With Vigour and Zeal

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)

This week’s Legal Week - its monthly Global edition - contains an article of mine, Werner R. Kranenburg’s Debating derivatives, on US derivative actions against non-US corporations. What follows here are sources used, including two previous WV&Z posts which in turn include links to certain court documents, acknowledgements and annotations to the article.

A selection of the sources I have used, listing mainly the papers:

• Rule 23.1, Federal Rules of Civil Procedure (via Cornell Law School)
• Section 260 et seq, Companies Act 2006
• The Accident of Efficiency: Foreign Exchanges, American Depository Receipts, and Space Arbitrage, Brian P. Murray and Maurice Pesso (link to a later version than used)
• Before Competition: Origins of the Internal Affairs Doctrine, Frederick Tung (not used, found post-submission)
• BP Alaska derivative claim, Francis Kean and Roderic McLauchlan
• Enhanced directors duties, the new derivative action and other aspects of the Companies Act 2006, Dov Ohrenstein
• European litigation trends: March 2007, Freshfields Bruckhaus Deringer
• A Transatlantic Case: The Derivative Action as a Corporate Governance Tool, Irene Lynch-Fannon
• Shareholder Suits as a Technique of Internalization and Control of Management: A Functional and Comparative Analysis, Anne van Aaken
• Royal Dutch Shell Plc’s derivative settlement press release, including the notice to shareholders and the corporate governance principles
• WV&Z: ABN Amro: New York internal affairs
• WV&Z: In re BP Plc Derivative Litigation, where? (and subsequent posts on the action, see here)

I wish to gratefully acknowledge Brian P. Murray of Murray Frank & Sailer LLP, Adam Savett of Securities Litigation Watch and Stefan Winheller of Winheller Rechtsanwälte for their respective contributions of material. Any errors or omissions are of course my own and you are kindly invited to contact me with any feedback.

And finally some notes and updates: In the final paragraph of the article I state that the two plaintiffs in the BP action are American Depository Receipt holders; it would have been more accurate to have stated that the two filing plaintiffs are ADR holders. As discussed in a previous post on the action (as above), they were later joined by the London Pension Fund Authority, a UK shareholder. The defence argued the ADR and standing issue in its notice of removal of the action to Alaska district court (here, p.7).

The latest news in the case is that both the motion to dismiss and the motion for reconsideration of the motion to dismiss were denied, on the 17th and 30th of May respectively.

(Subscribe to WV&Z here; Days left: 51, so posting will become lighter and more irregular still)

The main post on the settlement is still pending (see previous post), but with thanks to The Race to the Bottom, in the interim a third note.

Earlier this month, Lead Plaintiffs PSERS and SERS (represented by Lead Class Counsel Bernstein Liebhard & Lifshitz LLP) have filed two motions in opposition of the settlement in the original US case pending in New Jersey District Court, opposing the severance and dismissal of the opt-out plaintiffs’ claims and in support of enjoinder of Shell and the Opt-Out Plaintiffs from seeking approval of the settlement in the Amsterdam Court of Appeals.

Shell (Robertson Freilich Bruno & Cohen LLC) and the Opt-Out Plaintiffs (Grant & Eisenhofer PA) each have filed motions in response. The University of Denver Sturm College of Law’s Corporate Governance section (with which The Race to the Bottom is affiliated) offers all four motions.

What’s more: though this is of course the shortest of short notices and hot on the heels of the IBA/ABA’s European class action conference of last week in Rome, Global Pensions hosts a conference in London tomorrow on the same topic under the title Class Action Forum 2007. (programme) The speakers are predominantly from plaintiffs’ firms Berger & Montague PC, Bernstein Litowitz Berger & Grossmann LLP and Murray Frank & Sailer LLP.

One presentation of note is on the Shell settlement as case study presented by Gerard W.R. Fehrenbach, a senior adviser with pension fund PGGM, one of the Opt-Out Plaintiffs.

