With Vigour and Zeal

Last week The Lawyer ran a Special Report series of articles on the topic of Litigation and Alternative Dispute Resolution, at least one of which is of interest here, namely the one by Daan F. Lunsingh Scheurleer of NautaDutilh NV. This week’s The Lawyer contains an excerpt of an interview with Anthony Maton, one of the partners in the London office of Cohen Milstein Hausfeld & Toll PLLC. Both deal with, to some extent, the EU becoming a more claimant-friendly environment.

In ‘Oiling the wheels’, Lunsingh Scheurleer and senior associate Dr. Ianika N. Tzankova discuss the burden on defendants in US class actions of foreign claimants and class certification, and Dutch rules governing collective settlements in an EU context. The Royal Dutch Shell settlement, ‘a potential groundbreaker’, and Vivendi’s class certification are cited as examples, among others. It is noted here that Lunsingh Scheurleer acted as counsel to two pension funds that were instrumental in the Royal Dutch Shell action’s settlement proceedings, namely ABP and another. (source)

Maton, in his comparison of UK firms with US firms and their respective handling of claimant actions, points to among other things the same procedural differences as Lunsingh Scheurleer does: “The process in the States… with contingency fees, juries and [in anti-trust cases] triple damages, means a very different approach. It’s an approach that we believe would not work in the European arena.” He however is reported to believe that, in the context of anti-trust claims, “it will not be long before there is a workable regime.”

Lower transaction costs is one factor in Lunsingh Scheurleer’s case for Europe as the forum of choice for the settlement of European mass disputes that exclude US claimants: “[T]ransaction costs in the EU are lower than in the US due to the absence of a jury system, extensive discovery and far-reaching no cure, no pay arrangements. Lower transaction costs are in the interest of both plaintiffs and defendants.”

The Maton interview excerpt is complemented by a two-minute segment in The Lawyer’s monthly podcast, October Edition (also available on iTunes).

What’s more: Dr. Tzankova joined NautaDutilh in 2007 after obtaining her PhD, with a thesis entitled ‘Access to justice in mass disputes’, from Tilburg University where earlier this month she has been appointed for a five year term as extraordinary professor of Comparative Mass Litigation. (press release; also see the Nederlands Juridisch Dagblad, in Dutch)

Asked to comment on KapMuG and Lovells LLP’s recent creation of a practice group focused on class actions in Europe (see previous post), Bernd Jochem of German firm Rotter Rechtsanwälte Partnerschaft has, with thanks, submitted the following on behalf of his firm:

As a law firm focussing on investor rights we have not only seen new legislation like the KapMuG coming into force but also a rising interest of institutional investors to participate in such actions in Germany.

Together with litigation funding, which is established in Germany, the KapMuG gives institutional investors the opportunity to fulfill their fiduciary duties without taking a leading role with all its consequences. Since a test case under the KapMuG does not - unlike in the U.S. - stop the clocks running under the statutes of limitation for those who have not filed a court claim, in Germany an investor who wants to reserve his rights still has to file at least an initial claim.

However, only one case will be the test case while the other proceedings will be stayed. This has led to the participation of several, even foreign, institutional investors to participate in the case against Daimler, which will be the first one to be decided under the new KapMuG by the German High Court of Justice (”Bundesgerichtshof”) in the near future. Expectations are the court will deliver its decision between December 2007 and March 2008.

New cases that will be filed soon will involve the stock drop of IKB Kreditbank [Xetra: IKB] shares due to the subprime exposure in the U.S. Here too we are experiencing a significant interest by institutions to participate.

I absolutely agree with Lovells’ expectation that in this regard the focus for such actions will be in the UK, Germany and the Netherlands and that securities and anti-trust law will be the main areas.

In the comment he adds that it is his expectation that “[t]he cross-border issues in this context will also lead to alliances among law firms of different countries focussing on class actions.” The firm already has a long-standing relationship with US plaintiffs’ firm Shalov Stone Bonner & Rocco LLP.

