PwC Annual Study Reports Record Number of Securities Suits

pwcLargely driven by a “dramatic” increase in the number of federal court merger objection lawsuits, securities class action litigation filings rose to the highest level ever in 2016, according to PwC’s most recent annual securities litigation report. The report also noted that for the first time securities litigation rose though the stock market performance during the year did not, contrary to prior patterns. The April 2017 report, entitled “A Rising Tide or a Rogue Wave? 2016 Securities Litigation Study,” can be found here. Continue Reading

The Steep Rise of Collective Actions in Europe

eu flagIn prior posts (for example, here), I have described the rise of collective investor actions outside of the U.S. as one of the most important current developments in the world of directors and officers liability. The rise of these collective investor suits is not happening in a vacuum; the growth in the number and size of these kinds of lawsuits is part of a larger upsurge in collective actions generally. According to a recent Report, collective redress actions represent a “growing business” in Europe, and the “volume and value of the cases being filed is on a steep upward curve.”


The Report, a detailed and interesting March 2017 publication by the U.S. Chamber of Commerce Institute of Legal Reform entitled “The Growth of Collective Redress in the EU: A Survey of Developments in 10 Member States” (here) takes an anxious and uneasy look at the changes in the collective action environment in Europe, and proposes several recommendations as ways for countries to avoid abuses that the report contends have arisen elsewhere.  The Institute’s March 21, 2017 press release about the report can be found here. Continue Reading

Late Notice and Claims Made Date Issues

zillowA recurring circumstance fraught with peril for policyholders is one in which the policyholder receives a demand letter in one policy period and then receives a related lawsuit in a subsequent policy period. The fact that these events straddle two policy periods creates potential for possible coverage preclusive issues having to do with Notice of Claim and Claims Made Date issues. In an April 13, 2017 order (here), Judge James Robart, applying the law of Washington State, held that because Zillow failed to give timely notice of a demand letter it received in the prior policy period, there was no coverage for the later lawsuit filed against Zillow in the subsequent policy period, because the claim had first been made at the time of the demand. As discussed below, this case and Judge Robart’s analysis raises some interesting issues. Continue Reading

U.S. Securities Enforcement Authorities’ Extraterritorial Reach Under Morrison, Dodd-Frank Act

utahPrior to the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank, U.S. courts held that the U.S. securities laws could be applied extraterritorially if there was sufficient fraudulent conduct or were sufficient effects from that conduct in the U.S.  In Morrison the Supreme Court rejected this “conduct or effects” test, ruling that the U.S. securities laws apply to allegedly fraudulent transactions, not to alleged fraudulent conduct or its effects, and further that the securities laws apply only to domestic transactions. However, within days after the Morrison decision, the U.S. Congress, as part of its enactment of the Dodd-Frank Act, purported to provide the SEC and the U.S. DOJ “jurisdiction” to pursue enforcement actions based not on transactions in the U.S., but rather based on conduct or its effects in the U.S.


Despite the passage of time, no court reached the question of how to interpret and apply this Dodd-Frank provision in light of the Morrison decision – until now. In a detailed March 28, 2017 decision (here), District of Utah Judge Jill N. Parrish held, notwithstanding Morrison and in reliance on the Dodd-Frank Act provision, that the SEC may bring an enforcement action based on transactions outside the U.S. and involving non-U.S. residents if there was sufficient conduct in the U.S. The ruling potentially has important implications for U.S. regulatory authorities’ reach for securities enforcement actions involving foreign actors or non-U.S. transactions. Continue Reading

Thinking About the Wells Fargo Executive Compensation Clawbacks

wells fargoWells Fargo’s bogus customer account scandal is back in the news again, most recently because of the bank’s release on Monday of the report of its independent directors’ investigation of the bank’s improper sales practices. The April 10, 2017 report, which the bank posted on its website, makes for some interesting reading. Of particular interest, the report discloses that as result of the independent directors’ investigative findings, the bank has imposed compensation clawbacks on former bank officials in excess of $180 million. The clawbacks, which the bank said in its April 10, 2017 press release are “among the largest in corporate history,” raise a number of interesting issues, as discussed below. Continue Reading

