Securities class action trends 2008

December 20th, 2008

This week two reports were published, by NERA Economic Consulting and RiskMetrics Group, both covering securities class action litigation trends of the past year. NERA’s 2008 Trends in Securities Class Actions (report, press release) is its annual year-end study of US case filings and settlements. Securities Docket has a short overview of the report’s findings and additional details on the study from the two primary authors.

RiskMetrics’ Globalization in Securities Class Actions (registration required), authored by Adam T. Savett also of Securities Litigation Watch, is an update to last year’s paper Accountability Goes Global. It ‘explores recent trends in non-US investor interest in US Securities Class Actions.’ For instance, it finds that from 1996 through 2007 there were ‘234 different instances of an international [non-US] institutional investor seeking to serve as a lead plaintiff in a US securities class action’, in 134 different cases. And that ‘[i]n every year since 2002, international institutional investors have filed lead plaintiff motions in more than 5% of all new federal securities class actions.’

One thing you, regular WV&Z readers, are surely familiar with is the report’s latest reason explaining ‘the continued trend’ of non-US investor interest in US securities class actions: ‘The increasing availability and acceptance of securities litigation in non-US jurisdictions.’

Sweden evaluates Group Proceedings Act

December 19th, 2008

Earlier this week I came across a 2006 article by Shook Hardy & Bacon LLP’s Laurel J. Harbour and Marc E. Shelley, entitled The Emerging European Class Action: Expanding Multi-Party Litigation To A Shrinking World. Among other things, the Swedish collective action legislation (Lag om grupprättegång, Group Proceedings Act) is discussed therein (from p.5). (Also see this 2006 intervention by (then-)Deputy Consumer Ombudsman Marianne Åbyhammar of Konsumentverket, the Swedish Consumer Agency.)

That discussion ended with the note that ‘[t]he Swedish Act is to be reviewed at the end of 2006 or beginning of 2007.’ So I e-mailed the authors with the question if that review indeed took place and if so what the outcome was. After exchanges with both, I invited Marc to amend slightly his initial comprehensive response for publication as a guest post. He kindly accepted the invite. With thanks, his guest post is as follows:

In October 2008, the committee to evaluate Sweden’s Group Proceedings Act (SFS 2002:599) released its nearly 300 page report and recommendations (in Swedish; summary, in English). When the Act was adopted in 2002, the law provided for an evaluation after five years. In June 2007, the Ministry of Justice appointed the committee to analyze the cases filed since the law went into effect on January 1, 2003 (for the interest of the readers of With Vigour and Zeal, to my knowledge, none has been filed yet based on alleged misconduct related to securities).

By way of background, the Act requires cases to satisfy several preconditions in order to proceed. Like the U.S. Rule 23, a class action may be brought by an individual or association seeking monetary or injunctive relief on virtually any type of claim. There must be common factual circumstances, and the action must be manageable and a superior way of handling the litigation compared with the alternatives of joinder and test cases. The class must be “appropriately defined” and the plaintiff must suitably represent the class. However, in contrast to Rule 23, class members must opt in to be included as a member of the class and only individuals who have done so will be bound by the judgment.

The committee concluded after surveying the cases filed since 2003 that there has been no abuse of the device and, on the contrary, it has had a positive effect on access to justice for consumers. Despite the lack of abuse and its apparent success, the committee proposes to expand the procedural law in the following way:

  1. Introducing U.S. style contingency fees of up to 30% of the disputed amount, in order to facilitate the financing for the plaintiffs to bring more class actions. The committee’s report specifically cites to the 2006 German Supreme Court decision that a bar on contingency agreements is unconstitutional. The report also proposes an increase of legal aid for class actions.
  2. Allowing plaintiffs to provide notice to class members instead of the court to improve the notification process for greater participation.
  3. Expediting the court’s certification process, particularly with respect to the class definition, to make the device quicker and more effective.
  4. Preserving the opt-in model, despite calls for changing to an opt-out model (either generally or for certain types of claims, as permitted in the Norwegian and Danish class action models).

It is not yet clear whether these proposals will be successful. Interested parties have until January 16, 2009, to submit comments.

Fortis SA/NV subject of enquiries

December 1st, 2008

The Enterprise Chambers of the Amsterdam Court of Appeals and of the Courts of Brussels both declined to enjoin the transactions that, among other things, saw Fortis SA/NV partially sold off to BNP Paribas. (previous post) The Brussels court issued its decision on 18 November, the Amsterdam court a week later on the 24th. (Amsterdam summary, decision, in Dutch; Brussels, decision in French and see, in Dutch) Plaintiffs’ counsel in the Dutch case is Spigthoff Advocaten & Belastingadviseurs NV.

