With Vigour and Zeal

Today Parmalat SpA (Milan: PLT) announced it has settled the securities class action pending against it (SDNY). It will issue 10.5 million shares - ‘new’ according to AP, ‘existing’ according to WSJ - worth approximately €24 million to the class. (press release, Forbes and see the FT, WV&Z archives)

The Guardian quotes Lead Counsel Grant & Eisenhofer PA’s Stuart M. Grant:

“We are very pleased with the settlement reached with the company, bringing total investor recovery obtained so far in the Parmalat case to approximately $90 million. […] We will also continue to press claims against other defendants whom we allege defrauded investors over a period of years prior to Parmalat’s ultimate collapse in 2003.”

So it’s not over yet for the class, nor for Parmalat that still is involved in other legal procedures of its own.

The laws have changed in Italy to allow for class actions (azione collettiva risarcitoria) from 30 June this year. Since it’s been in the works for years, a lot has been written about it already. WV&Z offers a few resources to get up to speed, starting with material produced by practitioners:

• PwC (study paragraph, p.65 of 77)
• Lovells LLP (bulletin article, p.7 of 20)
• DLA Piper LLP (The Lawyer article, p.29)
• Clifford Chance LLP (client briefing)

Prof Elisabetta Silvestri of the University of Pavia has written an extensive guide (report, supplement) on the legislation and its history (with thanks to GCAX). Also see this 2005 paper by two Italian professors on Parmalat (about which see the next post too). From the abstract:

[After a description of Parmalat’s frauds and governance, w]e subsequently analyse the causes of under-enforcement and the reasons why Parmalat generated litigation in the US rather than Italy. Drawing from economic analysis, we explain the role of private enforcement and consider the benefits of class actions. In this respect, we emphasize the importance of discovery and pleading rules. We also find that the interplay between public and private enforcement is missing in Italy and argue, by way of conclusion, that US securities regulation was transplanted into Continental Europe without sufficient modernisation as to civil procedure in the area of mass claims and complex litigation.

But is a change in the law enough? What about the judges presiding over these cases? These two papers examine just that:

• Do Corporate Law Judges Matter? Some Evidence From Milan (link)
• Off the Books, but on the Record: Evidence from Italy on the Relevance of Judges to the Quality of Corporate Law (link)

The post I wrote on 16 January 2007 about Converium Reinsurance Co being partially granted and partially denied its motion to dismiss the class action pending against it following its IPO never did find its way here. It was in the earliest days of WV&Z and on the basis of the case I actually went on a tangent about disclosure and the Transparancy Directive and never did finish the post properly. So, nudged by SLW (this post, with thanks), some of that material, the important stuff on the case itself, does find its way here now in updated form. (I’ll spare you the rest.)

In her December 2006 opinion (via New York Law Journal), SDNY Judge Denise Cote dismissed the claims against former parent Zurich Financial Services and its underwriters UBS AG and Merrill Lynch International and certain claims against Converium Holding AG and three Converium officers, but not all. Even so, back then it was presented as if it was a dismissal (New York Law Journal, AFX News). (Converium was part of Zurich Financial Services before being spun off; it’s now known as SCOR Holding (Switzerland) AG, SWX: CHRN; NYSE: CHR) Far from that being the end, litigation of course continued on the basis of what was left, the Securities Act claims and the remaining Exchange Act claims. (Also see the consolidated amended complaint, September 2005.)

Fast forward a good year and Judge Cote has partially granted and partially denied a motion to certify the class in the action. (SLW has the March 2008 opinion.) She specifically denies ‘to include foreign investors who purchased shares on a foreign exchange’ (WV&Z archives) but includes ‘United States residents who purchased Converium shares on the SWX [and] any person who purchased Converium ADSs on the NYSE’. See the opinion from page 7 for the discussion on subject matter jurisdiction over non-US purchasers on the Swiss exchange in this case.

Notably, the certification denies Co-Lead Plaintiff Avalon Holdings Inc., an institutional investor based in Greece, being a member of the class. In response to SLW’s final observation then, WV&Z points to Avalon as most likely to lead that charge.

What’s more: Also see Prof Samuel P. Baumgartner’s 2007 paper Class Actions and Group Litigation in Switzerland.

