IndyMac Coverage Suit Settled, But Oral Argument Will Stay on the Calendar?: As I noted in a recent post (here, second item), the parties in the IndyMac D&O insurance coverage action – that is, the dispute to determine whether or not only a single $80 million tower of insurance applies to the various D&O claims surrounding the bank’s collapse or whether two $80 million towers have been triggered – had notified the Ninth Circuit that they reached an agreement to settle all of the disputes subject to completion of documentation and subject to bankruptcy court approval. At the time of their initial notice to the court, the parties did not ask that the oral argument scheduled for April 7, 2014 be taken off of the calendar, because not all parties agreed to have the oral argument taken off calendar while the settlement documentation remained uncompleted.
However, in a March 7, 2014 Joint Notice of Settlement to the Ninth Circuit (here), the parties advised the appellate court that the settlement documentation had been completed and that all of the parties were now requesting that the oral argument be taken off calendar. The parties also advised the appellate court that on March 5, a motion for approval of the settlement had been filed with the bankruptcy court.
Apparently, the parties’ Joint Notice of Settlement to the court that they had settled the case was not good enough for the Ninth Circuit. In a March 14, 2014 order (here), the Ninth Circuit denied the parties’ joint request to have the scheduled oral argument removed from the calendar.
The appellate court noted that in their Joint Notice, the parties had advised that “after the bankruptcy court rules and grants ‘certain related relief,’ its decision ‘will allow other settlements to be consummated.’” The Ninth Circuit said “When those matters are actually settled, or when the parties can give some further explanation of the status of those matters and the contingencies involved, the parties may so inform this court and renew their motions to remove the cases from the oral argument calendar>”
The one thing that isn’t clear from the documents submitted to the court is whether or not the bankruptcy court will act, and the related settlements can be put into place, before the scheduled April 7 date for oral argument. You would hope that the Ninth Circuit would not make the parties actually show up and argue the issues in a dispute that has been resolved. Perhaps if the various approvals and contingencies cannot be sorted out before April 7, the Ninth Circuit would at least agree to continue to the argument to a later date to allow the bankruptcy court processes play out. However, there is nothing in the Ninth Circuit’s somewhat cranky order to suggest that it would entertain such a request.
In any event, for now, the scheduled oral argument — in a case that has been settled – remains on the calendar. I wonder what you would do know if you were one of the lawyers that was planning on presenting in the April 7 oral argument session. Do you go ahead and prepare? Of course, one thing you would to is to press the bankruptcy court for all of the approvals and try to complete all of the remaining contingencies, so you can go back to the Ninth Circuit as soon as possible to answer the appellate court’s questions and requests. However, what do you do if the bankruptcy court doesn’t act quickly enough? Or the Ninth Circuit still has a problem with removing the argument from the calendar?
I know from the list of counsel on the Joint Notice that there are a lot of lawyers out there that know the answers to these questions. I would be grateful of one of the lawyers involved would drop me a note and let me know what it is going on and what is likely to happen. To the extent I can, I will update this post with any additional information.
German Court Dismisses Investor Action Filed Against Porsche: According to a March 18, 2014 New York Times article (here), a judge in Stuttgart has dismissed the damages lawsuit that 23 hedge fund investors had filed against Porsche in connection with the car company’s unsuccessful attempt to acquire Volkswagen. A March 17, 2014 Reuters article about the dismissal ruling can be found here.
The dismissal in the German lawsuit is the latest setback in a series of defeats for hedge fund investors in their efforts to press their claims against Porsche. As discussed here, certain hedge funds first filed an action in the Southern District of New York alleging that during 2008, Porsche and certain of its executives made a series of misrepresentations in which Porsche claimed that it did not intend to acquire control of Volkswagen, while at the same time it allegedly was secretly accumulating VW shares with the purpose of obtaining control. In October 2008, after Porsche disclosed its intent to obtain control of VW, VW’s share price rose significantly and the short sellers suffered significant trading losses. The short-sellers’ federal court complaint asserted claims under the U.S. securities laws and also for common law fraud.
