Photo Sharing and Video Hosting at Photobucket In a prior post (here), I took a preliminary look at the securities class action filings for the first half of 2007. In a July 10, 2007 press release (here), Stanford Law School and Cornerstone Research released their own mid-year report discussing the year-to-date filings through June 22, 2007. The full Cornerstone Report can be found here. (The Cornerstone Report’s analysis differs slightly from mine because my analysis included all filings through June 30.)

Cornerstone’s Report confirms that securities filings remain “well below historical averages for the fourth consecutive six-month period.” The press release contains a quotation from Stanford Law Professor Joseph Grundfest that after two years, the lower filing level “is starting to look like a permanent shift, not a transitory phenomenon” – although the Report itself contains conflicting projections about the possible levels of future filings, as discussed below.

The Report projects a year-end 2007 filing level of 124 class actions (consistent with my prior projection), which is well below the 12-month filing average of 203 class actions for the period from the second half of 1996 through the first half of 2005. The Report analyzes these levels in relation to the number of publicly traded companies by comparing the number of filings to the number of issuer companies. The Report states that the projected 2007 “number of filings per issuer” of 1.6% is well below the 2.3% average of filings per issuer during the period from the second half of 1996 through the first half of 2005.

The Report proposes two alternative (but not mutually exclusive) explanations for the continued lower filing levels. The first is the “less fraud” hypothesis, and the second is the “strong stock market” hypothesis. The “less fraud” hypothesis is based on the view (in Professor Grundfest’s words) that “increased enforcement activity and a heightened awareness among corporate insiders may have led to a shift in the incidence of securities fraud litigation.” The “strong stock market” hypothesis is premised on the observation that we have now enjoyed several years of strong stock market performance characterized by historically low stock price volatility. (Volatility has been correlated in the past with securities class action activity.)

These two possible explanations lead to “differing expectations for future levels of class action filings.” The “less fraud” theory suggests a permanent shift, but the “strong market” suggests that the current lower level of securities class action filings is only temporary. Indeed, one of the Report’s co-authors, John Gould, is specifically quoted as saying “if the market goes south, I would not be surprised to see the number of filings move back to the 200 per year level.”

The Report’s quotations from Professor Grundfest also include his refutation of that the prosecution of the Milberg Weiss firm and two of its partners (so far) is “chilling” the securities class action plaintiffs bar. He rejects the suggestion that “the prevalence of alleged questionable, unethical or illegal kickback or fee splitting activity is so pervasive in the class action bar that the Milberg indictment chilled other plaintiffs and law firms from instituting class actions.”

The Report also details that the total market capitalization losses on cases filed in the first half of 2007 are slightly above losses associated with 2006 filings, although the losses continue at levels well below those observed in the 2000-2002 period.

The Report’s analysis of the possible reasons for the lower lawsuit filing levels is interesting. I remain skeptical that we have moved to a permanently lower level of fraudulent activity. I am inclined to think that given the low stock market volatility that the Report itself details, the marketplace is now just reacting less to adverse public disclosure. (Herb Greenberg details this phenomenon in his July 7, 2007 discussion in the Wall Street Journal, here, about the lack of marketplace reaction to accounting scandals).

I also think the historically low interest rate environment has enabled many companies to use low-cost debt to avoid crises that could have otherwise required disruptive disclosures. As credit becomes less freely available and more expensive, and as volatility levels revert to the historical mean, more disruptive disclosures may be required and the stock market may prove less forgiving than it may have been in the recent past. For that reason, I personally am inclined against Professor Grundfest’s view that we have passed some epochal threshold on the occurrence of fraudulent activity. I am much more inclined to the alternative view that changed marketplace conditions could lead right back to historical filing levels.

I also have to respectfully disagree with Professor Grundfest’s rejection of the possibility that the Milberg Weiss criminal investigation is a contributing cause to the reduced filing levels. I start with the fact that the reduced filing levels first emerged in mid-2005, at the same time that the grand jury returned its first indictment in the Milberg Weiss investigation (about which refer here). I add the observation that the most prominent lawyers at the two most prominent plaintiffs’ law firms, as well as the firms themselves, have been highly preoccupied by the criminal prosecution. I also add the common sense observation that it is extremely improbable that the behavior that is the target of the Milberg investigation was limited exclusively to that law firm. All of these factors added together mean to me that the Milberg Weiss criminal proceeding, and the scrutiny of the kickback practices, has had to have had some impact on the filing activity levels.

The quotation in the Cornerstone Report to the effect that changed stock market conditions could lead us right back to the 200 filings a year level represents a strong precautionary warning to the D & O industry. It would be a very short step from Professor Grundfest’s statement that there may have been a “permanent shift” in the filing levels to the conclusion that there has been a permanent shift in D & O exposure, and that D & O pricing appropriately should be reduced commensurately. Carriers that were to act on this seeming logic could quickly find themselves instead in a very serious trouble if instead of permanently lower frequency levels, the filing levels were to revert to historical norms.

The Report’s observations about the level of investor losses associated with 2006 and 2007 filings are also interesting. Most of the discussion within the D & O industry in recent months about the lower frequency levels has usually been accompanied by observations that severity levels are at all time highs. But as the level of investor loss associated with class action filings falls well below levels from the era of the corporate scandals earlier this decade, and as the cases associate with the corporate scandals work their way out of the system, the severity levels should be expected to decline. It may be that in the months and years ahead we will see severity levels fall below their current record high levels.

The agreement by now-former Milberg Weiss partner David Bershad to enter a guilty plea in connection with the government’s investigation of the firm’s alleged kickbacks to individual class plaintiffs represents a watershed event, not only in connection with the criminal investigation but also potentially for the Milberg firm and even for the plaintiffs’ class action securities bar. Bershad’s plea agreement can be found here and the Statement of Facts accompanying the plea agreement can be found here. (Hat tip to the WSJ Law Blog, here, for the links to the plea documents.)

The Statement of Facts accompanying the plea agreement has a number of interesting features, not the least of which is the statement of potential criminal matters the government agrees that it will not continue to pursue against Bershad. The non-prosecution agreement includes not only the allegedly improper payments to class plaintiffs, but also references alleged violations of law arising out of “requests to courts for reimbursement of fees and costs of a damages expert witness and/or his associated entities based in Princeton, New Jersey” or “the Princeton Expert’s financial relationship with PNC bank.” These allusions to the expert witness apparently refer to regular Milberg Weiss expert witness John Torkelson, who separately entered his own guilty plea in an unrelated matter in November 2005 (refer here). Bershad’s plea agreement also references non-prosecution for “election, campaign or other political contributions.” Unfortunately, the plea agreement provides no further elaboration on what this last point might be all about.

