer to Europe’.

And finally, two more articles of last month, in The Times and The Lawyer, on US class actions ’still [being] a bigger threat to British business’ and on UK pension funds’ Time Warner Inc. (NYSE: TWX) opt-out action success. Cohen Milstein Hausfeld & Toll PLLC is the focus of criticism in the former - note, this is two days after the same paper labelled partner Michael Hausfeld a ’star’ and ‘litigation supremo’ (see previous post) - and in the latter, Lerach Coughlin Stoia Geller Rudman & Robbins LLP is the subject as counsel to the pension funds.

London-based Allen & Overy LLP partner Peter Watson quoted in The Times:

Companies should be wary of the long arm of the US law reaching into foreign boardrooms and hauling British companies - or individual executives - before American courts… US courts tend to take the view that if foreign companies come to the US to enjoy the benefits it has to offer, then they should also accept the costs of doing business there which means answering to the American legal system where appropriate.

What’s more: The author of the The Times article, a journalist with the paper’s Law section, responded to this post. In his e-mail he offers a clarification - “Although owned by the same group, the Sunday Times and Times are not the same paper from an editorial point of view” - and the following statement:

I don’t believe CMHT is the “focus of criticism” in the story I did. I simply mention their arrival in London as part of a broader movement towards more US-style litigation in Europe.