As discussed here, on December 30, 2012, Southern District of New York Judge Harold Baer dismissed the securities claims based on Morrison, on the grounds that the subject transactions — securities-based swap agreements — represented a foreign transaction and are therefore not within the purview of the U.S. securities laws. Judge Baer declined to exercise supplemental jurisdiction over the common law claims. The hedge funds appealed the district court ruling to the Second Circuit. However, as discussed here, in March 2013, twelve of the hedge funds withdrew their appeal, although press reports suggest that the appeal of the 20 remaining hedge funds remained unaffected. As far as I know the remaining hedge funds’ appeal remains pending (although if any reader out there has different information, I would be grateful for the clarification).
In March 2011, several of the same short sellers launched a separate action in New York Supreme Court against Porsche alleging claims for fraud and unjust enrichment. Porsche moved to dismiss the state court complaint on the grounds of forum non conveniens and for failure to state a claim. Porsche also moved in the alternative to stay the state court action pending the outcome of the Second Circuit appeal in the federal court action. As discussed here, on August 6, 2012, New York (New York County) Supreme Court Judge Charles E. Ramos rejected Porsche’s motion to dismiss the case on forum non conveniens ground. A copy of Judge Ramos’s decision can be found here. Porsche filed an appeal.
As discussed here, in a December 27, 2012 opinion (here, starting at page 138), a five-Justice panel of the New York Supreme Court appellate division unanimously reversed Judge Ramos’s decision and entered a judgment of dismissal in Porsche’s favor. In dismissing on the grounds that New York was not an appropriate forum, the appellate court noted that the only alleged connections between the action and New York “are the phone calls between plaintiffs in New York and a representative of the defendant in Germany” and “emails sent to plaintiffs in New York but generally disseminated to parties elsewhere.”
While these investors struggled to try to get a U.S. court to take up their case, other investors took their claims to the German courts. As discussed here, these hedge fund investors initiated an action against Porsche in Stuttgart based on the same allegations. According to the recent media reports, however, a judge in Stuttgart has ruled that Porsche managers did not commit misconduct when they denied plans to try to take over Volkswagen. According to the Times article, the judge ruled that Porsche was not obligated in early 2008 to disclose its intention to acquire VW shares. The Times article quotes the judge as saying that “It was hardly possible to react to public speculation about a takeover of VW except with a denial.”
The hedge funds’ action in Germany represented an interesting initiative for aggrieved investors whose claims were foreclosed from U.S. court by Morrison to try to pursue their claims in the corporate defendant’s home country rather than in the U.S. The German lawsuit represented the possibility that the elimination of the U.S. forum for these kinds of investor disputes would force investors to pursue their claims in the courts of the country of domicile, which in turn might lead to the development of the law and of remedies to address these kinds of claims. The Stuttgart court’s dismissal of the hedge funds’ action represents something of a set back for the possibility of the development of these kinds of jurisdictional alternatives in the wake of Morrison.
On the other hand, the dismissal of the Stuttgart action may not be the end of the story. Presumably, the claimants in Stuttgart action have appeal options of some kind. In addition, the Times article also notes that legal proceedings relating to the takeover attempt remain pending in Braunschweig, Germany, as well as in Hannover and Frankfurt. As far as I know, the Second Circuit appeal remains pending as well. So there may be much more of this story to be told before the outcome is known for sure. But the dismissal of the Stuttgart action seems to represent something of a setback for the idea that investors precluded from U.S. courts by Morrison might be able to pursue their claims in the home courts of the corporate defendants.
Speakers’ Corner: On April 1 and 2, 2014, I will be participating in the C5 Forum on D&O Liability Insurance in London. On April 1, I will be participating in a panel entitled “Assessing the Impact of Regulatory Investigations and Claims on D&O Insurers” with Helga Munger of Munich Re and Clive O’Connell of Goldberg Segalla. On April 2, I will be moderating a panel entitled “Securities Class, Collective and Representative Actions – Critical Developments and Comparisons within the USA and Europe” with panelists Chris Warrior of Hiscox, Isabelle Hilaire of Chubb, and Leslie Kurshan of Marsh. Information about the conference can be found here.
If you are attending the conference, I hope that you will make a point of saying hello, particularly if we have not met before.