Another interesting feature of the Statement of Facts is its description of the personal cash pool that Bershad and other Milberg partners supposedly formed to be “used by the Conspiring Partners to supply cash for secret payments to paid plaintiffs and others.” The contributions to the pool, which was maintained in Bershad’s office, were proportionate to the contributing partners’ respective partnership interests. The contributing partners then “caused Milberg Weiss to award ‘bonuses’ to them” to reimburse them for the cash contributions to the pool. Among the partners alleged to have contributed to and made cash payments out of the fund are the pseudononymous “Partner A” and “Partner B” whom some commentators (refer here and here) believe to refer to Melvyn Weiss and Bill Lerach, respectively. Neither Weiss nor Lerach has been charged with any crime, nor even mentioned by name in any of the government documents in the criminal matter.

Among other features of the government’s undertakings in the plea agreement is the government’s agreement that if Bershad provides “substantial assistance to the prosecution” (according to the plea agreement’s specifications) then the government agrees “to move the Court…to fix an offense level and corresponding guideline range below that otherwise advised by the Sentencing Guidelines, and to recommend a sentence no greater than the low-end of this reduced range.” In other words, Bershad has a real incentive to cooperate – he will undoubtedly provide the government with a lot more particulars about the “cash pool” and the activities in connection therewith of Partner A and Partner B. (According to the Washington Post, here, Bershad could avoid jail time altogether if the government elects to fully reward him for his help.) These incentives are the reason that there had been speculation (refer here) that Bershad’s entry into a plea agreement might well put enormous pressure on, say, Partners A and B.

There had been press coverage (refer here) suggesting that Mel Weiss and Bill Lerach had recently rejected possible plea agreements. (The Wall Street Journal also confirmed here that Lerach will retire from his firm by year’s end.) Whether or not they will face further pressure or have further opportunities to reach an accommodation with prosecutors remains to be seen. But the obvious incentive for the government to reach an agreement with Bershad was to enlist his assistance to go after ‘bigger fish” (as the Los Angeles Times put it, here) – which would suggest further pressure on Messrs. Weiss and Lerach. Indeed, most of the press coverage of Bershad’s plea is focused on the boost Bershad’s cooperation will give the prosecutors, as illustrated for example in the articles in USA Today (here) and the Wall Street Journal (here)

Where all of this leaves the Milberg Weiss firm itself is even more complicated. The firm was named as a defendant in the prior criminal indictment (refer here). The Statement of Facts accompanying Bershad’s plea suggests that firm checks were used for some of the improper payments and that the partnership itself reimbursed the payoff pool participants out of partnership proceeds. Bershad’s actions were clearly undertaken on the firm’s behalf, as well. Whether the firm itself will now be forced to face the music also remains to be seen, but Bershad’s forthcoming cooperation with the government does not bode particularly well for the firm. According to the Washington Post (here), the firm’s criminal defense lawyer is negotiating with the government toward a possible plea agreement, supposedly involving a “multimillion dollar” payment, in advance of a scheduled August 6 hearing. The Legal Pad Blog’s very pointed comments about the Milberg Weiss firm’s fate can be found here.

It may take a while longer for all of these possibilities to sort themselves out, but make no mistake that the consequential effects from Bershad’s plea agreement will, in the end, result in a reordered plaintiffs’ class action bar. The role of the most prominent players and prominent firms on the plaintiffs’ side will substantially change. Other plaintiffs firms may jockey for position, but only within the constraints of the game as it will now be played in the backwash from these events. Among other things, these events may also portend that the current lower level of securities class action filings may continue for some time, if for no other reason than that the leading players are just a little preoccupied right now.

Options Backdating Litigation Update: Regular readers know that I have been maintaining a list (here) of companies that have been sued in options backdating related litigation. I have recently updated the post to include in the list of companies named in options backdating related securities class action litigation a reference to PainCare Holdings. When the securities class action lawsuit was originally filed against PainCare (refer here), the lawsuit did not contain options backdating allegations. But when plaintiffs filed their Amended Consolidated Complaint on May 23, 2007 (here), the amended pleading included for the first time allegations of stock option manipulations. In light of the amended allegations, I have added the PainCare case to the list.

Special thanks to Cara Perlas of the Stanford Law School Securities Class Action Clearinghouse for the link to the amended complaint in the PainCare case.

At the beginning of 2007, I took a closer look at the 2006 securities class action lawsuits (here). Now that we have reached the halfway point of 2007, it seems like a good time to take a look at the securities suits that have been filed so far this year.

I have based my review on the 2007 filings listed on the Stanford Law School Securities Class Action Clearinghouse website (here). I have taken the data as presented. Were I using these data for actuarial purposes, I would probably make a few adjustments. For example, the site’s list includes at least 2 lawsuits against private companies, and at least one lawsuit where the publicly traded company is the plaintiff, not the defendant. For simplicity’s sake, I have taken the data as presented, without any refinement, to avoid the need for a detailed explanation of what I omitted or included.

According to the Stanford website, there were 62 companies sued in securities class action lawsuits during the first half of 2007, which means that we are on pace for roughly 124 lawsuits by year’s end. That would be slightly more than the 118 lawsuits filed in 2006. The projected 2007 number of 124 lawsuits is well below the 1996-2006 average for traditional securities class action lawsuits of 187 per year.

The companies sued so far in 2007 are spread across 47 different Standard Industrial Classification (SIC) Codes. The SIC Code with the highest number of companies sued is 2834 (Pharmaceutical Preparations), which is the SIC Code of 5 of the companies sued. There were four companies sued in SIC Codes 2836 (Biological Products), 4899 (Communications Services), and 6331 (Fire, Marine and Casualty Insurance).

The most frequently sued industrial sector so far this year has been Technology (with 15 of the lawsuits), followed by Services (14), Financial (13) and Healthcare (11). The most frequently sued industries are Biotechnology and Drugs (5), Insurance (Property and Casualty) (4), and Electronic Instruments and Controls (4).

Eight of the lawsuits involve companies domiciled outside the United States (I omitted the one case where the public company is the plaintiff from this count). The list of foreign defendants includes companies based in Israel (2), Canada, Bermuda, South Korea, Great Britain, Switzerland and China.

