According to NERA Economic Consulting’s latest annual securities litigation report, there were a “record number” of securities class action lawsuit filed in 2016. The January 23, 2017 report, which is entitled “Recent Trends in Securities Class Action Litigation: 2016 Full-Year Review” (here), attributes the growth in filings during the year largely to the number of federal court merger objection lawsuits, which more than doubled from the previous year. NERA’s January 23, 2017 press release about the report can be found here.
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Supreme Court Agrees to Hear Securities Act Statute of Repose Tolling Question
The U.S. Supreme Court has agreed to take up a case arising out of the credit crisis-era collapse of the Lehman Brothers investment bank, in order to decide whether or not, under principles known as the “American Pipe doctrine,” the filing of a securities class action lawsuit tolls the Securities Act’s statute of repose. In its 1974 American Pipe decision, the Court held that the filing of a class action suit tolls the applicable statute of limitations; in this latest case, the Court must resolve a split between the federal circuit courts and decide whether a class action lawsuit filing also tolls the applicable statute of repose. Though the case involves seemingly arcane issue, it could have very important practical implications, particularly with respect with respect to the timing of class members’ decisions whether or not to opt-out of the class. The U.S. Supreme Court’s January 13, 2017 order granting the petition of the plaintiff for a writ of certiorari in California Public Employees’ Retirement System v. ANZ Securitites Inc. can be found here.
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Setting the “Blow Provisions” in Securities Class Action Settlement Agreements
Among the important parts of any securities class action lawsuit settlement agreement are the so-called “blow provisions,” which provide settling defendants with an option to terminate the settlement agreement if a specified threshold of investors elect to opt out of the settlement. Among other key consideration with respect to blow provisions is that the threshold specified must be carefully structured to allow defendants to terminate or renegotiate the class settlement when opt-outs reach an unacceptable level. In a December 8, 2016 research paper entitled “Considerations for Blow Provisions in Securities Class Action Settlements” (here), Cornerstone Research takes a look at the various ways that blow provisions can be structured, and identifies the pitfalls with the various alternatives.
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Early 2017 Securities Suit Filings Show Continued Active Pace, Life Sciences Focus
In the Bard’s timeless words, what’s past is prologue. And in that same vein, many of the last year’s most pronounced securities class action lawsuit filing trends are already showing signs of strong continuity in the early days of the New Year. As shown in my recent annual securities class action lawsuit filings analysis, by year-end, a record number of securities suits had been filed during 2016, with life sciences companies among the most frequent lawsuit targets. We are only just a few days into 2017, but these securities suit filings trends already appear to be continuing in the New Year, as so far this year both the continued strong filing pace and the heightened levels of securities suit activity involving life sciences companies are already appear to be well-established.
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Court Holds U.S. Securities Laws Apply to OTC Transactions in Volkswagen’s Sponsored ADRs
During the more than six years since the U.S. Supreme Court issued its opinion in Morrison v National Australia Bank, the lower courts have worked out a host of issues about how Morrison applies in a variety of circumstances. One issue that has continued to percolate is the question of how the Morrison decision applies to non-U.S. companies that have American Depository Receipts (ADRs) trading over- the-counter (OTC) in the U.S.
These issues arose again the U.S. securities class action lawsuit that Volkswagen ADR investors filed against the company and related defendants based on allegations involving the company’s recent high-profile vehicle emissions scandal. The Volkswagen defendants argued in reliance on Morrison that the U.S. securities laws do not apply to the OTC transactions in the company’s ADRs. In an interesting January 4, 2017 opinion (here), Northern District of California Judge Charles R. Breyer held that the U.S. securities laws do indeed apply to over-the-counter transactions in the U.S. of Volkswagen’s sponsored Level 1 ADRs.
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2016 Securities Lawsuit Filings Surge to Record Levels
Largely driven by a surge in the number of federal court merger objection class action lawsuits, the number of securities class action lawsuit filings during 2016 reached record high levels. The number of filings in 2016 accelerated as the year increased, with a significantly greater number of filings in the year’s second half, compared to the number of filings in the year’s first half.
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Long-Running Halliburton Securities Suit Settles for $100 Million
According to the company’s December 23, 2016 press release (here), Halliburton has reached an agreement to settle the long-running securities class action pending against the company and certain of its directors and officers for $100 million. During its 14-year existence, the storied case had made two trips to the U.S. Supreme Court and three trips to the Fifth Circuit. The settlement is subject to court approval. Nate Raymond’s December 23, 2016 Reuters article about the settlement can be found here.
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Bribery-Related Follow-On Securities Suit Filed Against U.K.-Based Rio Tinto
In yet another securities suit following on news of a bribery or corruption investigation, and in the latest securities suit involving a global mining company, on December 12, 2016, a plaintiff shareholder filed a securities class action lawsuit in the Southern District of New York against the world’s second-biggest mining company, U.K.-based Rio Tinto plc, and certain of its current and former officers. The complaint arises out of the company’s recent announcement of a corruption investigation involving its operations in the Simandou iron mine, located in southern Guinea. As discussed below, this latest lawsuit exemplifies a number of the key securities litigation filing trends that have arisen this year.
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Book Review: “Securities Litigation: Law, Policy, and Practice”
It is a truth universally acknowledged that a public company D&O insurance practice requires knowledge of the federal securities laws. And so like many others in our field, I have had to back-and- fill a working knowledge of the securities laws. Due to the way I acquired this knowledge, there are some bare spots – in particular, I sometimes am hamstrung because I lack the perspective that would allow me to see how it all fits together. So every now and then, I need to step back and reengage with the basics. All too often I find myself relying on the indifferent result of a Google search for this gap-filling. I have never really found a good, manageable source to use for caulking those securities law gaps. Until now, that is.
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The Securities Litigation Storm is Already Here
In an interesting post on his D&O Discourse blog earlier this fall (here), Doug Greene of the Lane Powell law firm raised the question whether there is a securities litigation storm brewing. Citing a number of different factors ranging from the SEC whistleblower program to changes in the plaintiffs’ bar, Greene suggested that we could be headed toward a significantly increased number of securities class action lawsuits. I agree with most of what Greene said, except for one thing. The securities litigation storm isn’t on the horizon – it is already here.
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