Lead counsel contests take shape in Facebook, JPMorgan cases

July 26, 2012

Bernstein Litowitz Berger & Grossmann and Robbins Geller Rudman & Dowd are the most successful members of the securities class action bar. Check the ISS rankings for 2011: Bernstein Litowitz is in the top slot, with $1.37 billion in settlements last year; Robbins Geller is second, with $1.14 billion. Those total dollars, though, mask the very different business models of the two firms, which are reflected in two other numbers on the ISS chart. Bernstein Litowitz settled only 13 cases in 2011, for an average settlement of about $106 million. By contrast, Robbins Geller settled 28 – more than twice as many as Bernstein Litowitz and 12 more than any other leading class action firm. Robbins Geller’s average settlement was about $49 million, less than any firm in the top 10 except Milberg. Both models work, or you wouldn’t always see Bernstein Litowitz and Robbins Geller at the top of the ISS rankings, but the firms are the yin and yang of securities class action litigation.

That’s why it’s so interesting that they’re both angling for lead counsel appointments in the two hottest cases of the year. The deadlines for lead plaintiff briefs have come and gone in the JPMorgan “London Whale” and Facebook IPO cases. There’s plenty of competition in both – though, as I predicted, less in the JPMorgan case – but the strongest leadership bids come from clients represented by Robbins Geller or Bernstein Litowitz.

Let’s look first at the JPMorgan briefs, which came in earlier this month. JPMorgan lost more than $17 billion in market capitalization when it disclosed in May that its chief investment office had lost $2 billion as a result of risky credit default swap positions taken by the so-called London Whale, derivatives trader Bruno Iksil. Shareholders have offered different theories about when the bank’s alleged deception began, but they all point to CEO Jamie Dimon calling the CDS position “a tempest in a teapot” in an April call with analysts.

Robbins Geller, which was one of the firms that launched the litigation with a complaint on behalf of an individual shareholder, is making a leadership bid as counsel to a pipefitters’ union pension fund. In its lead plaintiff brief, the firm asserts that the union fund bought more than 137,000 shares between January 2012 and May 2012, and lost more than $1 million on its investment. “To the best of its counsel’s knowledge, there are no other plaintiffs with a larger financial interest in the class period for the related actions,” the brief said, in the standard language of these kinds of filings.

But that assertion depends on the class period. A group of state public pension funds jointly represented by Bernstein Litowitz, Grant & Eisenhofer and Kessler Topaz Meltzer & Check alleged that the fraud began way back in 2010. Under that extended class period, they claim in their lead plaintiff brief, the pension funds lost a combined $52 million, which would dwarf the losses of Robbins Geller’s client. Courts don’t always like these ad hoc agglomerations of plaintiffs, however. Expect to see Robbins Geller argue that the public pension funds are only litigating as a group because their lawyers want to be named lead counsel.

The same, however, could be said of the trio of private trust funds Robbins Geller represents in the Facebook IPO litigation, which has mushroomed in both Manhattan and San Francisco federal court. Robbins Geller’s lead plaintiff brief asserts that the three funds collectively lost more than $1.5 million on their investment in more than 226,000 shares in Facebook’s initial public offering. But here again, that’s a smaller loss than Bernstein Litowitz’s clients. Bernstein teamed up with Labaton Sucharow to make a bid on behalf of three state pension funds and a private fund that claim to have lost a collective $7.2 million in their Facebook investment.

There’s lots more competition in the Facebook IPO case, in which damages could be sky-high, but clients of Motley Rice; Lieff Cabraser Heimann & Bernstein; Pomerantz Haudek Grossman & Gross; and Morgan & Morgan cite losses of less than $1 million. That’s probably not enough to make them contenders, at least on their own. Entwhistle & Cappucci‘s lead plaintiff brief argues that its clients should be named to lead the related class action against Nasdaq, asserting that its clients traded more than $316 million in Facebook shares in the IPO. But the brief doesn’t say how much the Entwhistle clients lost, and it’s by no means clear that the Judicial Panel on Multidistrict Litigation will consolidate litigation against Facebook and its underwriters with class actions against Nasdaq. Nor is it likely that one lead counsel would be appointed in both cases.

Based on the lead plaintiff briefing, it looks like the JPMorgan and Facebook cases aren’t going to shake up the established order in the securities class action game.

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