Stefan Winheller of Winheller Rechtsanwälte (US relationship: Schiffrin Barroway Topaz & Kessler LLP), in a separate reaction to the same post, stated that “the KapMug is not like the US style class action: it is not an opt out system and each investor has to file suit on its own. At least it allows aggrieved investors to recover their damages with lower cost risks.” (Subscribe)

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.

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.

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.)

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.

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.”

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).

Drugs have landed GlaxoSmithKline Plc (LSE, NYSE: GSK) in the docket, again. Two years ago it was securities fraud claims surrounding Paxil - in the UK marketed under the name Seroxat - two weeks ago it was the drug Avandia. See the 2005 action’s press release and the 2007 action’s complaint (07 Civ. 5574, SDNY).

Plaintiffs’ Counsel: Scott + Scott LLC (2005) and Kaplan Fox & Kilsheimer LLP (2007)

The current status of the earlier action, In re GlaxoSmithKline Sec. Litig. (05 Civ. 3751, SDNY) filed in May 2005, is that the second amended complaint was dismissed in October 2006: “Plaintiff has failed to state a primary violation of the securities laws under section 10(b). Without a primary violation, there can be no secondary, or derivative, violation under Section 20(a). Accordingly, Plaintiff’s Section 20(a) claim is also dismissed.” (cited in In re NTL Sec. Litig.) An appeal had been filed with the US Court of Appeals for the Second Circuit. (Also see GSK’s 2006 Annual Report, p.163 (165 of 192).)

After having read the complaint in the current action (filed 11 June), for more information see the following GSK communications:

• press release in response to New England Journal of Medicine editorials (5 June)
• press release regarding data from RECORD study in relation to Avandia (5 June)
• statement of Moncef Slaoui, PhD, GSK Chairman Research & Development in testimony before the House Committee on Oversight and Government Reform (6 June)

A GSK spokesperson has, in line with its policy not to comment on individual lawsuits, submitted the following in response to a request for comment concerning the current action:

We will vigorously defend our medicine. GSK has acted responsibly, transparently and with the best interest of patients in mind. Any fair examination of the company’s record will show that GSK has been transparent in its efforts to thoroughly study the safety and effectiveness of Avandia, and to widely communicate that information to governments, regulatory authorities, scientific peers, physicians and others in a variety of ways.

The proposed Class Period is the period between 27 October 2005 and 21 May 2007, inclusive. The deadline to apply for Lead Plaintiff status is 10 August 2007.

Though it actually warrants far larger exposure (and scrutiny) than given here now, for now just two notes on proceedings involving Vivendi Universal SA, as it then was (Vivendi SA; Euronext: VIV), namely on the SEC settlement and the class certification in the securities action.

The deadline to file your claim to share in the $51 million SEC settlement is in two days, Tuesday 12 June. See the Vivendi SEC Settlement website for the notice, proof of claim form and more information and to file your claim online. (Note that the eleven countries on the home page of the site seem to indicate language only. The eligibility criteria do not include requirements of citizenship or exchange of purchase.)

Ross Dixon & Bell LLP’s D&O Liability alert of 28 March has a review of the class certification, the court having certified the class as purchasers of the United States, France, England and the Netherlands. “Recognition in England, Your Honour? Is that England the constituent country, or England and Wales together which share the same legal system under English law? Your Honour, are all citizens of the United Kingdom of Great Britain and Northern Ireland, the sovereign state, included?” (In re Vivendi Universal SA Securities Litigation, No. 02-5571 (SDNY))

With thanks to Eric J. Belfi of Labaton Sucharow & Rudoff LLP for his submission of the class certification decision at the time and an update this week, earlier this week the review of the decision has been denied and so the class as certified remains. Also see the US Chamber of Commerce’s amicus brief, in which its affiliate the National Chamber Litigation Center argues that “there should be a virtual certainty of preclusive effect before a class including foreign members should ever be certified”.

What’s more: Steve W. Berman of Hagens Berman Sobol Shapiro LLP and James Quinney of Herbert Smith LLP give the only presentation on class actions at the International Litigation and Fraud conference in London, 26 and 27 June. Key note speaker is Mr Justice Langley of the Royal Courts of Justice. (programme with registration form or book online)