One of the main themes of PricewaterhouseCooper’s 2007 Securities litigation study is in relation to foreign issues, involving both issuers and purchasers. In her introductory observation (page 1 of 77, all pages ‘of 77′), Grace Lamont, Partner and Leader of the Securities Litigation Practice, states among other things that ‘[w]ith the European Union and individual countries seemingly poised to consider collective litigation alternatives [to US class action litigation], 2008 could prove just as transformative in the foreign markets’.

Skip to the chapter ‘What a difference a year makes’ (p. 56) and the article ‘Global class actions’ (p. 70, contributed by Allen & Overy LLP) for the analysis. (Also see the Gibson Dunn & Crutcher LLP contribution, p. 45)

In short, the number of actions against foreign issuers is well up, to 27 from 14 in 2006. Of the 27, ten are European which is higher than the 2000 - 2006 average of 7. Settlement values too are up. The average settlement amount of the fifteen settlements was US$253.3 million (2006: US$149 million) or US$26.6 million (US$11.7 million) excluding outlier settlements. The Royal Dutch Shell Plc settlement (WV&Z archive) was not taken into account in these figures as that is a European settlement. (For the NAPF paper referred to on p. 66, see this previous post.)

For last year’s study, see this previous post and for more commentary on this year’s, see the D&O Diary and The 10b-5 Daily.

The European Commission has presented a White Paper on actions for damages, ’suggesting a new model for achieving compensation for consumers and businesses who are the victims of antitrust violations’. One of the key recommendations is that of collective redress in particular for small value claims.

‘However, safeguards to avoid that such actions would lead to unfounded claims need to be put in place. In the field of antitrust, the Commission therefore recommends allowing only representative actions led, for example, by recognised consumer groups and actions in which victims can choose to participate, as opposed to class actions run by law firms for an unidentified number of claimants.’ (press release, related documents)

The paper follows the Commission’s Green Paper (2005) on the same topic. (press release) See also SJ Berwin LLP’s latest Community Week, today’s The Lawyer for an article by Weil, Gotshal & Manges LLP’s Matthew Shankland and Competition Commissioner Neelie Kroes’ remarks on the White Paper.

BP Plc (LSE, NYSE: BP) has settled the derivative litigation pending against it. (3AN-06-11929CI, Unite Here National Retirement Fund et al vs. The Lord John Browne of Madingley et al; See WV&Z’s archive for previous posts). The notice of and terms of the settlement and more documents relating to the action can be found in BP’s Corporate Governance section and Lead Counsel Coughlin Stoia Geller Rudman & Robbins LLP’s settled cases section.

The action has not satisfactorily established that English corporations can be sued derivately in a US Court under the English Companies Act 2006, which allows for derivative claims. Instead, the Court had denied BP’s motion to dismiss on the grounds that Alaska law is applicable and that the case should not be dismissed on the basis of forum non conveniens.

The Court is to hold the settlement fairness hearing on 7 May 2008 at 2pm. The deadline to object to the settlement is 23 April. (Subscribe to WV&Z here.)

This week’s Legal Week has an extensive overview of the players, law firms and funding specialists alike, in the UK litigation funding market. At least one is missing though, namely accountancy firm Smith & Williamson, which had set up its funding practice in September last year.

From the article: “The dramatic adoption of the once-controversial technique illustrates the fast-changing attitudes as London litigators position themselves for an expected upturn in group claims and litigation in general.”

It quotes Skadden, Arps, Slate, Meagher & Flom LLP’s Paul Mitchard, head of Skadden’s European International Arbitration Group thus: “Funding is definitely here to stay. It is a significant development in dispute resolution, where litigation and arbitration are now being viewed as a commercial venture for outside funders for the first time.”

Then yesterday’s FT Weekend chipped in too, with a writing of a far more general nature. If this was London buses, the wait would be for the third piece around the corner…

So just in case, to make up for it if there isn’t one, one off the WV&Z shelf then from over a year ago, a profile of ‘trailblazer’ and founder of IM Litigation Funding, Toby Duthie. (FT) (Note, another IMLF founder of higher profile, Susan Dunn, has left that company late last year to join fellow funder MKM Longboat Capital Advisors LLP. (The Times, The Times))

What when where: Next week the US Chamber of Commerce Center for Capital Markets Competitiveness is to hold the second installment of its Annual Capital Markets Summit (26 March 2008, Washington DC). This year’s focus is on ‘Strengthening U.S. Capital Markets for All Americans’. (programme) Two topics of the day will be securities litigation reform and the state of regulation, which, given the events of the past week or so, should be very interesting indeed. Not a single speaker from the plaintiffs’ bar, mind.