The lawsuits have been filed in 23 different district courts. The district courts in which companies most frequently have been sued are the Southern District of New York (13), the Central District of California (7) and the Northern District of California (4).

Nine of the class action lawsuits involve allegations involving the defendant company’s initial public offering. Five involve allegations of options backdating. Six involve allegations involving subprime lending (four involving lenders, two involving home builders).

In a prior post (here), I took a closer look at subprime lending lawsuits. And in another prior post (here), I took a look at the lawsuits that have been filed against pharmaceutical companies.

Photo Sharing and Video Hosting at Photobucket The Supreme Court’s decision in the Tellabs case (about which refer here) is still new and as yet untested in the lower courts. But post-decision publications and discussions are continuing, as key players wrestle with its possible implications. In particular, D & O industry participants have been struggling to discern whether or not the decision represents a significant shift in D & O exposure. (A copy of the Tellabs opinion can be found here.)

Upon consideration of these post-decision publications and discussions, I have some further reflections about the Tellabs decision (beyond those in my initial post on the case, here) which are as follows.

Private Securities Suits Are “Essential”: In its opening lines, the majority’s Tellabs opinion states that “this Court has long recognized that meritorious private actions to enforce federal antifraud securities lawsuits are an essential supplement to criminal prosecutions and civil enforcement actions brought, respectively by the Department of Justice and the Securities and Exchange Commission.” (Emphasis Added). As if this statement were not sufficiently emphatic, the majority opinion returns to this same theme again, in footnote 4, where it states that “private securities litigation is an indispensable tool with which defrauded investors can recover their losses.”

These statements not only underscore the importance that the Supreme Court attaches to private securities litigation, but they also represent an important (and perhaps influential) perspective in the current debate surrounding possible securities litigation reform (about which refer here and here). The Court’s statements provide a significant counterpoint to the contentions of would-be reformers who propose to eliminate private securities litigation, in favor of arbitration or of a government-action only model.

Scienter Requirements Deferral: One ever-present wildcard when the Supreme Court agrees to hear a securities case is the possibility that the Court might finally get around to addressing the long-deferred Hochfelder question — that is, whether reckless behavior is sufficient for civil liability in a Section 10(b) action. The Tellabs court, in footnote 3, specifically acknowledged that it had “previously reserved” this question, but noted further that the question whether and when recklessness satisfies the scienter requirement was “not presented in the Tellabs case.”

The Tellabs court noted that all of the Circuit Courts agree that recklessness is sufficient to satisfy the scienter requirement, although the court noted further that the Circuits “differ in the degree of recklessness required.” The court’s forebearance on this issue leaves in place the Ninth Circuit’s anomalous holding that the scienter requirement requires a showing of “deliberate or conscious recklessness.” For whatever this current state of affairs may represent, the pre-Tellabs disposition of the circuits on this issue remains unchanged. The Ninth Circuit’s more demanding standard (about which refer here), which has resulted in a greater dismissal rate and arguably a reduced filing rate in that Circuit, remains in place.

Uniform Standard, Disparate Impact: The Supreme Court agreed to hear the Tellabs case in part because of the disagreement in the Circuits over what satisfies the PSLRA’s requirement that a securities complaint plead facts that give rise to a “strong inference” that the plaintiff acted with scienter. As a result of the Tellabs majority’s opinion, the district courts in the various Circuits will now apply a uniform standard going forward. But because the Circuit Courts previously had differing standards, the practical impact of this uniform standard will vary by Circuit according to the standard that previously applied. This means, as the Morgan Lewis law firm noted in its memorandum commenting on Tellabs (here), that “whether the Tellabs decision improves the litigation climate for a defendant depends on where the defendant has been sued.”

The most obvious impact will be in the Seventh Circuit, where the Tellabs case originated. The Supreme Court overturned the Seventh Circuit’s standard (which the K&L/Gates law firm in its memorandum commenting on the Tellabs decision, here, characterized as an “outlier”) that a complaint was sufficient if it alleges facts “from which, if true, a reasonable person could infer that the defendants acted with the requisite intent.”

This outcome represents a victory for defendants in the Seventh Circuit, but at most a “mild” victory, in the words of the Morgan Lewis law firm’s memorandum. The Seventh Circuit’s standard, requiring only that an inference be plausible, clearly falls short of the statute’s requirement that that the inference be “strong.” (The inadequacy of the Seventh Circuit’s standard was so manifest that the Securities Law Prof Blog, here, characterized its rejection by the Supreme Court as “quite predictable.”)

On the other hand, the Supreme Court rejected the standard urged by Justices Scalia and Alito in their concurring opinions, that the statute requires a plaintiff to allege facts sufficient to support the “most plausible competing inferences.” In rejecting this standard, the K&L/Gates law firm’s memorandum notes, the Supreme Court appears to have rejected the standard adopted by at least four of the Circuit Courts (the Sixth, First, Ninth and Fourth). For defendants in these circuits, it may now prove more difficult than in the past for defendants to prevail on a motion to dismiss, as a result of the rejection of the more rigorous standard. By the same token, the Tellabs standard, according to the K&L/Gates memo, appears substantially similar to the standards that applied in the Eighth, and arguably, the Tenth Circuits.

The Tellabs opinion’s impact in the Second and Third Circuit may be less clear. The Supreme Court did not adopt the “motive and opportunity” standard that had applied in those Circuits, but in articulating its own standard, the Court noted that while “motive can be a relevant consideration,” the absence of a motive is “not fatal.” District courts in the Second and Third Circuits will adapt to this subtle shift in the pleading standard, but whether this change will prove outcome determinative remains to be seen.

In short, the practical impact of the Tellabs decision necessarily will be a mixed bag. That is undoubtedly why the Securities Law Prof blog opined (here) that the balance that the Tellabs courts struck “probably inflicted the least amount of damage on the plaintiffs” among realistic outcomes given the language of the statute.

Does Tellabs Change D & O Exposure?: Despite these considerations, the popular press generally has characterized the Tellabs case as a victory for the defendants and as a defeat for plaintiffs — for example, here and here. (This view has also been expressed in some law firms’ memoranda as well; for example, refer to the Proskauer Rose law firm’s memorandum, here.) This perception that Tellabs represented a major victory for defendants seems, at least based on my recent conversations, to be the view most predominant in the D & O industry as well. This view in turn has led some to whom I have spoken in the D & O insurance industry to question whether the Tellabs decision represents a significant reduction in D & O exposure, and that D & O insurance pricing therefore should be expected respond accordingly.

