INSIDE THIS ISSUE

•  Class Certification Granted In AkeenaSecurities Fraud Lawsuit

•  DOL Files Amicus Brief SupportingScott+Scott In GM 401(k) Case

•  Scott+Scott Partner Joseph GuglielmoRecognized For Expertise In Electronic Discovery

 Senator Seeks Repeal Of The RailroadIndustry’s Antitrust Exemption

•  Scott+Scott Reaches Settlement InSignalife Securities Action

•  U.S. Events

(Flashlit version)

ClassCertification Granted In Akeena Securities Fraud Lawsuit

On March 11, 2011, Scott+Scott obtained class certification in a securities fraud class action brought on behalf of those who purchased the common stock of Akeena Solar, Inc. on the open market between December 26, 2007 and March 13, 2008. The Hon. James Ware, now Chief Judge of the U.S. District Court for the Northern District of California, certified the case as a class action under the federal securities laws. In certifying the Class, Judge Ware rejected all of Defendants’ challenges to the Class representatives’ typicality and adequacy. Judge Ware also rejected Defendants’ attempt to rebut Plaintiffs’ market efficiency showing. Scott+Scott is counsel for the Lead Plaintiffs and Judge Ware appointed the firm Class Counsel.

The case, first filed in May 2009, alleges Akeena’s founder, Chairman and Chief Executive Officer Barry Cinnamon, intentionally inflated the Company's stock price in order to fund his own divorce settlement by selling shares at the inflated price. Lead Plaintiffs allege that on October 31, 2007, Cinnamon was ordered to pay his former spouse a multi-million dollar divorce settlement by January 31, 2008, or face turning over to her bankers shares with significantly higher value. According to Cinnamon’s filing with the Securities and Exchange Commission at that time, “[u]nder his Rule 10b5-1 Plan, Mr. Cinnamon contemplates selling up to 700,000 shares of common stock over the course of the next year,” which they said would “constitute approximately 8% of Mr. Cinnamon’s current holdings of common stock and options.”

Knowing Cinnamon had to sell the shares by January 31, 2008, Akeena’s executives announced on December 26, 2007, that Comerica Bank increased the Company’s line of credit to $25 million and that the increased portion of the line of credit did not have the restrictions that applied to the prior smaller line of credit. That drove up the Company's stock price from $6.84 per share to $8.10 per share, as investors saw Comerica's decision as a sign of confidence in the Company.

Then, a week later, Akeena announced a distribution agreement with Chinese solar panel maker Suntech. Market rumors placed the value of the contract to Akeena in terms of annual revenues in the tens of millions of dollars. As intended, that announcement drove the Company's stock price up a further 40% to $11.45 per share.

The stock traded over $15 per share in the days following these two announcements. During that time period, Akeena’s CEO sold 400,000 shares of the Company’s stock at inflated prices. Plaintiffs alleged that the stock price inflation actually allowed the CEO to sell far fewer shares than he had previously announced he would sell, but also to receive more than twice what he would have received had he sold those same shares back on October 31, 2008.

As the truth emerged, Akeena's stock price tumbled. On January 16, 2008, Akeena revealed in a regulatory filing that the purported “increase” in its “line of credit” was nothing of the sort. Instead, Akeena would be required to deposit the entire $25 million in its Comerica account in order to use any portion of the purported “line of credit.”

And while Akeena trumpeted the Suntech distribution agreement, the Company hid important aspects of the deal—including that Akeena had no legal right to enforce royalty payments under the agreement. Finally, on March 13, 2008, Cinnamon publicly admitted that the Suntech agreement would increase sales only $1 million during 2008, and Akeena Chief Financial Officer Gary Effren conceded that the agreement could increase sales by as little as $500,000. Akeena’s stock price fell 8.4% that day on heavy trading.

While Cinnamon claimed his stock sales were made pursuant to an SEC Rule 10b5-1 “trading plan” set up in late 2007, Plaintiffs argue the 10b5-1 plan was not valid because it was not set up to permit regularly scheduled sales for diversification purposes, but instead was set up when Cinnamon was already in possession of material non-public information that was then inflating Akeena’s stock price. Plaintiffs also argue that while a properly designed and implemented 10b5-1 trading plan may insulate executives from insider trading claims under certain circumstances not present here, the mere existence of a 10b5-1 trading plan does not insulate executives from liability for issuing false and misleading statements of fact in violation of the federal securities laws. Finally, Plaintiffs argue that Cinnamon’s announcement that he had instituted a 10b5-1 trading plan was in and of itself misleading because he said he had to sell the stock “during 2008,” when in reality he knew he had to sell it by January 31, 2008.