Every year, PricewaterhouseCoopers LLP releases a report on US securities class action litigation activity, reserving some space in the report to focus on non-US issuers. (download it from the press release)

It names the 13 filers, from eight different countries and mostly from outside of Europe, which were subject of such actions last year (down from 19 the year before) and notes that this represents just 1 percent of the total 1,200 foreign issuers, in line with domestic issuers (93, 1.2 percent).

Skip to pages 56 - 75 (from 60 of 82) for the two chapters on foreign issuers and two editorials, by Reed Smith Richards Butler LLP on the controversial US-UK Extradition Treaty and PwC on deregistration. For a general review, see the D&O Diary.

What’s more: the Savett paper on the growing role of non-US investors in US securities class actions (see previous post) is now available, here. (Subscribe to WV&Z here; days left: 68)

ABN Amro Holding NV (Euronext, NYSE: ABN) got served a double defeat in Amsterdam courts Thursday, in cases regarding its role in the initial public offering of World On Line International NV (World Online, also commonly referred to as WOL) and regarding the sale of its US subsidiary ABN AMRO Bank North America Holding Company (LaSalle Bank) to Bank of America (NYSE: BAC). In both cases, the Vereniging van Effectenbezitters (Dutch Investors’ Association, VEB) had filed the petition with the court. (opinions: WOL, LaSalle, both in Dutch)

Unsurprisingly, the next day’s headlines focused on the latter action in light of ABN Amro being on the target end of ‘the world’s largest banking deal’. (For more on the ABN Amro takeover battle, see for example the FT.com ABN Amro In depth section.) The VEB had sued ABN Amro to halt the sale of LaSalle, arguing that the transaction effectively served as a poison pill. The court agreed that the bank, considering the sale was linked to the takeover approach from Barclays Plc (LSE: BARC; NYSE: BCS), should have sought shareholder approval for the sale. Now ABN Amro may still seek that shareholder approval or appeal against the ruling by June 14.

That noted, the M&A developments themselves do take place largely if not exclusively outside the scope of WV&Z, at least for now.

The action against ABN Amro and its co-defendants Goldman Sachs (NYSE: GS) and World Online on the other hand is well within the scope here. ABN Amro and Goldman Sachs, as well as World Online itself, have been found guilty of misleading investors in the events, including by way of the prospectus, leading up to the initial public offering of World Online shares and during a certain period of share trading thereafter. (WOL was subsequently taken over by Tiscali SpA (Borsa Italiana: TIS).)

The Shell settlement - approval of which is pending before an Amsterdam court - was relatively big, an upcoming WOL settlement, based on the claim to follow this verdict, could be even bigger: VEB says that 150,000 investors (of which nearly 11,000 are VEB members) have lost €3 billion and it has indicated that the claim could run into the ‘hundreds of millions of euro’. (A partial defeat suffered by VEB in this case is that it has to revise how to administer the claim from the procedure presented to the court.)

A settlement however is no certainty, as the parties may appeal the decision. Watch this space. (Days left: 79)

What’s more: the day after the Enterprise Chamber’s ruling that the sale of LaSalle required shareholder approval, Bank of America filed a breach of contract action against ABN Amro (SDNY, Case number 1:07-cv-03578-PKC); see the complaint.

L&H’s former main commercial bank Dexia Bank Belgium and its parent Dexia SA (Euronext: DEXB, DX; formerly known as Artesia Banking Corp.), have settled the securities class action brought against them, in a case relating to In re Lernout & Hauspie Speech Products Securities Litigation. (Dexia press release) Their $60 million takes the total settlement amount to $180.52 million plus interest.

Plaintiffs’ Lead Counsel: Berman DeValerio Pease Tabacco Burt & Pucillo, Shalov Stone Bonner & Rocco LLP

The L&H Securities Litigation website has been updated and now includes the Dexia notice and claim form. (Also see the memorandum and order denying Dexia’s motion to dismiss the third amended complaint.) The Court will hold a hearing on 22 June 2007 to decide whether to approve the settlement and the deadline for submission of the claim form is 21 August 2007 - for other dates, please see the notice.

Note however that only NASDAQ purchasers are included in the class to which this settlement applies. The litigation on behalf of Easdaq purchasers continues (see previous post).