Securities class action lawsuit filings in the first half of 2016 leapt to their highest level in years, according to a recent report from Cornerstone Research. According to the report, which is entitled “Securities Class Action Filings: 2016 Midyear Assessment,” both the number of lawsuit filings and the rate of litigation were well above long-term historical semiannual averages in the first six months of 2016. The increases are attributable in part to the increase in federal court M&A-related securities litigation, as discussed below. The report can be found here. Cornerstone Research’s July 26, 2016 press release about the report can be found here. Cornerstone Research’s analysis is largely consistent with my own review of the first half securities suit filings, which can be found here.
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Securities Class Action Lawsuit Filings Continue at Elevated Pace in the Year’s First Half
Continuing 2015’s elevated pace, the number of securities class action lawsuit filings during the first half of 2016 accrued in numbers well above both historical averages and recent levels. The first half 2016 levels puts the securities suit filing activity on pace for the most active year for securities class action lawsuit filings since 2004.
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Russian Trade Sanctions-Related Securities Lawsuit Dismissed
In a prior post, I noted that among the implications of the international trade sanctions is the possibility that companies affected by sanctions could face D&O claims. Among the risks the sanctions program presents is the possibility that a company dealing with sanctions-related issues could face a follow-on securities lawsuit, as investors seek to hold the company and its senior officials liable for share prices declines following disclosure of sanctions-related issues.
In the Seadrill Limited Securities Litigation, a securities class action lawsuit pending in the Southern District of New York, investors sued the company, a subsidiary, and certain of its directors and officers, for the company’s elimination of its dividend and loss of significant business with a Russian oil company subject to international sanctions following Russia’s invasion and annexation of Crimea. On June 20, 2016, in an interesting opinion (here), Southern District of New York Lorna Schofield granted the defendants’ motion to dismiss the Seadrill case. Due to the case’s factual circumstances, the opinion makes for some interesting reading. In any event, the case represents an important example of the possibilities for D&O claims arising from sanctions-related issues.
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Guest Post: Deeper Trends in Securities Class Actions 2006-2015
There have been a number of important developments in class action securities litigation case filings in the recent years. In the following guest post, Michael Klausner, Professor of Law, Stanford Law School, and Jason Hegland, Executive Director, Stanford Securities Litigation Analytics, using the Stanford Securities Litigation Analytics database, identify and review several of these developments. As their guest post explains, there have been a number of interesting changes with respect to the kinds of cases that are being filed, as well as with respect to who is filing them. I would like to thank Mike and Jason for their willingness to publish their guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this site. Please contact me directly if you would like to submit a guest post. Here is Mike and Jason’s guest post.
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Securities Litigation and Life Sciences Companies: An Update
Life sciences companies are among the most frequent targets of securities class action litigation as I noted in a recent post. However, according to a recent law firm report, life sciences company defendants fared well in securities litigation in 2015. The recently released report, written by the Sidley Austin law firm and entitled “Securities Class Actions in the Life Sciences Sector: 2015 Annual Survey,” can be found here. This comprehensive report reviews all of the district court and appellate court decisions in 2015 in securities class action lawsuits pending against life sciences companies, and also reviews the new securities suits that were filed in 2015 against life sciences companies. The report provides a broad overview of the important issues involved with securities class against litigation against life sciences companies.
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Long-Running Household International Securities Suit Settles for $1.575 Billion
On June 16, 2016, HSBC, as successor in interest to Household Finance, announced that the parties to the long-running Household International securities class action litigation had agreed to settle the case for $1.575 billion. Subject to court approval, the settlement will bring to a close an epic case that has been pending for fourteen years. The case is one of the few securities class action lawsuits ever to go to trial; the post-trial judgment of $2.46 billion in the case, which was the largest judgement ever in a securities fraud trial, was later set aside by the Seventh Circuit. The case was poised to go to trial again when the parties reached the recently announced settlement. HSBC’s June 16, 2016 press release about the settlement can be found here. The plaintiffs’ law firm’s June 16, 2016 press release about the settlement can be found here.
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Onslaught of Securities Suits Against Brazilian Companies Continues
As a result of scandals, investigations, and even an environmental catastrophe, there has been a wave of securities lawsuit filings in the U.S. against Brazilian-domiciled companies whose securities are listed in the U.S. This filing trend began in late 2014 with the first lawsuit filing against Petrobras and certain of its directors and officers, which was in turn followed by lawsuits against other companies caught up in the corruption scandal. In recent weeks lawsuits related to a separate regulatory investigation in Brazil have emerged, bringing the total number of securities lawsuits pending in the U.S. against Brazilian companies to six. These developments, along with events in Brazil itself, have roiled the D&O insurance marketplace in Brazil, particularly for Brazilian companies with securities listed in the U.S.
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Guest Post: Second Circuit Strikes Down Imposition of $1.27 Billion FIRREA Penalty
On May 23, 2016, in an interesting development in one of the more high profile lawsuits to arise out of the financial crisis, the Second Circuit reversed the $1.27 billion civil penalty that Southern District of New York Judge Jed Rakoff imposed on Countrywide and several related defendants in a case involving the company’s sale of mortgages to government sponsored entities. A copy of the Second Circuit’s opinion can be found here.
In the following guest post, attorneys from the Paul Weiss law firm take a look at the Second Circuit’s decision and discusses its implications, particularly with respect to the government’s use of the the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to prosecute financial institutions’ alleged to have committed financial misconduct.
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Guest Post: The State Court Section 11 Problem: Three Solutions
One of the more interesting current issues in the securities litigation arena is the question of whether or not the concurrent jurisdiction provisions in the ’33 Act continue to afford state court jurisdiction for Section 11 securities class action lawsuits, or whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA) superseded these provisions. As I noted in a recent post, a corporate defendant recently filed a petition for writ of certiorari with the U.S. Supreme Court to try to get the Court to take up this question. In the following guest post, Priya Cherian Huskins, of Woodruff-Sawyer & Co. examines three different “solutions” that have been proposed to address the ongoing question regarding concurrent state court jurisdiction for Section 11 class action lawsuits. One of the three proposed solutions in the cert petition recently filed with the U.S. Supreme Court, while the other two suggested solutions involve different alternative approaches, including one suggested by Stanford Law Professor Joseph Grundfest.
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The Interesting Story Behind a Recent $310 Million Class Action Settlement
Any time a civil lawsuit settles for a combined total of $310 million, it is noteworthy, if for no other reason than the sheer size of the deal. But a $310 class action settlement recently preliminarily approved in Jefferson County (Alabama) Circuit Court is noteworthy not just for its size, but also for the nature of the allegations involved.
In the recently settled case, the plaintiffs alleged that in connection with the 1999 settlement of the MedPartners Securities Litigation, the defendant company and its primary D&O insurer had misrepresented the amount of insurance available in connection with the litigation, and more particularly, failed to disclose that the company had obtained a post-litigation “unlimited” excess insurance policy (known as an “LMU”) from the primary D&O insurer. After the details of the LMU came to light in subsequent unrelated litigation, a plaintiff from the prior securities lawsuit class filed a new lawsuit alleging misrepresentation in connection with the securities lawsuit settlement. The details of the plaintiffs’ allegations in the misrepresentation lawsuit — most of which the defendants dispute — make for some interesting reading.
The plaintiffs’ class motion for preliminary approval of the settlement of the misrepresentation lawsuit, to which the parties’ stipulation of settlement is attached, can be found here. The Alabama Court’s June 1, 2016 order preliminarily approving the settlement can be found here. The settlement is subject to the Court’s final approval.
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