Archive for September, 2007

Kerkorian’s $39 million Daimler opt-out cost

Thursday, September 27th, 2007

The direct action by Kirk Kerkorian’s Tracinda Corp. against DaimlerChrysler AG (Deutsche Börse, NYSE: DCX), the next week to be renamed Daimler AG, is no more. The Third Circuit Court of Appeals upheld the earlier decision and rejected Tracinda’s claim for damages. See this previous post for some background on the case and the International Herald Tribune for more on the latest decision.

Terry N. Christensen, of Christensen Glaser Fink Jacobs Weil & Shapiro LLP which represented Tracinda, is quoted in the IHT article as saying: “We feel that we did our duty to try to protect Chrysler shareholders.” (WV&Z’s emphasis) By opting out?

The shareholders that in 2004 settled the securities class action Tracinda opted out of shared $300 million among them. (notice) Tracinda held approximately 13% of DaimlerChrysler’s shares at the time and so would have been able to claim about $39 million of that settlement amount. (Other sources put the figure at $30 million and $35 million.)

Opting out however, to retain the right to pursue a direct action for and on behalf of itself, it lost the right to claim and thus, at least in hindsight, it thereby lost another $39 million. (To put that into perspective, it had sought as much as $3 billion in damages in the direct action.) Tracinda’s unclaimed amount was to be distributed among those claimants that stayed in instead, an instant 15% gain. One may doubt however whether this is what Christensen referred to in his statement. He couldn’t be reached for comment at the time of posting.

Jonathan J. Lerner, of Skadden Arps Slate Meagher & Flom LLP and the lead trial counsel defending DaimlerChrysler, responded to WV&Z’s request for comment saying that “Daimler is delighted at the unamamous affirmance of the dismissal of Tracinda’s claim. The case had no merit and the basic theory of the case was legally and factually flawed.” Lerner’s defence of the action in District Court was named one of the 10 best defence wins in 2005 by the National Law Journal.

Lovells dispute lawyers focus on class actions

Wednesday, September 26th, 2007

City firm Lovells LLP announced on Monday that it has formed a dedicated group of dispute resolution lawyers to focus on class actions. Most of the members of the new group are located across the firm’s European offices.

London-based dispute resolution partner Neil Mirchandani, leader of the group, states the following in the press release:

The formation of the Class Actions Unit comes at a time when a number of continental European jurisdictions have implemented or are considering legislation to introduce new group litigation procedures. The Class Actions Unit offers a coordinated cross-jurisdiction and practice area team able to provide experienced strategic and technical legal advice wherever and whenever an issue arises.

WV&Z asked him to elaborate on that statement, in particular which limited areas of law in which specific jurisdictions the firm expects will feature most prominently in terms of work for the firm and the industry in general in the short term. His response:

The areas we expect to experience most group litigation activity in the short term are antitrust, product liability and shareholder disputes. It is harder to say which jurisdictions but there may possibly be increased activity in Germany following the Kapmug legislation; Holland if the procedures used in the recent Shell case are accepted more broadly; and the UK following on from proposals for private enforcement in competition cases and the influx of US claimant firms.

In addition to these developments, the press release also refers to the recent increase in interest in litigation funding and the coming into force (in just a few days now) of the Companies Act’s derivative claim provisions in general. (Please use the Search function on the right to find previous WV&Z posts on these topics, for example on Shell.)

See Lovells’ Publications section for the archive of its periodical Class Actions Bulletin and a perspective of class action law in five European countries.

What’s more: ‘KapMuG’ is the German statute on class actions. The abbreviation stands for ‘Kapitalanleger-Musterverfahrensgesetz’ or, in full, ‘Gesetz über Musterverfahren in kapitalmarktrechtlichen Streitigkeiten’ which loosely translates to ‘Statute governing representative legal actions on the grounds of capital markets disputes’. For the official text of the Act, see the Bundesministerium der Justiz’ KapMuG entry, in German.

Blue Ribbon for Roundtable’s fourth place

Monday, September 17th, 2007

After, in chronological order, the Paulson Committee, Bloomberg/Schumer and Daley/Culvahouse, the Washington, DC-based financial institution lobby group The Financial Services Roundtable is to publish its report on capital markets regulation and competitiveness next month, according to today’s FT. And then there were four…

It is to recommend a ‘principles-based’ approach, such as the UK has, across the country’s ‘patchwork’ of financial markets regulators and “that [the US version of the UK] model would also tackle litigation reform”.

A Roundtable spokesperson has indicated to WV&Z that the report will be entitled “Blue Ribbon Commission on Enhancing Competitiveness”. It is due to be published shortly after the Roundtable board meeting next week, during which the report will be discussed by the four policy setting committees, one of which is the Regulatory Oversight Committee. (Subscribe to WV&Z here.)

Litigation funding to drive euro-class actions

Saturday, September 15th, 2007

Legal Week has published the results of its latest Legal Week/EJ Legal Big Question survey, namely on the topic of class actions in Europe. The headline conclusion: “The UK legal community is united in the belief that US-style class action litigation is set to take off throughout Europe, with product liability cited as a key growth sector.” The second area of law cited behind product liability (cited by 52% of respondents) is shareholder claims (36%).