This discussion is highly reminiscent of the debate that followed the original enactment of the PSLRA in the mid-90s. Then, several key players took the view that the statute had dramatically reduced securities litigation risk, and they cut their D & O insurance prices accordingly. But securities litigation levels soon returned to (or beyond) pre-PSLRA levels, and the D & O industry has taken years to recover from the ensuing bloodbath. This all-too-recent episode, caused by erroneous presumptions about reductions in the risk exposure, should give everyone pause as they speculate about the possible effects of the Tellabs decision.

Another reason for caution is that it is far too early to predict how district courts will apply the Tellabs case. The discussion above about the opinion’s likely disparate impact further argues against jumping to conclusions about how it will affect overall D & O risk exposure.

It is entirely possible that the Tellabs decision will not, in the end, have that much of an impact one way or the other. Indeed, Justice Scalia expressly acknowledged this possibility in voting with the majority notwithstanding his view that the statute requires a more rigorous standard that the majority opinion adopted; as he stated, “I doubt in this instance, what I deem the correct test will produce results much different from the Court’s.”

The one category of cases that Tellabs undoubtedly will affect is that in which the existence of the allegedly fraudulent scheme is implausible. Not only is this the correct and desirable outcome, but as a practical matter, it is almost certainly the outcome to which the district courts would tend, regardless of the theoretical legal standard to be applied.

My crystal ball is no better than anyone else’s, but I believe that the Tellabs court’s balanced approach will in the end not have a material impact on the number of cases that get dismissed or on the number of cases that get filed. To be sure, the Tellabs opinion has clarified where battle lines must be drawn, and the placement of the battle lines may well affect some skirmishes. But neither side has been handed a strategically decisive weapon, and so the battle will rage on, in many ways much as before. In that regard, I think everyone should consider the press release that the Milberg Weiss firm issued the day the Tellabs decision was released (here); the press release says, “Investors everywhere should be very comfortable with the Supreme Court’s decision. We believe that the decision will not have an adverse impact on the prosecution of securities fraud cases.” I think they mean it; I also think they are right.

For these reasons, I am skeptical that the Tellabs decision represents a material change in D & O exposure, and I think it would be a mistake for D & O industry participants to change their behavior solely because of Tellabs, as least without substantial further evidence about how the trial courts are going to implement it.

But by the same token, there may be other factors out there that are altering D & O exposure. To cite but one example, I think the Dura Pharmaceuticals case has had and will continue to have a material impact on whether some complaints survive a motion to dismiss. Indeed, the impact from Dura may be one factor in the decline in the number of securities suits (about which more here). Because of Dura and other factors, I believe it is important for D & O industry participants to inquire whether the D & O risk exposure is changing. I just think it is premature (at best) for the industry to assume that the Tellabs decision alone represents a material change in D & O risk exposure.

In addition to the law firm memos cited above, some others I have read and are worth linking to here include the memos about the Tellabs decision from the following: Debevoise & Plimpton (memo here); Chadborne & Parke (memo here); Sidley Austin (memo here). The 10b-5 Daily has a round up of articles and comments on the Tellabs case, here.

As I have noted in prior posts (most recently here), there is a growing chorus of voices calling for the elimination of “short-termism,” and specifically, for the elimination of quarterly earnings guidance. The recently issued reports of two blue-ribbon groups underscore the need for companies to develop and maintain a long-term orientation. More specifically, both reports also recommend the elimination of quarterly earnings guidance.

The first of the reports, called “The Aspen Principles” (here) was released on June 18, 2007 (refer here) and developed by the Aspen Institute, a group of corporate executives, business groups and labor unions, and endorsed by the Center for Audit Quality, a nonpartisan group affiliated with the AICPA. The Aspen Principles were “prompted by concerns about the short-term pressures on publicly traded companies and rising public sentiment against executive compensation.” The Aspen Principles contain a number of specific recommendations, including that corporate boards communicate with “long-term oriented inventors” about executive compensation; that senior executives be required to hold at least some portion of company stock beyond their tenure with the company; and that senior executives be barred from hedging the risk of long-term stock compensation.

The Aspen Principles also specifically recommend that “companies stop providing quarterly earnings guidance to analysts” and that they “not respond to analyst estimates.” A June 20, 2007 Law.com article discussing the Aspen Principles entitled “Biz Group Takes Aim at Short-Term Investors” can be found here.

A more detailed discussion of the ways to fight companies’ short-term focus appeared in the June 27, 2007 report of the Committee for Economic Development (CED), entitled “Built to Last: Focusing Corporations on Long-Term Performance.” The Report can be found here, and a press release summary of the Report can be found here. The CED is an independent research group of over 200 business leaders and academics. The Report was prepared by the CED’s Corporate Governance Committee, which is chaired by former SEC Chairman, William H. Donaldson.

The CED prepared its report because of its view that “an increasingly short-term focus by many business leaders is damaging the ability of public companies to sustain long-term performance.” The subcommittee specifically focused on the “role directors can play in changing culture and practices of corporations” because of their view that “directors are uniquely positioned to make a difference.” The subcommittee has “no illusion” that directors “by themselves can solve all the problems,” and the Report acknowledges that some investors, and in particular hedge funds, may be driving short-term expectations. However, the Report expresses the belief that long-term perspectives are in the best interests of the companies themselves and of the overall economy.

The Report contains a number of specific recommendations, including the suggestion that directors should support management’s development of strategic plans with long-term objectives, and structure incentive compensation so that a significant portion of executives’ income is tied to long-term objectives.

The Report also specifically recommends that “companies voluntarily refrain from issuing short-term guidance,” which, the Report notes, represents “both symbol and substance of concerns over companies’ lack of strategic focus on long-term performance.” The Report observes that about half of listed companies continue to give quarterly guidance, but that “research studies indicate that quarterly guidance is at best a waste of resources and, more likely, a self-fulfilling exercise that attracts short-term traders.” The report cites a study of over 4000 companies between 1997 and 2004, which found no evidence that guidance affected valuation multiples, improved shareholder returns, or reduced share price volatility. The study did find that the cost of management time and other resources of providing earnings guidance were significant.