Both courts though decided to instigate an inquiry (enquêteonderzoek), into the policy of Fortis, the course of events from 27 May 2007 and the transactions that occurred between 26 September 2008 until 7 October 2008, inclusive (Amsterdam) and into the valuation of the shares (Brussels), respectively. Modrikamen, counsel for the plaintiffs in the Belgian case, has stated it will appeal the decision.

In New York, so far at least one action (case detail, complaint dated 22 October 2008) has been filed against Fortis. The proposed class period is between 28 January 2008 and 6 October 2008, inclusive. Plaintiff’s counsel is Wolf Haldenstein Adler Freeman & Herz LLP. If you want to move for Lead Plaintiff status in that case, you must do so no later than 22 December 2008. Scott+Scott LLP has Fortis listed in its ‘Case investigations’ section for the present (here).

Wrapping it up, 26 November 2008

November 26th, 2008

One event for in the diary, notes on one that has taken place and updated links here on WV&Z:

Grant & Eisenhofer PA’s 8th Global Shareholder Activism Conference (details, programme) takes place in New York from 4-6 December. (The 9th is in London, 23-24 April 2009.) Alexander Reus of Diaz Reus LLP and Andree Nesselrodt of DekaBank Deutsche Girozentrale, a Diaz Reus client, are on the panel of the luncheon breakout session IV-C Class Action Settlements on the Friday. Unrelated to the event, both Reus and Nesselrodt (a Vice President and Senior Legal Counsel with DekaBank) are quoted in the Financial Times Deutschland (in German) earlier this year, as are Geoffrey C. Jarvis of G&E and Winheller Rechtsanwälte’s Stefan Winheller, on the role German investors may play in US class actions. has published notes on the 12th Annual National Institute on Class Actions conference (previous post), including on the “Class Actions Sans Frontières” presentation.

NERA Economic Consulting’s new topic specific website Securities Litigation Trends has been added to the Resources links section (right column). It has NERA’s reports on SEC settlement trends and shareholder class action trends, settlement documents and a weekly securities blog digest among other things all in one place. In the past few weeks a number of plaintiffs’ firms has changed firm names and domain names accordingly. These have been amended in the Firms / US / Plaintiffs links section (right column).

My friends at Tilburg University have recently launched the Tilburg Institute of Comparative and Transnational Law (TICOM). The Institute “aims to be a leading institute for scholarly research into law as an international phenomenon… [It] questions the relevance of territorial and dogmatic borders delineating both national jurisdictions and the classical areas of law.” (original emphasis) Their link has been added to Resources as well. WV&Z wishes TICOM and all involved all the best.

Wachtell Skadden & Gladwell

November 25th, 2008

In a somewhat off-topic post, last night I went to see Malcolm Gladwell live on stage. He’s got a new book out, Outliers, and his untitled hour-long talk was basically an introduction into his book’s theme, subtitled The Story of Success, and mostly the oral presentation of one of the chapters in the book - Chapter Seven: The Ethnic Theory of Plane Crashes. From the inside cover:

The real secret of success turns out to be surprisingly simple, and it hinges on a few crucial twists in people’s life stories - on the culture they grow up in and the way they spend their time.

On the way home from the theatre I started reading my fresh hard back, signed copy, from Chapter Five: The Three Lessons From Joe Flom. ‘Flom‘ as in ‘Skadden Arps Slate Meagher & Flom LLP‘, the firm’s first associate back in 1948 and now its last living name partner. His story is being told from an expectedly unconventional angle. ‘What were Joe Flom’s opportunities?’

Gladwell is a fascinating storyteller with lots of fascinating stories to tell. (Also see his talk on the ‘ketchup conundrum‘ at TED, below.) Why too is it relevant, in understanding the firm, to know that all four Wachtell Lipton Rosen & Katz name partners were born in 1930 or 1931?

“Will Aggregate Litigation Come to Europe?”

November 23rd, 2008

Just earlier this week (in this previous post) I referred to a research paper on res judicata and how the development of collective litigation procedures in various European jurisdictions is arguably one factor in the easing of recognition concerns of US courts. But what good are procedures if not put to use? That in turn is the concern of the two authors of the paper Will Aggregate Litigation Come to Europe?. From the abstract:

European thinking on the topic appears to have reached consensus on two points… the second [being that] whatever form European aggregate litigation takes, it will not replicate American class action litigation with its domination by entrepreneurial plaintiffs’ attorneys. […] Drawing on America’s long history of collective enforcement, we… ask whether Europe will adopt the incentives and institutional arrangements necessary to make aggregate litigation an effective remedy. Our concern is that Europe’s revulsion at accepting the reality of legal enforcement as an entrepreneurial activity may leave the incipient reforms without the necessary agents of implementation.

