April 2014 Newsletter


•  Supreme Court Set to Rule on Trio of Securities Class Action Cases

•  Securities Class Action Settlements Increase to $5 Billion In 2013

•  Class Action “à la française”

•  United States Supreme Court Revisits the Fraud-on-the-Market Theory

•  On the Record

•  Conferences and Educational Seminars


            Supreme Court Set to Rule on Trio of Securities Class Action Cases

            On March 13, 2014, the Supreme Court of the United States granted certiorari in Public Employees’ Retirement System of Mississippi v. IndyMac MBS, making it the third securities class action lawsuit to be on the docket of the Supreme Court.  The Court’s decisions in IndyMac and in the other two cases, Halliburton Co. v. Erica P. John Fund, Inc., and Omnicare v. Laborers District Counsel Construction Industry Pension Fund¸ could change the landscape of securities class action cases in the coming year. 

            The first case that the Supreme Court heard was Halliburton, discussed more in depth in this newsletter, a case that the Supreme Court already ruled upon in 2011 regarding a different issue.  The issue currently before the Court is the viability of the “fraud-on-the-market” presumption of reliance.  The fraud-on-the-market presumption makes it easier to pursue a securities fraud suit as a class action.  Without the presumption, a class of investors would have to provide proof that they commonly relied on a misrepresentation.  The defendant in the suit, Halliburton, seeksto overturn Basic v. Levinson, a 1988 case where the fraud-on-the-market-theory was first recognized.  The Supreme Court heard oral argument on March 5, 2014.

            On March 4, 2014, the Supreme Court granted certiorari in Omnicare, Inc., v. Laborers District Counsel Construction Industry Pension Fund, a case regarding the scope of Section 11 of the Securities Act of 1933, a law that provides a remedy for purchasers of securities issued pursuant to a registration statement that contained a misstatement or omission.  The Supreme Court will determine the standard necessary for pleading a false or misleading opinion.  The Second, Third, and Ninth Circuits have each held that under Section 11, a plaintiff must plead that the statement was both objectively and subjectively false, which requires allegations that the speaker’s actual opinion was different from the opinion made public.  In Omnicare, the Sixth Circuit held that if a defendant "discloses information that includes a material misstatement [even if it is an opinion], that is sufficient and a complaint may survive a motion to dismiss without pleading knowledge of falsity."  The Supreme Court’s decision will likely harmonize the split among the various circuit courts of appeal. 

            As noted above, the Supreme Court granted certiorari in IndyMac on March 13, 2014.  IndyMac is a case from the Second Circuit Court of Appeals that held that the tolling doctrine established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (“American Pipe”), does not apply to the three-year statute of repose in Section 13 of the Securities Act of 1933.  Statutes of repose bar a lawsuit after a fixed number of years from the time the defendant acts in an illegal way.  In American Pipe, the Supreme Court held that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.”  The open issue, however, was whether the American Pipe tolling doctrine applied to the statute of repose, or alternatively, whether statutes of repose are bright-line cutoffs for which no tolling is available.  Like Omnicare, the Supreme Court’s decision in IndyMac will harmonize a split of authority between the circuit courts of appeal.

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Securities Class Action Settlements Increase to $5 Billion In 2013

2013 saw the highest total dollar value of securities class action settlements approved since 2007.  This was due, in large part, to an increase in the number of cases settled, as well as relatively high average shareholder losses associated with cases settled.  In 2013, 67 securities class actions were resolved, up from 57 matters settled in 2012, according to a study issued on March 27, 2014 by Cornerstone Research.

“Resolution of credit crisis–related cases has comprised a large portion of settlement activity in the financial sector in recent years— 22 percent of settlements in 2013, 30 percent in 2012, and 18 percent in 2011.”  According to the study, the increase in average settlement amount in 2013 was significantly affected by the resolution of subprime credit crisis cases.  Of the 44 settlements related to the credit crisis analyzed, Cornerstone found that the median settlement was $30 million and the average settlement was over $140 million.

Settlements involving pharmaceutical firms also contributed to the increase.

Six mega settlements, which are defined as those exceeding $100 million, accounted for 84 percent of total settlement dollars—the second highest proportion in the past ten years.

Positive Effect of Institutional Investor Involvement

Cornerstone’s report also showed that since 2006, more than half of the settlements in any given year have involved institutional investors as lead plaintiffs.  Among institutional investors, public pensions were involved as lead plaintiffs in over 55 percent of settlements with an institutional investor lead plaintiff during the same time frame.  In 2013, public pensions served as the lead plaintiff in 43 percent of settled cases, slightly lower than the 47 percent of settled cases in 2012, but nearly four times the 2004 statistics (12 percent of settled cases.)

The median settlement in 2013 for cases in which a public pension fund served as lead plaintiff was $23 million, compared with $3 million for cases without, according to the study.  Also driving settlement value was the involvement of the U.S. Securities and Exchange Commission, according to the report.  Settlements of $50 million or less were less likely to involve accompanying SEC actions or public pensions as lead plaintiffs.