Are We Witnessing the Sunset of the U.S. Public Company?

stock marketThere is a long and venerable tradition of predicting the demise of the American public corporation. For example, back in 1989, Harvard Business School Professor Michael Jensen famously questioned whether we were seeing the “eclipse of the public corporation.” In a February 2017 paper entitled “Is the American Public Corporation in Trouble?” (here) University of Arizona finance professor Kathleen Kahle and Ohio State University finance professor René M. Stulz reexamine the question and suggest that in the years since Jensen’s landmark article, there have been “striking changes” in the landscape for American corporations. The relatively few remaining public companies are, in effect, “survivors,” and few “want to join their club,” as new enterprises prefer private equity and other non-public finance sources to the public securities markets. A March 24, 2017 summary of the authors’ paper on the Harvard Law School Forum on Corporate Governance and Financial Regulation can be found here. Continue Reading

A Continued Focus on Corporate Governance in Europe and the U.K.

eu flagukJust as the new Presidential administration leads a charge to roll back corporate regulation, “the rest of the world seems to be headed in the opposite direction,” according to a recent post in the PubCo@Cooley blog. Last month, the European Parliament approved a new Shareholder Rights Directive that is intended to “sharpen big EU firms’ focus on their long-run performance, by fostering their shareholders’ commitment to it, according to the legislature’s press release announcing the Directive’s adoption. As the same time, a recent report from a U.K. Parliamentary Committee may signal further governance changes ahead in the U.K., as well. Both of these initiatives proceed from perceived governance shortcoming and concerns over disproportional corporate focus on short-term results. Continue Reading

A Clash of Names

helloIt all began over a bottle of wine. A bottle of wine from Portugal, to be precise. The wine was from the the Tejo region, named for its proximity to the Rio Tejo, the river that runs through the heart of the Iberian peninsula and on which sits Lisbon, Portugal’s capital city. As I pointed out to my wife, the Rio Tejo is known to English-speaking people as Tagus River, a language-based distinction that has always struck me as odd. Continue Reading

Cornerstone Research: 2016 Accounting-Related Securities Suit Filings and Settlements Again Increased

cornerstoneAccording to Cornerstone Research’s latest annual survey of accounting-related securities suits, the number of accounting-related securities suit filings rose to the highest level in years in 2016, largely as a result of the number of federal court merger objection lawsuit filings involving accounting-related allegations during the year. The total value of accounting settlements during the year was also at the highest level in years. The Report, entitled “Accounting Class Action Filings and Settlements: 2016 Review and Analysis,” can be found here. Cornerstone Research’s April 5, 2017 press release about the report can be found here. Continue Reading

Securities Litigation: What if the Real Exposure is Less Than Supposed Damages?

gavel1Most securities class action lawsuits that are not dismissed outright ultimately settle. One of the starting points for securities suit settlement negotiations is what is referred to as “plaintiffs’ style” damages estimate. The plaintiffs’ damages estimate is usually adjusted to reflect the composition of the class, the duration of the class period, trading patterns in the defendant company’s stock, and so on. Even with these adjustments, the dollar amount under discussion, at least on the plaintiffs’ side of the equation, is still some form of the plaintiffs’ damages estimate.


One specific fact that would be useful in the dialogue would be to know how much the estimated damages exceed the dollar amount of the damages claims that will actually be submitted and approved for payment if the case settles or if the plaintiffs prevail at trial. It is difficult to come up with the data to calculate these amounts because the outcomes of securities class action lawsuit settlement claims processes are not publicly available and because few cases go to trial and reach a verdict.


However, in a recent paper, several researchers from Cornerstone Research examined the claims data following two recent securities suit jury verdicts. Their analysis identifies actual claims rates in these two cases, information that may be useful to securities litigators and to their clients’ D&O insurers. Continue Reading