As Prof. Samuel Issacharoff and Prof. Geoffrey P. Miller (both of NYU) point out, “it is all well and good to lay down railroad track and invest in a stock of modern trains [b]ut someone has to drive the train.”

WV&Z can only speculate how long it will be until a European court, in a collective action brought exclusively in its own jurisdiction, “notes that class counsel were clearly not motivated entirely by notions of charity and a pursuit of justice for its own sake” before awarding the lawyers who brought the case an “adequate award” in the amount of, say, $31,500,000 in fees plus expenses.

With thanks to Mass Tort Litigation Blog for spotting the paper (posted on SSRN 10 November), picked up by Point of Law and discussed by the D&O Diary and thanks to The 10b-5 Daily for the link to the order concerning attorneys’ fees in the The Coca-Cola Company securities litigation.

In re Bayer AG claims deadline near

November 21st, 2008

There are only a few days left to participate in the $18,500,000 In re Bayer AG Securities Litigation (No. 03 cv 1546 SDNY) settlement by filing your proof of claim form (Bayer AG, Xetra: BAY). The deadline is 25 November 2008 (date of postmark).

The class is defined as “[a]ll persons or entities who or which from August 4, 2000 through and including February 21, 2003: (a) purchased or otherwise acquired ordinary shares of Bayer AG on the U.S. over-the-counter market or purchased American Depository Receipts (ADRs) of Bayer AG on the New York Stock Exchange, regardless of the purchaser’s country of residence at the time of purchase; or (b) purchased or otherwise acquired ordinary shares or ADRs of Bayer AG on any other stock exchange and the purchaser, or beneficial owner, was a resident or citizen of the United States at the time of purchase.” (WV&Z’s emphases) For a list of exchanges Bayer was listed on from time to time, see here.

It was alleged that Bayer’s share price was artificially inflated during the class period due to material misrepresentations and omissions in relation to its cholesterol-lowering drug, Baycol. The class period commences on the date of Bayer’s withdrawal of the drug from the US market. (FDA) The price of its securities then allegedly fell following publication of this article in The New York Times, marking the end of the class period. (Also see lead counsel Lowey Dannenberg Cohen & Hart PC’s latest announcement on the case.)

The dedicated settlement website contains all relevant documents - including the Notice of Pendency and Settlement of Class Action and Proof of Claim and Release - a FAQ and details on how to file your claim electronically.

“We are not the world’s court”

November 18th, 2008

The issue before the court in Morrison v National Australia Bank was whether to excercise subject matter jurisdiction over the foreign claimants who bought their NAB shares on a foreign exchange. (ASX, LSE, NYSE, NZX: NAB/NABHA) It held that in this case it could not (decision), based on the ‘conduct test’. The court however refrained from creating a ‘rigid bright-line rule’ for all ‘foreign-cubed’ cases, advocated by defendants and friends of the court. From the decision:

[D]eclining jurisdiction over all “foreign-cubed” securities fraud actions would conflict with the goal of preventing the export of fraud from America. As the argument goes, the United States should not be seen as a safe haven for securities cheaters; those who operate from American soil should not be given greater protection from American securities laws because they carry a foreign passport or victimize foreign shareholders. […]

Moreover, we are leery of rigid bright-line rules because we cannot anticipate all the circumstances in which the ingenuity of those inclined to violate the securities laws should result in their being subject to American jurisdiction. That being said, we are an American court, not the world’s court, and we cannot and should not expend our resources resolving cases that do not affect Americans or involve fraud emanating from America. In our view, the “conduct test” balances these competing concerns adequately and we decline to place any special limits beyond the “conduct test” on “foreign-cubed” securities fraud actions.

Thomas A. Dubbs, senior partner with plaintiffs’ counsel Labaton Sucharow LLP, who argued the appeal has stated that “[w]e are obviously disappointed in the outcome. However, the decision does contain good news for investors. For example, the Court clearly rejected the bright-line ban of ‘foreign-cubed’ securities cases… Instead, the Court held that jurisdiction in such cases must be reviewed on a case-by-case basis. [T]he Court also rejected defendants’ arguments that the American courts’ acceptance of such cases would result in a ‘parade of horribles’.”