In contesting Plaintiffs’ class certification motion, Defendants contended that the Lead Plaintiffs would somehow make inadequate representatives of the putative class, claiming they lacked specific enough knowledge of the complaint’s allegations. They also claimed that one Plaintiff was indifferent to the suit’s outcome because he could not promise to a moral certainty that his university teaching schedule would permit him to attend each and every day of any eventual trial.

Contrary to these baseless aspersions, Judge Ware found that “[t]he threshold of knowledge required to qualify a class representative is low; a class representative will be deemed inadequate only if ‘startlingly unfamiliar’ with the case.” Continuing, Judge Ware held that the “fact that plaintiffs are familiar with the basis for the suit and their responsibilities as lead plaintiffs is sufficient to establish their adequacy.”

Specifically, Judge Ware found that “Plaintiffs offer[ed] ample evidence that the putative class representatives [were] familiar with both the basis for the suit and their responsibilities as Lead Plaintiffs,” where:

+ “Both putative class representatives testified to their understanding that the suit involves misleading and fraudulent statements on the part of Defendants.”

+ “Both putative class representatives testified that they understood that the suit was being brought as a class action, and that they understood their responsibilities as lead plaintiffs in such an action, including the responsibility to determine whether to accept a proposed settlement or go to trial.”

+ “Plaintiffs also offer[ed] evidence that both putative class representatives plan[ned] to pursue the litigation vigorously.”

Judge Ware also expressly found that the Scott+Scott firm was experienced in complex class actions and was “capable of adequately and vigorously prosecuting this litigation.”

The case is Hodges v. Akeena Solar, Inc., No. 09-cv-02147, in the U.S. District Court for the Northern District of California.

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DOL Files Amicus Brief Supporting Scott+Scott In GM 401(k) Case

The Department of Labor (“DOL”) recently filed an amicus brief indicating that it agreed with, and supported, the position that Scott+Scott has taken in the General Motors (“GM”) 401(k) lawsuit, which is currently pending on appeal before the Sixth Circuit United States Court of Appeals.

In the lawsuit, Scott+Scott represents a proposed class of GM employees and retirees who are suing State Street Bank and Trust Company (“State Street”) for breaching its fiduciary duties under the Employee Retirement Income Security Act of 1974 (“ERISA”). State Street was hired to serve as the “investment manager” and “independent fiduciary” for the GM retirement plans, and was solely responsible for managing over $2 billion worth of GM stock that GM’s employees and retirees held for retirement in the GM plans.

Plaintiffs in the GM 401(k) lawsuit claim that State Street breached its fiduciary duties under ERISA by failing to act more quickly to sell GM stock in the months leading up to GM’s bankruptcy filing. Plaintiffs claim that State Street should have sold GM stock when it first became apparent that GM was in serious financial jeopardy, which Plaintiffs claim occurred as early as July 2008, and no later than November 2008. This was long before the April 2009 date when State Street actually sold the GM stock that was held in the retirement plans.

The lawsuit was initially filed in federal court in Detroit, but was dismissed at the motion to dismiss stage of the case. It is currently pending on appeal before the Sixth Circuit United States Court of Appeals. It was during the pending appeal, in a crucial February 15, 2011 filing, that the DOL filed its amicus brief supporting the GM employees and retirees. This is an important development because the DOL is the federal agency responsible for interpreting ERISA.

In the brief, the DOL took the position that: “Plaintiffs plausibly allege that State Street breached its fiduciary duties by maintaining GM stock as a plan investment when it was no longer prudent for the plans to hold such stock, resulting in significant plan losses.” The DOL also made it clear that: “State Street is not relieved of its liability for losses resulting from its breaches of fiduciary duty . . . by the actions of participants,” which was the basis for the district court’s dismissal of the case. The DOL then emphasized that “[t]he staggering losses that the plans suffered when GM stock became essentially worthless were the result of State Street’s imprudence . . . in failing to act more quickly to divest the GM stock.”

The appeal in the GM 401(k) case has been fully briefed, and oral argument is scheduled for the spring or summer of 2011. A decision in the case is expected during the latter half of the year.

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Scott+Scott Partner Joseph Guglielmo Recognized For Expertise In Electronic Discovery

With over 10 years of experience in electronic discovery issues, Scott+Scott Partner Joseph Guglielmo is a recognized expert in electronic discovery. In his upcoming speaking engagement on electronic discovery for the American Bar Association, Mr. Guglielmo will be lecturing at the Property Insurance Committee Annual Spring Meeting on the unique challenges of litigating catastrophic property claims, such as weather-related events, massive oil spills, and terrorist attacks. Mr. Guglielmo will contribute his expertise in electronic discovery as part of a four-person panel on “E-Discovery and the Catastrophic Property Claim.”

Mr. Guglielmo has previously spoken on electronic document retention and production at the Sedona Conference Working Group. The Sedona Conference includes participants from the federal and state judiciary, governmental entities, litigators, in-house counsel, and electronic information systems personnel. Mr. Guglielmo has lectured on electronic discovery at the Georgetown Law School’s Advanced E-discovery Institute, where he spoke on proportionality in litigation involving electronic discovery.