The Potential Impact of the Supreme Court’s Resolution of Halliburton

The report also notes that the landscape for securities class actions and their settlements may shift dramatically depending on the outcome of Halliburton Co. v. Erica P. John Fund, currently pending in the U.S. Supreme Court.  As discussed in more detail in this month’s newsletter, Halliburton challenges the fraud-on-the-market presumption that was established in 1988 through Basic Inc. v. Levinson.  Cornerstone notes that “[t]he suit has the potential to dramatically affect the entire landscape surrounding securities class actions… such as the damages associated with securities cases, the progression of these cases through the litigation process, and ultimately, the settlement amounts involved.”

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Class Action “à la française

For the first time in France, the French Senate and the French National Assembly adopted the so-called “Hamon Law” which may make it possible to launch class actions for damages resulting from harm to consumers and for anti-competitive practices.  The approval by the Supreme Constitutional Court (the “Conseil Constitutionnel”) finding the Hamon Law to be compatible with the French Constitution completes the initial process of the bill’s introduction.  By doing so, France becomes yet another European nation, after the United Kingdom and Germany to adopt some form of group redress legislation.

Much of the discourse surrounding the introduction of the Hamon Law involved how similar to an American-style system of class lawsuits the French version might be.  The Hamon Law, named after Benoit Hamon, the minister who led support for the bill, incorporates certain key features to temper the law.  A major restriction is imposed by the fact that the Hamon Law only allows officially recognized national consumer protection associations to bring class actions.  These groups may seek damages for the individual harm suffered by consumers who are similarly situated, provided that their common cause of action arises from a breach by one or several professionals of their legal and contractual obligations in the context of a sale of goods or services, or when the harm resulted from a breach of competition laws.  

Furthermore, “à la française” class actions may only seek recovery for pecuniary losses resulting from material and financial damage to consumer’s assets.  Unlike under the Anglo-American legal system, losses resulting from corporal or moral harm are excluded.  Certain industries, many of which are frequently targeted by American litigants, will remain shielded from group actions.  For instance, it will not be possible to sue members of the pharmaceutical industry or manufacturers of injury-causing goods.  On the other hand, anticipated defendants will likely be businesses providing financial services and public utilities.

The Hamon Law includes provisions relating to class actions for cases when the alleged harm results from the breach of competition law or abuse of dominant position.  In those instances, the defendants may only be liable on the basis of a decision by a jurisdiction or competition authority of the European Union or a member state.  Once the member state jurisdiction concludes that a breach was committed, then the defendant’s breach cannot be further disputed.    

During his 2012 presidential campaign, now-French President François Hollande unveiled plans to introduce new tools for economic regulation.  His commitment to mold the French consumer law to conform to the legal models already existing in other European nations was motivated by balancing a desire to protect what he deemed to be the “most vulnerable” groups – consumers, small businesses, small producers, and craftsmen – while maintaining adequate support for large corporations.

A second examination of the Hamon Bill by each assembly is expected to clarify any uncertainties and impracticabilities of the new law.  If fully adopted, France will become the latest nation in Europe to adopt some form of class actions to redress harm done to multiple consumers.

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United States Supreme Court Revisitsthe Fraud-on-the-Market Theory

The United States Supreme Court heard oral arguments in Halliburton Co. v. Erica P. John Fund – revisiting its landmark decision in Basic v. Levinson.  In Basic, the Supreme Court held that the element of reliance in a securities fraud action may be presumed where “[a]n investor who buys or sells stock at the price set by the market does so in reliance on the integrity of that price.”  This is referred to, aptly, as the fraud-on-the-market theory.  In order to invoke the fraud-on-the-market theory at the class certification stage, a plaintiff must demonstrate that the market for a particular security is efficient.

In the Halliburton oral arguments, an attorney for Halliburton argued first that Basic should be overturned or, in the alternative, that the Court adopt a so-called “middle ground.”  The middle ground would supplant the efficient market hypothesis with an event study to determine the market impact for an alleged fraudulent misstatement or omission.  The middle ground was also advocated in briefs submitted by a number of amici.

In practice, adopting the middle ground would accelerate when price impact should be considered.  Under the Basic regime, price impact is generally not considered until the merits stage.  If the Supreme Court adopts the middle ground, as might be suggested by the focus of the Court’s questions, price impact would be considered earlier during litigation, at the class certification stage.

The Supreme Court Justices questioned attorneys for the Erica P. John Fund (the “Fund”) and the Deputy Solicitor General of the Department of Justice (the “DOJ”) for the United States about the practical implications of adopting the middle ground, with diverging responses.  The attorney for the Fund argued that the middle ground would accelerate and potentially increase the cost to litigate, as it would require merits-based discovery before the class certification stage.  The attorney for the DOJ maintained that the middle ground would be a net benefit to plaintiffs, who must ultimately prove price impact.