This f-cubed case failed because the relevant conduct was in Australia. Hardly the ‘major victory’ the Washington Legal Foundation, one of the friends of the court in this case (case detail), has called the outcome. Without the rigid rule, the next such case may well see a different result.

What’s more, three learned fellow bloggers have already written (extensively) about this case - the D&O Diary, The 10b-5 Daily and D&O Diary provides three of the four amicus curiae briefs (and more background to the case, here), the fourth brief being from the Securities and Exchange Commission (here) in response to the court’s request.

Res judicata of US class action judgments

November 17th, 2008

Weil Gotshal & Manges LLP has published its annual 10b-5 Guide (2007) this summer, with thanks to Paul A. Ferrillo for this submission. It includes discussion of two cases that have featured here, one of which is Borochoff v. GlaxoSmithKline PLC (p.156). In that case the judge did not appoint as lead plaintiff the movant with the largest combined loss, a group of German investors, due to the concern whether “the foreign courts will not enforce a decision in favor of [defendant] against foreign plaintiffs in the class.” In the case of Vivendi Universal S.A. (p.175) the court included some foreign countries into the classification and specifically excluded others over the same concern. (Also see In re Rhodia S.A. Sec. Litig., p.195.)

In his 2007 paper Recognition and Res Judicata of U.S. Class Action Judgments in European Legal Systems, Dr. Andrea Pinna (LinkedIn) of French law firm Darrois Villey Maillot Brochier adresses exactly that concern, with thanks to Prof. Dr. Ianika M. Tzankova for her notifying me of the paper. Pinna actually concludes that his “analysis seems to suggest that the hostility of European legal systems towards granting Res Judicata effect to US class action judgments is progressively declining… [as a] consequence of a general acceptance of the necessity of renovating the old-continent civil procedures with tools allowing the consolidation of individual claims in collective claims.” (p.29 of 31)

Since the paper was published, more ‘old-continent’ jurisdictions have adopted collective claim procedures. DLA Piper’s article Global Realm of Securities Class Actions, with thanks to The 10b-5 Daily, highlights some of these procedures in its discussion of “the evolution of the class action device for securities claims in foreign jurisdictions.”

(Also of interest in a wider context is Prof. Samuel P. Baumgartner’s paper How Well Do U.S. Judgments Fare in Europe?, published just a few weeks after Pinna’s paper.)

Collective redress, four events (well, five)

October 20th, 2008

In the next few weeks four events will take place, so there’s three dates for your diary. The fifth one has already taken place on the 8th of October, a programme in King & Spalding LLP’s University e-Learn Series, entitled The Globalization of U.S. Securities Class Actions and U.S. Securities Law Enforcement (details). The handout (62 slides) is still available online.

Looking forward then, the 14th annual Bernstein Litowitz Berger & Grossmann LLP sponsored Forum for Institutional Investors is on next week in New York, 23-24 October. This year’s theme is Protecting Shareholder Value, The Credit Crisis and Beyond. (programme)

Next up is the ERA’s Collective Redress, Towards a system of class actions in Europe? (ERA is short for Europäische Rechtsakademie, Academy of European Law based in Trier and Brussels.) This event takes place in Florence, 30-31 October, under the patronage of the Ordine degli Avvocati di Firenze and the University of Florence. ERA itself is supported by the European Union. (programme, register) The programme takes a very European approach, first setting the scene by way of comparative analysis between the US and Europe,
then discussing several national systems - England, the Netherlands, Germany among them - before
concluding with ‘Expectations for a collective redress mechanism at EU-level’, the latter being presented by
representatives of the European Commission (Dirk Staudenmayer) and European Parliament (Diana Wallis MEP).

Next month the American Bar Association hosts two events of note on the same day, 7 November, with thanks to for the notice. And not only the same day, the most interesting discussions are even held the same time at 4pm and on the same topic!

That topic is Class Actions Sans Frontières as one panel is called, or about ‘actions brought in the US and Europe on behalf of purported worldwide classes’ according to the details of the other. Panelists in New York include Lynda J. Grant of Cohen Milstein Hausfeld & Toll PLLC (based in New York) and in Miami Gerard J. Meijer of NautaDutilh NV (Rotterdam) and Peter J. Rees of Debevoise & Plimpton LLP (London). Also note Miami’s 2pm litigation funding panel which will ‘examine… new techniques for funding major litigation and debate their practical as well as ethical impact.’