In the continuing saga that is the Shell Settlement (see the WV&Z archive for previous posts), the latest development came last week with the company’s settlement with US investors. (Royal Dutch Shell Plc: Euronext, LSE, NYSE: RDSA, RDSB; Shell press release, The 10b-5 Daily)

The US settlement covers all purchasers of Shell shares on US markets during the Class Period and US residents, citizens and entities who purchased Shell shares on non-US markets during that period. The settlement amount is US$79.9 million plus US$2.95 million, plus interest, plus an additional US$35 million split between the US settlors and non-US settlors. (What isn’t in the press release is the exact amount Shell pays in fees to Lead Counsel Bernstein Liebhard & Lifshitz LLP: US$27 million (Court memo).) The non-US settlement is pending before the Amsterdam Court of Appeals.

Taking a step back however, behind the settlement news was the required preceding development of having to rid the US action of the non-US claimants, which had already established their own settlement last year, in order for the Stateside plaintiffs to be able to enter into their own settlement without them. That occured by way of final order of the New Jersey District Court on 5 December 2007, dismissing the claims of non-US investors from the action with prejudice for lack of subject matter jurisdiction.

(Subscribe) How long will it take for a US pension fund to be appointed lead plaintiff against a US company in a euro-class action? That was the question that came to mind reading an article in the Wall Street Journal today, entitled Adding to Woes of U.S. Stocks, Pension Funds Are Pulling Back. The article details US pension funds offloading billions of dollars in US equities in favour of investing outside the US.

From the article: “Among the funds that are part of this trend: the New York State Teachers’ Retirement System, the New York State Common Retirement Fund, the Teacher Retirement System of Texas and the Florida Retirement System Pension Plan. Collectively, these plans control more than $500 billion in assets.”

California Public Employees’ Retirement System (Calpers, US$250 billion in assets) may “reduce its U.S. stock position to 24%, from 40% of its portfolio, which would represent the fund’s lowest allocation to U.S. stocks in more than 20 years. […] The New York State Teachers’ Retirement System, with $100 billion in assets, also disclosed plans to cut its target rate for U.S. stocks to 46% from 51%.”

Follow all that money (and experience of the US legal system) and add two elements to the mix, namely the emergence of class action legislation across the EU and the increase in the number of US listings on EU exchanges. Cases are being added to the ‘f-cubed’ list, ‘foreigners’ (i.e. non-US entities) suing fellow foreigners in US fora, the reverse, a first ‘f-cubed Americana’ action might well be a logical next step. You read it here first.

In March 2005, England-based Vodafone Group Plc (LSE, NYSE: VOD) settled the US securities class action pending against it by creating a US$24.5 million (then £14.1 million) settlement fund. (settlement notice) The respective class of plaintiffs was defined as purchasers of Vodafone’s American Depository Shares, limiting the class to US investors only.

Non-US investors may however still receive a share of a Vodafone settlement, albeit not out of that fund. This month a new action has been filed against the company, again in New York and again on the basis of ‘impairment of goodwill’, on behalf of ‘all persons who purchased the publicly traded securities’ regardless of location. (complaint)

It’s potentially another f-cubed in the making: The plaintiff is the Lothian Pension Fund, administered by Scotland’s City of Edinburgh Council. Its counsel is familiar with Vodafone and the previous action: Samuel H. Rudman’s old firm, Milberg Weiss Bershad & Schulman LLP (as it was at the time of the settlement), was a settling Plaintiff’s Co-Lead Counsel and he signed this complaint for his current firm, Coughlin Stoia Geller Rudman & Robbins LLP.

The class period is 10 June 2004 - 24 February 2006. The deadline to move the Court for lead plaintiff status is no later than 60 days from the date the case was filed, 9 November 2007. (Subscribe)

What’s more: “US plaintiff firms will continue to enforce the law by way of civil actions in US courts against UK corporations on behalf of US and foreign investors, including those situated in the UK.” (article)