On the latter area in particular, Anna Pertoldi of Herbert Smith LLP is quoted as saying:

Shareholder actions could be an area for increased group litigation in Europe, but we will have to see how it pans out. With the new Companies Act coming into force in the UK, and new funding methods becoming available, people may be encouraged to have a go and test the waters.

Note how she is apparently not squarely in the other camp then but appears to be so on the issue of the derivative claim and the Companies Act 2006 (see previous post). Two more quotes:

John Whittaker, Clyde & Co LLP:

If class actions are given a platform through proactive law firm initiatives, it is likely that claimants will seize the opportunity to litigate their claims.

Matthew Newick, Clifford Chance LLP:

Across Europe there are government moves to facilitate class actions [for example, in Denmark], with specialist firms setting up shop [Cohen Milstein Hausfeld & Toll LLP in London] and increasing investor activism as well as interest in third-party funding, which, if it takes off, could be a key driver for class action growth.

The survey also shows that 72% of respondents are in favour of the concept of litigation funding. Herbert Smith is reportedly (Legal Week) considering offering access to litigation funding to its clients, indirectly joining the ranks of funder IM Litigation Funding and funding broker Calunius Capital LLP.

(One error Legal Week continues to make however: Skadden Arps Slate Meagher & Flom (UK) LLP has not launched a class action defence practice in London, see previous post.)

What when where: Mark Wells of Calunius Capital and Susan Dunn of IM Litigation Funding will be joined by Sam Eastwood (Norton Rose LLP) to discuss litigation funding at the Masterclass session of The Lawyer’s Private Litigation Conference, which overall has an emphasis on litigation relating to competition. The conference takes places on 28 - 30 November 2007 at the Melia White House in London. (programme and registration form)

Topics discussed include (speaker or selected speakers in brackets):

  • ‘How should private enforcement develop in UK & Europe?’ (Vincent Smith, Cohen Milstein Hausfeld & Toll; Nicolas Bessot, European Commission - DG Competition),
  • ‘Comparison of class actions in the UK, Europe & the US’ (Mike Pullen, DLA Piper UK LLP), and
  • ‘Settlement options’ (Simon Morgan, Simmons & Simmons), as well other topics by Howrey LLP, Freshfields Bruckhaus Deringer and Irwin Mitchell among others.

Class action civil justice reform in Denmark

Tuesday, September 11th, 2007

From 1 January 2008, new legislation will come into force in Denmark that will introduce the class action procedure (Gruppesøgsmål) as part of the country’s reform of civil justice.

Jens Rostock-Jensen of Danish law firm Kromann Reumert gives a very brief overview of the new rules in his guest column in Schiffrin Barroway Topaz & Kessler LLP’s Summer 2007 Bulletin. For a more extensive discussion, see this article (in English; in Danish) from the Law Department of Denmark’s Ministry of Justice.

Noteworthy here is the rationale of the Standing Committee on Procedural Law’s (Retsplejerådet) findings and recommendations, in the article under the heading ‘Class actions under Danish law in general’. A quote:

The Standing Committee on Procedural Law finds that rules on class action will ensure that more people will have real access to the courts and that that form of action will thus facilitate the satisfaction of justified claims. Against this background, the Standing Committee on Procedural Law recommends that rules on class actions be introduced in Danish law.

The Standing Committee on Procedural Law is aware that there may be a certain risk that access to class actions is “abused” to pressure enterprises and others to accept unjustified claims. When drafting the detailed rules on class actions, the Standing Committee on Procedural Law has therefore emphasised the importance of avoiding this risk by laying down a number of conditions for bringing class actions, including that the court must approve the case as being suited for a class action as well as a number of ‘control mechanisms’[.]

For the Bill itself (in Danish), see here.

Rostock-Jensen predicts that “[a]lthough there are no limitations on the nature of the claims that are suitable for class action, it is expected that in the beginning it will first and foremost be consumer claims organised by the Consumer Ombudsman that will use this new method of processing a claim.”

Counting down to Companies Act’s D-Day

Monday, September 10th, 2007

Written about for some time now, those provisions in the Companies Act 2006 relating to the derivative claim are finally about to come into force shortly, from 1 October.

DLA Piper UK LLP’s Andrew Dodd is squarely in the camp of those predicting the codification is not to lead to more claims. Fellow residents include Simmons & Simmons, Edwin Coe LLP and yours truly (see previous post) among others. Dodd’s latest article on the topic was in FTfm, the weekly fund management section of the Financial Times, last week. A quote:

The likelihood is, nonetheless, that directors will not face a proliferation of claims. Those responsible for drafting the 2006 Act made it abundantly clear that they did not wish, or envisage, there to be any greater degree of litigation as regards directors’ duties than there is now.

The 2006 Act expressly provides that the new codified directors’ duties should be interpreted and applied by reference to existing legal case law and principles. This should act as a brake on any significant change.

Dodd, with associate Matthew Daly, had previously published on directors’ duties and liabilities and derivative actions in the Company Secretary’s Review and Commercial Litigation Journal.

What when where: A reminder, Legal Week’s Litigation Forum 2007 takes place next week, Wednesday 19 September at London’s Renaissance Chancery Court (programme and registration form).