The Report also notes that “the availability of information on short-term performance acts as magnet to those who trade based on such considerations,” but that “market pressure to provide earnings guidance may be receding,” since many companies are discontinuing the practice. A June 28, 2007 news article discussing the CED Report can be found here.

As I have noted in prior posts, the elimination of quarterly earning guidance would not only contribute to the reduction of a short-term orientation, but it would also discourage activity that frequently is at the center of shareholders’ claims against companies and their directors and officers. The drive to make (or avoid missing) earnings projections is the root cause of many behaviors that drive shareholder claims. As the CED Report puts it, “companies that drop quarterly guidance have one fewer reason to manage earnings.”

The elimination of quarterly earnings guidance is the first step for any company that is serious about managing its securities litigation risk. By the same token, as an increasing number of companies eliminate quarterly guidance, and as more and more thought leaders call for the elimination of guidance, companies that continue to provide quarterly guidance could increasingly be viewed with concern by D & O underwriters – and perhaps even by investors with a long-term orientation.

Photo Sharing and Video Hosting at Photobucket With its announcement (here) that it is the target of a Department of Justice antibribery investigation, BAE Systems added its name to the growing list of foreign-domiciled companies targeted by U.S. officials for alleged violations of U.S. anticorruption laws. The recent high-profile investigation of Siemens (about which refer here), as well as investigations involving Total, the French oil company, and Magyar Telecom of Hungary, not to mention a long list of domestic companies, are all part of an increasingly tough stance by U.S. regulators and prosecutors toward allegedly corrupt business activities.

The BAE disclosure says that the U.S. investigation relates “to the company’s compliance with anticorruption laws including the company’s business concerning the Kingdom of Saudi Arabia.” News reports (here) state that the investigation involves a 20-year old transaction involving the Al-Yamamah Saudi arms deal, and encompasses two areas of activities. The first is the alleged use of a supposed slush fund that BAE used to transfer tens of millions of dollars of hospitality benefits to Saudi officials. The second is the allegation that Prince Bandar bin Sultan, the former Saudi ambassador to Washington, received a total of up to 1 billion British pounds in the form of deposits to a Saudi embassy bank account at Riggs Bank in Washington, D.C. In addition to the Department of Justice investigation, the Financial Times reports (here) that BAE is also the target of an SEC investigation focused on potential violations of the books and records provisions of the Foreign Corrupt Practices Act (FCPA).

The British government previously brought a halt to an investigation by the Serious Frauds Office because of national security concerns. (Saudi Arabia apparently threatened to end intelligence collaboration with Great Britain if the investigation continued.) Beyond these concerns, there are additional complications to the circumstances under investigation. The first is that the Saudi government’s relation the Saud royal family is highly interwoven, creating a complicated issue over the question, for example, of who rightfully was the beneficiary of the deposits to the Riggs Bank account. And while Prince Bandar undoubtedly was, as the Saudi Ambassador to Washington, and as Saudi Arabia’s current national security chief, a government official, it could prove very difficult to show that even very large amounts of cash actually bought influence, since he is a an extremely wealthy person (his 56,000 sq. ft. Aspen mansion is on sale for $135 million).

But while there are these complicating factors, it is apparently not a constraint on any enforcement action against BAE that it is foreign domiciled and the alleged corrupt activity aimed at influence outside the U.S. Even if the involvement of the Riggs bank account were not a sufficient nexus, the U.S. authorities have already demonstrated their willingness and ability to pursue foreign domiciled companies for corrupt activities abroad. Indeed, last year, the Department of Justice forced Statoil, the Norwegian state oil company, to pay a $21 million fine for bribery activities involving Iranian government officials, even though the company had already paid a $3 million fine in connection with a Norwegian investigation. (The company did get a credit for the prior payment).

The current high profile investigations against Siemens and now BAE are significant in their own right, but the larger significance is that these two prominent cases may be that they are only a part of more than 55 public companies the Financial Times reports (here) that U.S. officials are currently investigating for overseas corruption. These investigations can of course result in fines and penalties that may be significant in and of themselves. But as I have pointed out in prior posts (most recently here), these investigations can also lead to follow on civil lawsuits alleging improper disclosures or accounting inadequacies as a result of the underlying activities or the investigations themselves.

With over 55 publicly traded companies under investigation, the possibility of follow on civil litigation could represent an increasingly significant D & O risk. These risks extend to foreign domiciled companies whose shares trade on U.S. exchanges, as well as domestic companies with significant overseas operations or activities. In an increasingly global economy, this risk could become an important part of the D & O liability exposure, particularly given the U.S regulators’ and prosecutors’ increased focus on anticorruption issues.

Photo Sharing and Video Hosting at Photobucket When it passed the Sarbanes Oxley Act in 2002, Congress’ primary focus was on the transparency and governance of publicly traded companies. But the Act has turned out to have a more pervasive influence, affecting not just public companies but also private companies and nonprofit entities as well. A June 18, 2007 report (here) by a special committee of the Board of Regents of the Smithsonian Institution illustrates how extensive the influence of Sarbanes-Oxley has become, and underscores the heightened expectations for corporate governance in the post-SOX era, even at nonprofit entities.

The Smithsonian itself is an unusual creation. It was founded in 1846 as a hybrid public/private institution to receive a bequest from James Smithson. It is organized as a trust, but functions as a body of the federal government, and it in fact receives the majority of its funding from the federal government. The institution is governed by the Board of Regents, whose members include the Vice President and the Chief Justice of the Supreme Court.

Even though the Smithsonian is a unique institution, earlier this year it found itself facing the kind of crisis that has become all too familiar for institutions and entities across the economy. A February 2007 series of articles in the Washington Post questioned the lavish compensation and spending habits of the Institution’s then-Secretary, Lawrence Small. (As a result of the controversy following this publicity, Small resigned as the Institution’s Secretary on March 26, 2007.) The Institution’s Board commissioned a special investigative committee to look into the concerns. The committee consisted of Charles Bowsher (former Comptroller General and head of the GAO), Stephen D. Potts (fomer director of the U.S. Government Office of Government Ethics) and A.W. “Pete” Smith (former head of the Private Sector Council and also former head of Watson Wyatt Worldwide). The Committee issued its Report on June 18.

The Committee’s Report provides interesting detail surrounding Small’s compensation and corporate spending habits, as well as his insular and imperious management style. News coverage discussing the Report’s findings regarding Small’s compensation, spending and management style can be found here and here. But perhaps even more interesting aspect of the Report is the Committee’s comments and observations on nonprofit corporate governance in the post-SOX era.