Mr. Guglielmo became involved in electronic discovery issues approximately 10 years ago as a result of working on litigation involving complex document and data production issues. As he became more involved with these issues, he realized that there were few attorneys who understood the complexities, both from a requesting party’s point of view as well as the practical realities of what information was truly necessary from a producing party. As time progressed, Mr. Guglielmo became more involved in electronic discovery efforts and worked with other attorneys to create a working dialogue that allowed parties to understand the tremendous amount of information that is available electronically, and to determine what information is necessary for the prosecution of civil litigation. In 2003, Mr. Guglielmo joined the Sedona Conference Working Group 1, created to develop principles and best practice recommendations for electronic document retention and production in civil litigation.

Emerging trends in computing, including cloud computing and social media, present novel issues in the field of electronic discovery. In cloud computing, data resides with the cloud provider as opposed to on an individual’s own computer or server. Web hosted e-mail, such as Gmail and Hotmail, are examples of cloud computing. The cloud provider, therefore, becomes a necessary partner in information governance. Similarly, the ever-changing world of social media poses challenges in electronic discovery. Information on websites such as Facebook, Twitter, and YouTube is constantly being updated. Capturing information on such websites can be extremely difficult. To complicate matters, the Stored Communications Act prohibits “a person or entity providing an electronic communication service to the public” from “knowingly divulg[ing] to any person or entity the contents of a communication while in electronic storage by that service.” To the extent businesses are using social media for business purposes, they should be aware that such communications may be discoverable and take appropriate steps to prevent spoliation.

It is important for both plaintiffs and defendants to be vigilant in preserving potentially discoverable information. Recent cases have made clear the importance of preserving evidence. In Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities, 685 F.Supp.2d 456 (S.D.N.Y. 2010), the court held that if a party does not properly preserve and collect evidence, that party may be presumed to have spoliated evidence. In Rosenthal Collins Group, LLC v. Trading Technologies International, Inc., No. 05 C 4088, 2011 WL 722467 (N.D. Ill. Feb. 23, 2011), the plaintiffs engaged in various acts of misconduct during discovery, including wiping USB drives to make their content unrecoverable even with advanced equipment. As a result of their misconduct, the court granted summary judgment for the defendants and imposed a $1million sanction on the plaintiffs.

Mr. Guglielmo’s expertise on electronic discovery is invaluable to Scott+Scott’s clients as electronic discovery becomes increasingly important to securities, antitrust, and consumer protection litigation.

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Senator Seeks Repeal Of The Railroad Industry’s Antitrust Exemption

Repeal of the railroad industry’s statutory exemption from the federal antitrust laws is on the Congressional agenda for the third time since 2007. Under current law, the railroad industry has an exemption from review of rail restructuring transactions, collective rate setting, and service issues. Railroad mergers and acquisitions are currently exempt from the U.S. Department of Justice’s full antitrust review and approval process, and are reviewed solely by the U.S. Department of Transportation’s Surface Transportation Board.

This exemption has been recommended for repeal several times over the past few years, with the most recent movement spearheaded by Senator Herb Kohl (D-WI), Chairman of the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights. Over the years, proposed repeals have also garnered support from the American Bar Association’s Section on Antitrust and 21 state attorneys general.

On January 25, 2011, Senator Kohl introduced the Railroad Antitrust Enforcement Act of 2011 (S.49) to repeal statutory antitrust exemptions. In early March, the Senate Judiciary Committee passed the bill with a 14-1 vote. The bill will now move to the Senate for the third time since 2007. In October 2007, both the Senate and House Judiciary Committees approved similar legislation; however, the bills were not voted on by the full chambers. Similarly, in March 2009, the bill’s predecessor passed the Senate Judiciary Committee but never made it to the Senate floor for debate before Congress adjourned last year.

Senator Kohl has led the legislative effort to banish the antitrust exemption for the freight railroads, claiming the vacuum has caused massive consolidation in the sector and denied consumers critical protections. The absence of antitrust barriers allowed Class I railroads to rapidly consolidate over the past three decades. During this time, the number of Class I railroads has shrunk from 42 operators to 7, with 4 (Union Pacific, Burlington North Santa Fe, Norfolk Southern, and CSX Corp.) providing nearly 90% of the nation’s freight rail transportation.

If enacted, the bill would amend the Clayton Act to extend the application of the federal antitrust laws to the railroad companies, and subject the freight railroads to regulatory scrutiny, anti-cartel enforcement, and civil lawsuits. Essentially, this would give the U.S. Department of Justice and the Federal Trade Commission the power to regulate freight railroads, and allow state attorneys general and private parties to sue over anti-competitive conduct. Furthermore, the railroads will be stripped of their right to engage in collective ratemaking and hindered from unilaterally imposing massive price increases on so-called captive shippers, industries that are served by a single railroad.