Though it is uncertain whether the Supreme Court will ultimately ratify Basic, overturn Basic, or adopt a middle ground, what is certain is that plaintiffs and defendants eagerly await the Supreme Court’s opinion.

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On the Record


“Justice is the means by which established injustices are sanctioned.”

Anatole France,
Nobel Prize Recipient in Literature

DOB: 4/16/1844


Conferences and Educational Seminars


April Events in the USA


+April 3rd-4th 2014


New England States Government Finance Officers’ Association (NESGFOA)

The Conference Center at Waltham Woods

Waltham, Massachusetts


The New England States Government Finance Officers’ Association promotes and encourages a closer relationship among those engaged in finance in the municipal, state and federal service.  The conference provides discussion, analysis and solutions under the laws existing in the New England states to public officials whose responsibilities and duties involve addressing state and municipal problems.  The conference also offers educational programs and training especially important to public finance officials and employees during pension reform.


+April 14th-15th, 2014


32nd Native American Finance Officers’ Association Annual Conference (NAFOA)

The Roosevelt Hotel

New Orleans, Louisiana


The two day conference will feature more than 2 dozen sessions and exciting keynotes focused on investing in Indian country, policy affecting tribes, accounting updates and economic development opportunities. Hear from leading industry experts and tribal leaders on strategies for financial success. Sessions support professional growth of attendees. Earn up to 14 continuing education credits


+April 16th – 18th, 2014


The 55th California Municipal Treasurers Association Annual Conference (CMTA)

Hyatt Regency San Francisco Airport Conference Center

Burlingame, California


The California Municipal Treasurers Association Annual Conference is one of the          profession’s longest running state conferences, bringing together almost 150 public sector treasurers and finance professionals throughout California who meet in an educational format to discuss treasury and financial management strategies, improve skills and address the tough challenges they face today.


+April 22nd-23rd, 2014

The Pension Bridge Annual Conference

The Four Seasons Hotel

San Francisco, California


The Pension Bridge Inc. is a professional company that offers educational conferences to the         Institutional Investment Community by providing a high level of education with an impressive and influential speaker faculty in a setting that is conducive to networking. The networking sessions are unique and designed to help connect industry peers and prospective business contacts. The ratio of plan sponsor to service provider allows the event to be desirable and accommodating in the conference industry. The Pension Bridge is known for its strength, stability, relationships and operational excellence.


+April 23rd – 25th, 2014


Pennsylvania State Association of County Controllers (PSACC) Annual Conference

Ramada Inn Conference Center

State College, Pennsylvania


The Pennsylvania State Association of County Controllers is an organization of 38 county government finance professionals whose purpose is to encourage the discussion and resolution of issues arising in the discharge of the duties and functions of the office of County Controller.  The organization advances the professional development of its members through a conscientiously applied program of continuing professional education and training. The Spring conference is the organization’s major educational conference providing an opportunity for attendees to receive continuing education credits in various topics.



+April 26th – May 1, 2014

National Council for Public Employees Retirement System (NCPERS)

Sheraton Chicago Hotel & Towers Convention Center

Chicago, Illinois


Founded in 1941, the National Conference on Public Employee Retirement Systems is the largest trade association for public sector pension funds, representing more than 550 funds throughout the United States and Canada.  As many as 1,000 trustees, administrators, state and local officials, investment, financial and union officers from across the nation attend this annual conference.  NCPERS works to promote and protect pensions by focusing on advocacy, research and education for the benefit of public pension shareholders.


Government Finance Officers’ Association Conferences


+ April 2nd - 4th, 2014

New York State Government Finance Officers’ Association (NYSGFOA)

Marriott Hotel

Albany, NY



+April 9th – 11th, 2014

Iowa Municipal Fund Officers’ Association (IMFOA)

www.imfoa.org  for conference details


+April 9th – 11th, 2014

Wisconsin Government Finance Officers’ Association (WGFOA)

The Osthoff Resort

Elkhart Lake, Wisconsin



+April 13th-15th, 2014

Government Finance Officers’ Association of Texas (GFOAT)

Renaissance Austin Hotel

Austin, Texas



+April 16th – 18th, 2014

Utah Government Finance Officers’ Association (UGFOA)

Hilton Garden Inn

St. George, Utah



+April 24th, 2014

Maryland Government Finance Officers’ Association (MDGFOA) Spring Conference

BWI Marriott

Linthicum, MD



+April 24th, 2014

Connecticut Government Finance Officers’ Association (CTGFOA)

Anthony’s Banquet Center

New Haven, CT



+April 27th – 30th, 2014

Pennsylvania Government Finance Officers’ Association (PGFOA)

Penn State Conference Center

State College, PA



+April 30th – May 2nd, 2014

Government Finance Officers’ Association of Missouri (GFOA-MO)

Country Club Hotel and Conference Center

Lake Ozark, MO



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