The Committee’s governance commentary derives from its observation that “the root cause of the Smithsonian’s current problems can be found in failures of governance and management.” The Committee specifically observed that “as a result of the corporate scandals of the early part of this decade and the adoption of the Sarbanes-Oxley Act of 2002, boards of directors have become increasingly active,” and “many nonprofit institutions have also updated their governance practices following the adoption of Sarbanes-Oxley.” The governance structure of the Smithsonian, the committee found, needs “comprehensive reform,” a process to which the Institution’s Regents “must devote substantial time and resources over the next several months.”

Many of the Committee’s suggested reforms are narrowly targeted to the issues of setting and monitoring the Smithsonian’s Secretary’s salary and spending. The Report also contains numerous recommendations to revise the Board of Regents’ composition and process to better position the Board to function more consistently with current governance best practices. The Committee recommended modifying the Institution’s board governance structure, so that the Smithsonian is “run by a governing board whose members act as true fiduciaries and who have both the time and the experience to assume the responsibilities of setting strategy and providing oversight.” The Committee also stated that the Institution’s “system of internal controls and audit needs to be strengthened through additional resources, adoption of best practices, and retention of personnel with substantial experience in the financial and audit area.”
The Smithsonian is far from the typical nonprofit entity, but the problems it faces and the governance reforms it must implement represent increasingly common challenges for nonprofit entities generally. Indeed, the Committee expressly recognized that the Smithsonian’s challenges present issues with implications for all nonprofit entities. The Committee further noted that the increased scrutiny and expectations for transparency raise “the issue of effective management of nonprofits and how governance at these entities should be structured, the responsibilities of their boards of directors and trustees and how oversight of these organizations should be provided.”

The Committee commented that “boards of nonprofits – especially large nonprofits – should move to reform their governance structures to bring them in line with best practices.” While some nonprofits have made progress, others have not, about which the Committee commented that “failure to take voluntary action will likely lead, ultimately, to action by Congress, state legislatures, and the courts to impose reforms from without, just as was done in the case of the corporate world.”

Even without the Committee’s warning about possible legislative or judicial mandates, nonprofit entities have sufficient motivation to address heightened governance and transparency expectations. Well-advised entities are already taking steps to implement reforms addressed to governance, financial controls and reporting, and oversight.

There are a number of good resources on the meaning of SOX for nonprofit entities, a few of which may be found here and here. My recent article on the implications of Sarbanes-Oxley for private companies can be found here.

One final observation is that it is not at all surprising that the Smithsonian’s present challenge, like so many that have arisen in the for-profit world, derives from issues surrounding executive compensation. For whatever reason, executive compensation seems to be the bane of all organizations, regardless of their profit orientation. For that reason, the effective and well-documented regulation of executive compensation should be an indispensable part of any organization’s institutional reform.

Photo Sharing and Video Hosting at Photobucket The Smithsonian Still Has Hope: For all of its present ills, the Smithsonian remains the repository of many of the world’s irreplaceable treasures. A favored childhood memory of a visit to the Smithsonian includes a visit to the Museum of Natural History’s Gem Collection, which houses the astonishing Hope Diamond. According to popular legend, the Hope Diamond carries a curse that brings misfortune on its owner. Among the unfortunate who supposedly have suffered as a result of the curse is Louis XVI, who gave the diamond to Marie Antoinette. Their enjoyment of the diamond’s ownership was, shall we say, cut short.

Photo Sharing and Video Hosting at Photobucket The Supreme Court has issued its much-anticipated opinion in the Tellabs case. The opinion can be found here. The case examined the question of what a plaintiff is required to plead under the Private Securities Litigation Reform Act (PSLRA) in order to establish a “strong inference” that the defendant acted with the requisite mental state. The Court’s opinion, written for an 8-1 majority by Justice Ruth Bader Ginsburg, rejected both the Seventh Circuit’s standard (by which the statute’s requirements could be met if the complaint alleged facts “from which, if true, a reasonable person could infer that the defendant acted with the required intent”) and the more demanding standard sought by the SEC in its amicus brief (urging the Court to require plaintiff to allege facts that establish a “high likelihood” that the plaintiff acted with intent).

The Court held that to qualify as “strong” an inference of scienter “must be more than merely plausible or reasonable — it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent.” The Court specifically held that in considering whether an inference is “strong,” a court must consider competing inferences, something which the Seventh Circuit had expressly declined to do. The inquiry, the Court said, is “inherently comparative.” The inference “need not be irrefutable,” but “it must be more than merely ‘reasonable’ or ‘permissible’ — it must be cogent and compelling, thus strong in light of other explanations.” A complaint should survive a motion to dismiss only if “a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inferences one would draw from the facts alleged.”

In looking at the Tellabs case itself, the Court noted that “motive can be a relevant consideration” and that “personal financial gain may weigh heavily in favor of a scienter inference” but the Court also agreed that “the absence of a motive allegation is not fatal.” The significance of an allegation of motive “depends on the entirety of the complaint.” The court’s job “is not to scrutinize each allegation in isolation but to assess all the allegations holistically.” The court’s job is to ask: “When the allegations are accepted as true and taken collectively, would a reasonable person deem the inference of scienter at least as strong as any opposing inference?”

While the Supreme Court says that the district court must weigh competing inferences, the Court rejected the Seventh Circuit’s suggestion that this type of comparative process usurps the jury’s role and violates the Seventh Amendment: “A Court’s comparative assessment of plausible inferences, while constantly assuming the plaintiff’s allegations to be true, we think it plain, does not impinge upon the Seventh Amendment right to a jury trial.”

With respect to the Tellabs case, the Court said that neither the District Court nor the Seventh Circuit “had the opportunity to consider the matter in light of the prescriptions we announce today.” The Court vacated the Seventh Circuit’s judgment and said that the case should be reexamined in accord with the Court’s construction of the PSLRA.

Even though the Court rejected the Seventh Circuit’s standard, the Supreme Court’s opinion does not go quite as far as the SEC and others may have hoped. Although the Supreme Court requires the court to weigh inferences, it does not require the inference the plaintiff urges to be the most plausible inference, only that it be at least as plausible as other inferences. A Wall Street Journal article discussing the opinion (here) quotes Barbara Hart of the Labaton Sucharow & Rudoff law firm as saying “these are the types of cases we are bringing already; our cases already meet this standard.”