In support of the bill, Senator Kohl argued that “[o]ver the past several years, railroad shippers of vital commodities have faced spiking rail rates. Rail shippers are forced to pass these price increases into the price of their products, and ultimately, to consumers.” Senator Kohl reiterated his commitment to repeal the railroad industry exemption by stating that “[o]ur bill will ensure that railroads play by the same rules as all businesses in our economy and give those injured by anti-competitive conduct strong remedies under antitrust law.”

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Scott+Scott Reaches Settlement In Signalife Securities Action

Scott+Scott reached a $4million settlement agreement with Signalife, Inc. to settle securities violation claims against the Company and its officers and directors.

Lead Plaintiffs brought the suit on behalf of all persons who purchased the publicly traded securities of Signalife during the period between February 10, 2004, and April 14, 2008, inclusive. The suit alleged that Signalife and certain of its officers and directors knowingly and/or recklessly disseminated materially false and misleading statements concerning business operations and the financial condition of the Company. During the time period at issue, Signalife was developing a heart monitor based on proprietary technology that made its product clearly superior to any other product available in the marketplace. The suit alleges that Defendants issued false and misleading statements about the commercial viability of these products, Signalife’s technology, and the Company’s accounting of sales and revenues. The suit alleged that these misrepresentations and omissions caused the artificial inflation of Signalife stock prices during the given period.

The proposed settlement is before a U.S. District Court in South Carolina. If the Court preliminarily approves the settlement, shareholders will be provided with formal notice of settlement and an opportunity to submit a claim for reimbursement.

Scott+Scott believes the proposed terms of settlement would provide an excellent outcome for Signalife investors overall. Pursuit of settlement will not only allow investors to be compensated for damages caused by the Defendants, but would also avoid a potentially long and costly trial. The Lead Plaintiffs have concluded that the proposed settlement is fair, reasonable, adequate, and serves the best interests of investors.

As the settlement is brought before the Court and hearings are scheduled, Scott+Scott will continue to provide updates to investors about the progress of this case.

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U.S. Events

Conferences And Educational Seminars

+ April 2-4, 2011

Building Trades Department Legislative Conference

Washington Hilton and Towers

Washington, DC

The Building and Construction Trades Department, AFL-CIO provides essential coordination and support for its affiliated and national unions to help organized construction workers achieve a powerful voice in government as well as their communities.

+ April 15-16, 2011

Police, Fire & Public Pensions Forum

Hyatt Regency Jacksonville Riverfront

Jacksonville, FL

This event offers attendees many opportunities for trustees and officers of pension funds to address issues surrounding the investment success of pension funds today and in the future.

+ April 26-29, 2011

Institute for Police Research Public Safety Conference

Hyatt Regency

Sarasota, FL

IPR is a non-profit educational and research association that hosts conferences focusing on various issues helping to improve officer’s relationships in the workplace as well as the community.

+ April 27-29, 2011

IBEW District # 4 Progress Meeting

Lakeview Resort

Morgantown, WV

The International Brotherhood of Electrical Workers District # 4 includes local unions from Ohio, Kentucky, Virginia, West Virginia, Maryland and Washington DC. This educational event focuses on keeping unions and their funds informed about issues important to thriving in today’s economy.

+ April 30-May 4, 2011

American Alliance Conference, Ltd.

Boca Beach Club

Boca Raton, FL

The American Alliance Conference will be conducting a joint conference with the Educational Conference of Benefit Plans this year. The conference is attended predominately by Union Officers, Benefit Fund Trustees and Administrators.

Government Finance Officers Association Conferences

+ April 2011

Kentucky GFOA

TBD

+ April 13-15, 2011

Iowa MFOA

TBD

+ April 15, 2011

Maryland GFOA

Stevensville, MD

+ April 19-22, 2011

California Municipal Treasurers Association

San Diego, CA

+ April 20-22, 2011

Alaska GFOA

Valdez, AK

+ April 20-22, 2011

Utah GFOA

St. George, UT

+ April 26, 2011

Oregon State Fiscal Association

Salem, OR

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Scott + Scott LLP is a nationally recognized law firm headquartered in Connecticut with offices in New York City, Ohio and California. The firm represents individual as well as institutional investors who have suffered from corporate stock fraud. Scott+Scott has participated in recovering billions of dollars and achieved precedent-setting reforms in corporate governance on behalf of its clients. In addition to being involved in complex shareholder securities and corporate governance actions, Scott+Scott also has a significant national practice in antitrust, ERISA, consumer, civil rights and human rights litigation. Through its efforts, Scott+Scott promotes corporate social responsibility.

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