Last June, when Delaware’s General Assembly was contemplating legislation to prohibit fee-shifting provisions that would require shareholders to pay defense costs for failed suits, the U.S. Chamber of Commerce’s Institute for Legal Reform moved fast. The Chamber sent a letter to the bill’s sponsor, Bryan Townsend, arguing that the proposed law be deferred. It also wrote to all of the members of the Assembly to urge them to oppose the legislation. Fee-shifting, according to the Chamber, was a great way to curtail meritless shareholder claims in “deal tax” suits. Why, the Chamber asked, would lawmakers “deprive” shareholders of the “opportunity” to rein in frivolous litigation?
Do trial judges have to review their rulings in order to vacate them? You might assume so, but in an en banc decision Tuesday, the 4th U.S. Circuit Court of Appeals ruled that federal judges can vacate remand orders that turn out to have been based on misrepresentations – despite the procedural rule prohibiting judges from reconsidering their orders to remand cases to state court.
Mark Lanier, one of the most successful trial lawyers of the past quarter century – and also a Texan – isn’t the type to roll over for adversaries.
Late Wednesday, U.S. District Judge George Daniels of Manhattan ruled that the Palestinian Authority and the Palestine Liberation Organization are not entitled to summary judgment on Anti-Terrorism Act claims by more than 40 U.S. citizens (or their survivors) who were the victims of attacks in and around Jerusalem between 2000 and 2004. Judge Daniels’ decision clears the way for a trial, scheduled to begin on Jan. 12, against the Palestinian Authority and the PLO.
Last week, the Federal Home Loan Bank of Pittsburgh filed a brief opposing summary judgment for the credit rating agency Standard & Poor’s, which the bank has accused of fraud in Pennsylvania state court. The case, which involves FHLB’s investments in supposedly misrepresented mortgage-backed securities, dates back to 2009. The Pittsburgh lender’s doggedness has already pushed JPMorgan Chase into a settlement (on undisclosed terms) last January, after FHLB’s lawyers at Robins Kaplan Miller & Ciresi demanded to see the Justice Department’s draft complaint against JPM. Countrywide and the credit rating agency Moody’s also made deals with FHLB in June to have claims against them dismissed. S&P is the last remaining defendant in the case.
As I reporter, I love when federal judges say provocative things outside of their courtrooms. It’s news if U.S. District Judge Jed Rakoff of Manhattan publishes an article chastising the Justice Department for prosecuting corporations instead of individuals or if his colleague Shira Scheindlin gives interviews about her willingness to stand up to prosecutors. The public benefits when brave judges like U.S. Magistrate Stephen Smith of Houston, who highlighted the government’s secret use of electronic surveillance in a 2012 paper for the Harvard Law and Policy Review, call attention to what they’ve observed from the bench. I also understand that judges, just like ordinary people, want to share (or occasionally overshare) their thoughts in a forum aside from judicial opinions.
The life insurance settlement company Imperial Holdings, as I told you last week, appears to be the first public corporation to adopt a bylaw requiring investors to provide written consent from at least 3 percent of all shareholders before they can sue the company. But it almost surely won’t be the last. Phillip Goldstein of Bulldog Investors, who is the board chairman at Imperial, sits on the boards of two other public corporations whose shareholders will vote on virtually identical minimum-stake bylaws at annual meetings in December: the Mexico Equity and Income Fund and the Special Opportunities Fund. Goldstein told me he expects shareholders at both funds to accept the provisions, just as he expects Imperial’s shareholders to endorse the board’s adoption of the minimum-stake bylaw at their annual meeting this spring.
On Thursday, the plaintiffs’ firm Robbins Geller Rudman & Dowd sued the Securities and Exchange Commission, which Robbins Geller accuses of improperly withholding Wal-Mart documents requested under the Freedom of Information Act. Robbins Geller is lead counsel in a shareholders’ securities fraud class action against Wal-Mart in Arkansas federal court. It wants the SEC to turn over all of the material as received from Wal-Mart in the government’s investigation of the company’s alleged coverup of bribes paid by its Mexican unit. The SEC has refused, citing its ongoing investigation. Robbins Geller’s suit argues that since all of the material it is requesting came from Wal-Mart – and much of it has been revealed in the New York Times articles and congressional disclosures – turning it over won’t interfere with the SEC’s case.
One of the biggest reasons for the seismic shift in shareholder litigation over the past decade from securities fraud class actions to M&A challenges is that it’s easier for plaintiffs’ firms to bring M&A cases and derivative suits. After Congress amended securities laws in 1995 to rein in shareholder suits, federal-court fraud class actions became the near-exclusive province of institutional investors, not individual shareholders with small holdings. But those small-timers could still bring derivative suits and shareholder class actions challenging M&A deals. So a lot of shareholder firms without ties to big pension funds stopped bringing fraud cases and started filing these instead.
Does the Securities and Exchange Commission have the right to define when someone who trades on insider information has committed a crime? Or is the SEC – and, for that matter, every other executive-branch agency – treading on Congress’s toes when it adopts rules interpreting laws with both criminal and regulatory implications?