The Court clearly aimed to achieve a balanced approach. It described its task in ruling on the Tellabs case as being to “prescribe a workable construction of the ‘strong inference’ standard” and to come up with “a reading geared to the PSLRA’s twin goals: to curb frivolous, lawyer-driven litigation, while preserving investors’ ability to recover on meritorious claims.” And while the majority accepted the notion that trial courts must weigh inferences in determining whether the PSLRA’s requirements must be met, it expressly rejected the position urged by Justices Scalia and Alito that “the test should be whether the inference of scienter (if any) is more plausible than the inference of innocence.” (Italics in Justice Scalia’s original concurring opinion) The majority’s rejection of this heightened standard is consistent with the Court’s stated goal of prescribing a workable construction that balances the “twin goals” of the PSLRA.

Because the Court deliberately strove for a balanced approach based on a “workable construction,” it seems unlikely that this decision will have an outcome-determinative impact on a significant number of future securities suits, and even less of an impact on whether or not suits get filed. The heightened standard that Justices Scalia and Alito urged might well have had a more significant impact, but the majority’s approach seems less likely to affect as many cases. The early commentary seems consistent with this view. For example, the Business Law Prof blog notes (here):

The majority standard is not what the defense bar wanted; they wanted the standard of the concurring judges, which the court rejected. This is not a defense bar victory; it is a draw at best. Reporters will fail to get this correct and will rack this up as another victory for corporate America; it is not. The majority held, importantly, that the pleading standard was not higher that the standard of proof required at trial; the defense bar argued that Congress so intended it to be higher. This is a big difference.

The SEC Actions blog (here) agrees, noting:

the decision should not be viewed as a clear victory for either side. Rather, the decision reflects a balance between the competing interests Justice Ginsburg sought to reflect in her opinion, permitting meritorious classes to proceed, but weeding out those that lack merit… In the standard adopted today, the Court blended together the requirement that plaintiff plead a cause of action properly and the heightened pleading requirements of the PSLRA. At the same time, the Court rejected definitions of “strong inference” that would have made it virtually impossible to plead such a case. Overall, it was a balanced decision by the Court.

The WSJ.com Law Blog has a round up of securities lawyers’ views on the Tellabs opinion (here), and they all seem to be consistent that while the Tellabs defendants successfully got the Seventh Circuit opinion thrown out, the decision is not a huge victory for defendants generally. While the Tellabs case will undoubtedly define where the battle lines will be drawn at the pleading stage in future securities litigation, the decision may not have as significant impact as it might have.

The 10b-5 Daily blog has a good summary of the case, here.

Photo Sharing and Video Hosting at Photobucket The Case of the Stolen Jade Falcon: An interesting sidelight is the interplay between majority and concurring opinions discussing Justice Scalia’s concurring opinion’s use of the example of the stolen jade falcon. Justice Scalia’s concurring opinion asks “If a jade falcon were stolen from a room to which only A and B had access, could it possibly be said that there was a ‘strong inference’ that B was the thief?”

Justice Ginsburg responds (in footnote 5) that “I suspect…that law enforcement officials as well as the owner of the precious falcon would find the inference of guilt as to B quite strong –certainly strong enough to warrant further investigation.”

Justice Scalia, committed to getting in the last word on the fabulous stolen jade falcon, responds (in a footnote to his opinion) the “it is quite clear (from the dispassionate perspective of one who does not own a jade falcon) that a possibility, even a strong possibility, that B is responsible is not a strong inference that B is responsible.”

There is also a vigorous verbal volley between Justice Scalia and Justice Stevens, whose lone dissent urged adoption of the Seventh Circuit’s more permissive standard. Justice Stevens characterized the standard Justice Scalia urges as “clearly wrong” and Justice Scalia referred to Justice Stevens as “mistaken.” The WSJ.com law blog captures this exchange, here.

An apology to all of my readers: This blog comment was originally posted yesterday at 11:30 am but my syndication service was offline due to technical difficulties until early this morning, so I have reposted it to facilitate the syndication emails.

Photo Sharing and Video Hosting at Photobucket Photo Sharing and Video Hosting at Photobucket In the latest manifestations of what Forbes magazine recently (here) called “the biggest buyback binge in the history of the market,” both Home Depot and Expedia announced that they would undertake massive amounts of debt to buyback significant portions of their outstanding shares.

The Home Depot plan (which it announced here) is particularly mind-boggling. According to the Wall Street Journal’s June 20, 2007 article entitled “Home Depot Boosts Buyback, Sets Unit Sale” (here, subscription required), Home Depot’s plan authorizes additional share buybacks of $22.5 billion, bringing the total authorized level of share repurchases to a staggering $40 billion. This is a company with a $74.9 billion market cap. Although an asset sale will fund $10.3 billion of the newly authorized share buyback, the remaining $12.2 billion will be financed with debt.

Expedia’s plan (which it announced here) is that it will repurchase as many as 117 million of its Class A shares, which represents as much as 42% of its shares, and will spend up to $3.5 billion, as much as $2.5 billion of which will be financed with debt. Expedia’s current market cap is $8.8 billion.

These companies share prices responded positively to these announcements, and there are indeed arguable benefits to these types of transactions. As the Wall Street Journal note (here, subscription required) in discussing the Expedia leveraged buyback, “reducing the outstanding stock can help a company boost per-share earnings, as the profit is divided by fewer shares. Also, interest payments on [the] debt are tax-deductible.”

But not all of the effects of a leveraged buyback are beneficent or benign. As the recent Forbes article (here) commented, buybacks “give a temporary, one-time artificial boost to earnings, they cause creaky cash-poor companies to load up on debt, leaving them vulnerable should the economy unexpectedly deteriorate and they pulverize credit ratings, causing borrowing costs to soar.” The credit rating concern may already have affected Home Depot; according to the Journal, Standard & Poor’s rating service and Moody’s Investor Service “both placed Home Depot’s credit ratings under review for possible downgrades.”

Detailed research suggests that the buybacks, at best, may provide “a short-term steroid shot.” The Forbes article quotes research from Birinyi Associates, which looked at the stock performance of 375 S & P companies that bought back shares in the six years through December 2006. Over that period, the companies’ median return post-buyback was 56%, far less than the 72% at companies that did not repurchase, and the average return post-buyback was 102%, less that then 131% at companies that did not repurchase.

