In my year-end analysis of the 2009 securities class action lawsuit filings, I noted a number of filing trends that developed in the second half of the year, including the incidence of new filings against leveraged Exchange Traded Funds (ETFs) and the surprising numbers of belated securities suit filings where the filing date came well after the proposed class period cut-off date. If the lawsuit filings in the first two weeks of January are any indication, these trends have continued into the New Year.
First, this past week, plaintiffs’ lawyers launched two new lawsuits on behalf of leveraged ETF fund investors, the UltraBasic Materials ProShares Fund (refer here) and the Direxion Energy Bear 3X Shares Fund (refer here). My prior post discussing the phenomenon of securities class action lawsuits and including a link to a running list of the ETF-related suits can be found here. I have updated the list to include these most recently filed suits.
Second, in the first 2010 instance of the belated lawsuit filing phenomenon, on January 15, 2010, plaintiffs’ lawyers filed a securities class action lawsuit against Stryker Corporation and certain of its officers and executives. The plaintiffs’ lawyers’ January 15 press release about the case can be found here.
The class period cut-off proposed in the Stryker complaint is November 13, 2008, well over a year before the lawsuit was filed.
We may have entered a new calendar year, but at least a couple of last year’s securities suit filing trends appear to have carried over from year-end, at least so far.
Galleon Out as Lead Plaintiff: Among the stranger circumstances surrounding the Galleon Management insider trading scandal is the fact that just two weeks before the scandal surfaced Galleon had been reaffirmed as lead plaintiff in the Herley Industries securities class action lawsuit. My prior post discussing these circumstances can be found here.
However, according to a January 15, 2010 Bloomberg article (here) written by Thom Weidlich, Galleon has now dropped out as lead plaintiff in the case.
In a January 15, 2010 order (here), Eastern District of Pennsylvania Judge Juan R. Sanchez permitted Galleon to withdraw as lead plaintiff. According to the Bloomberg article, Galleon’s counsel had advised the court that it had "become clear that the now-defunct Galleon can no longer continue in this role."
Delaware Chancery Court Tosses Bribery Follow-On Civil Suit: In numerous prior posts (most recently here), I have noted as along of the increasing number of antibribery enforcement actions has come the increasing incidence of follow-on civil litigation in the wake of the bribery enforcement action.
As reflected in a January 15, 2010 post on The FCPA Blog (here), a recent Delaware Chancery Court decision dismissing a case involving Dow Chemical contains language that may be important in future bribery enforcement follow-on civil actions.
The Dow suit arose after the Kuwaiti parliament acted to rescind the purchase of certain Dow assets (in a transaction known as K-Dow) based on the suspicion of profiteering and improper commissions paid to the Kuwaiti state owned enterprise that was the actual buyer. The plaintiffs filed suit in Delaware alleging that the Dow board "failed to prevent bribery in connection with the K-Dow transaction."
In a January 11, 2010 opinion (here), Chancellor William B. Chandler III dismissed the action on the grounds that the plaintiffs "do not allege that the board knew about or had reason to suspect bribery."
The FCPA Blog points out that in a footnote "that may have important consequences beyond this case," the court said that Dow’s compliance program was evidence that the board had met its fiduciary duty to prevent overseas bribery. The Chancery Court specifically referenced the company’s Code of Ethics prohibiting any unethical payments to third parties. The FCPA Blog concludes that this case provides "a powerful reason for directors and officers to insist on robust antibribery compliance programs that include regular reports back to the board."