Nevertheless, S & P 500 companies repurchased $432 billion of their own stock in 2006, more than triple the 2003 amount. Why are companies doing this? One guess is executive pay. The Forbes article notes that “buybacks can goose executive pay, because executive compensation is often linked to earnings per share.” Indeed, the Journal article discussing the Expedia share buyback plan, in trying to understand the plan, noted that “Expedia’s proxy statement gives one explanation: Executive Compensation is pegged to, among other goals, enhancing per-share earnings. And that looks to be one result of this particular buyback.” It is also probably worth noting that using share repurchases to boost executive bonus comp based on an EPS trigger is one of the practices for which Home Depot’s departed CEO Robert Nardelli was criticized, as I previously noted here.

One particularly troublesome form of share buybacks involves an aggressive, debt-financed buyback program that coincides with active insider sales. A recent study by Audit Integrity (cited in the Forbes article) identified 13 companies with market caps over $100 million that had both high levels of stock buybacks and insider selling. But the insiders sales don’t necessarily have to be contemporaneous to be troublesome; as the Forbes article notes, “insiders may be way too tempted to do buybacks so they can sell their holdings more lucratively once the buyback pushes the stock price higher.”

As I discussed in my prior post (here) about Share Buybacks and D & O Risk, none of this is lost on the plaintiffs’ lawyers. Indeed, the Forbes article cites the settlement of the Sprint class action lawsuit settlement “in which Sprint agreed that it would no longer allow insiders to sell Sprint shares while the company was buying them.” Sprint may have agreed to this under duress, but this requirement in fact seems like a prudent policy calculated to avoid activity that otherwise presents some troubling visuals. It should not be overlooked that this activity has already attracted the plaintiffs’ lawyers attention.

The share repurchase phenomenon may eventually abate as long term interests rates rise and the era of cheap credit comes to an end. We are definitely not there yet, as the Home Depot and Expedia buyback programs announced this week demonstrate. But when the music stops, there are could be some companies, saddled with buyback-motivated debt they are unable to service, refinance or restructure, that could pay a very steep price for their “buyback binge.”

Photo Sharing and Video Hosting at Photobucket The Supreme Court still has not yet issued its much-anticipated decision in the Tellabs case (about which refer here), but it did issue a 7-1 decision today (refer here) in the Credit Suisse Securities v. Billing case, holding that the securities laws preclude application of the antitrust laws in a case filed against ten investment banks and asserting IPO laddering allegations.

The plaintiffs alleged that between March 1997 and December 2000, the defendant investment banks “abused the practice of combining into underwriting syndicates” by allegedly agreeing among themselves to impose conditions on investors who wanted access to shares in sought-after IPOs. The alleged conditions included “laddering” (requiring investors to buy additional shares in the aftermarket); “tying arrangements” (requiring investors to purchase other, less-attractive securities), and excess commissions. The plaintiffs alleged that these supposed practices violated the Sherman Act, the Clayton Act, and state antitrust laws.

The case was before the Supreme Court on the question whether or not the securities laws “implicitly preclude the application of the antitrust laws to the conduct at issue in this case.” The regulation of underwriting syndicates’ behavior in connection with securities offerings is within the purview of the SEC, because it is “central to the proper functioning of well-regulated capital markets,” and the law grants the SEC the legal authority to supervise the activities in dispute – a legal authority the SEC has “continuously exercised.”

The court concluded that “to permit antitrust actions such as the present one threatens serious securities-related harm,” particularly given the fine line that exists between permitted underwriting syndicate-building collaborative activity and prohibited collusive activity. The SEC, according to the Court, is responsible for drawing a “complex, sinuous line separating securities-permitted from securities-prohibited conduct.” The Court asked “who but the SEC” could make these determinations with confidence? Without this sophisticated oversight, there is an “unusually high risk that different court will evaluate different factual circumstances differently,” which would in turn “suggest that antitrust courts are likely to make unusually serious mistakes.”

Under these circumstances, offering underwriters would not only steer clear of conduct the securities law forbids, “but also a wide range of joint conduct that the securities law permits and encourages (but which they fear could lead to an antitrust lawsuit and the risk of treble damages).”

The Court concluded that the need for antitrust-related enforcement is very small, since the SEC actively enforces its own existing rules prohibiting the contested conduct, and in any event, investors harmed by the disputed practices “may bring lawsuits and obtain damages under the securities laws.”

This last point about the availability of remedies under the securities laws may be the most telling. Many of us who can remember the inundation of IPO laddering cases that flooded the courts in 2001 will remember the antitrust cases that also appeared as stray artifacts from a period of lawsuit-filing madness. The mad rush for a piece of the IPO laddering action led to the filing of securities cases against over 310 companies (subsequently consolidated into the IPO Laddering action, about which refer here). This antitrust case looked at the time like nothing more than an attempt to purchase by other means a piece of the litigation territory that prior plaintiffs had claimed in securities lawsuits. The Supreme Court may well have sensed this “end-run” attribute of the antitrust action, noting that “to permit an antitrust lawsuit risks circumventing [the statutory requirements of the PSLRA] by permitting plaintiffs to dress what is essentially a securities complaint in antitrust clothing.”

There are several aspects of this decision that are interesting, beyond the holding itself. The first is that Justice Breyer, usually perceived as a member of the court’s liberal wing, wrote the opinion for a 7-1 majority (Justice Kennedy not participating) that cut broadly across the court’s usual political fault line. Justice Breyer has shown an interest in the past for business cases (he wrote the majority opinion in the punitive damages case earlier in the term). While this does not necessarily tell us anything one way or the other helpful to prognosticating the outcome of the Tellabs case, it does suggest that we can hope for an outcome that is at least clear-cut and that provides guidance on the pleading issues presented in the Tellabs case. (I wonder, without any basis whatsoever for so speculating, whether Justice Breyer will write the majority opinion in the Tellabs case?)

The second interesting aspect of this decision is that the Court seemed to have little trouble rejecting the compromise position advocated by the solicitor general, who advocated remanding the case to the lower court for further proceedings. This absence of deference to the government’s official position suggests that the court might not be overly swayed by the SEC’s amicus brief in the Tellabs case (refer here), which urged a narrow view of the PSLRA pleading standard. On the other hand, the majority opinion in the Credit Suisse case seems to reflect an awfully high opinion of the SEC’s expertise on securities law issues.

Good brief descriptions of the Credit Suisse decision can be found on the SCOTUS blog (here) and on the Legal Pad blog (here).