December 2013 Newsletter


•  Scott+Scott Appointed As Lead Counsel for Expanded Class In SAC Capital Insider Trading Class Action

•  Scott+Scott Senior Partner Speaks on eDiscovery

•  Court Rules Dodd-Frank Whistleblower Protections Apply Only In The United States

•  District Court Grants End-Payor Plaintiffs’ Motion For Class Certification In Nexium Case

•  On The Record

•  Conferences and Educational Seminars

Scott+Scott Appointed As Lead Counsel for Expanded Class In SAC Capital Insider Trading Class Action

Scott+Scott has been appointed as lead counsel in an expanded putative class action pending in the U.S. District Court, Southern District of New York, against SAC Capital Advisors (“SAC”) and other affiliated companies concerning the hedge fund’s $276 million insider trading scheme involving Wyeth stock (formerly NYSE:WYE).  The class action was brought by Scott+Scott in April 2013 on behalf of the City of Birmingham Retirement and Relief System, a Wyeth investor, and other persons and entities who purchased or otherwise acquired the common stock of Wyeth between July 21, 2008 and July 29, 2008.

The complaint charged that SAC Capital Advisors, CR Intrinsic Investors, LLC , and other company affiliates, illegally traded Wyeth shares based on material non-public information ahead of a July 29, 2008 announcement disclosing disappointing clinical trial results for Wyeth’s bapineuzumab (AAB-001) (“bapi”), an Alzheimer’s disease treatment that was the focus of Wyeth’s drug development efforts.

In June 2013, the City of Birmingham Retirement and Relief System was appointed as lead plaintiff for the class and Scott+Scott was appointed lead counsel. Following the firm’s appointment, Scott+Scott, on behalf of the City of Birmingham, filed an amended class action complaint, which greatly expanded the class to include investors in Wyeth common stock that traded contemporaneously with and opposite SAC Capital’s and its affiliates’ unlawful trades during the periods from July 1, 2006 through and including July 18, 2008.  On October 22, 2013, Scott+Scott was appointed as co-lead counsel for the expanded class by U.S. District Judge Victor Marrero.

The acts alleged in the expanded class action complaint are also the subject of a pending criminal prosecution, United States v. S.A.C. Capital Advisors, L.P., et al., No. 13-cr-541, and an SEC enforcement action, SEC v. CR Intrinsic Investors, LLC, No. 12-cv-8466 (the “SEC Action”), also proceeding in New York federal court.  SAC has agreed to a $616 million civil settlement with the SEC without admitting or denying the agency's allegations. 

Scott+Scott’s appointment came days ahead of a major development in the criminal case against SAC Capital.  On November 4, 2013, the United States Attorney for the Southern District of New York and the Federal Bureau of Investigation announced that they had reached a plea agreement in the criminal action with SAC Capital and certain of its affiliates, including CR Intrinsic. Under the agreement, which is subject to court approval, the SAC companies will plead guilty to securities fraud and wire fraud in connection with large-scale insider trading schemes carried out by the companies. The agreement imposes a $1.8 billion financial penalty —the largest insider trading penalty in history—split between a $900 million fine in the criminal case and a $900 million forfeiture judgment in a civil money laundering and forfeiture action filed by the government simultaneously with the criminal charges. The forfeiture judgment credits the SAC companies’ previous $616 million settlement with the SEC.

The agreement also provides that the SAC companies and their affiliates will no longer accept outside investor funds and will shut down operations as an investment adviser.

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Scott+Scott Senior Partner Speaks on eDiscovery

Scott+Scott senior partner, Joseph Guglielmo, recently participated in the annual meetings of two of the most influential groups on eDiscovery issues: The Sedona Conference and the Advanced eDiscovery Institute.

According to The Sedona Conference’s website, the organization was founded in 2002 to “mov[e] the law forward in a reasoned and just way.” To that end, The Sedona Conference Working Group on Electronic Document Retention and Production (“Working Group 1”) works to “develop principles and best practice recommendations for electronic document retention and production in civil litigation.”  Working Group 1 held its annual meeting in Phoenix, Arizona from November 6 through 8.

The Working Group 1 annual meeting was attended by numerous federal and state court judges, lawyers from both the plaintiffs’ and defense bar, as well as consultants and vendors who regularly work on matters that involve tremendous amounts of eDiscovery. All of the participants engaged in a reasoned dialogue on issues affecting the current eDiscovery landscape, including the proposed changes to the Federal Rules of Evidence.

Mr. Guglielmo represented the plaintiffs’ bar in a panel discussion on Implementing Meaningful Cooperation: Differing Perspectives of Requesting and Producing Parties.

The Advanced eDiscovery Institute at Georgetown Law was formed in 2003 with similar goals as The Sedona Conference. At the annual meeting held on November 21 and 22, Mr. Guglielmo was a panelist for Defending the eDiscovery Process through the Backward Lens of Hindsight.

The panel discussion was guided by a hypothetical fact pattern where Mr. Guglielmo, serving as plaintiff’s counsel, brought a motion to compel discovery after finding that some email evidence was missing from the defendant’s document production. By presenting this discussion in a series of real-world hypotheticals, the audience was given an opportunity to explore the balance between the need for information and the reasonableness of the defendant’s process in preserving, collecting, and ultimately producing documents. After the hypotheticals unfolded, the audience was then given an opportunity to participate by identifying what the parties could have done to avoid the disputes and how the process could have been made more transparent without compromising counsels’ duties to their respective clients.

Participating in these conferences is an effective and timely way to stay abreast of developments and best practices in eDiscovery – an aspect of civil litigation that is of crucial importance.

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Court Rules Dodd-Frank Whistleblower Protections Apply Only In The United States

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) was passed, in large part, to provide whistleblowers with significant financial incentives to report corporate wrongdoing or illegal activity.  Equally important, Dodd-Frank was passed to provide whistleblowers with adequate protections from retaliatory actions by the entities that they blow the whistle on.

As a result of these protections, the Securities and Exchange Commission (“SEC”) recently reported that in Fiscal Year 2012, the SEC fielded over 3,000 whistleblower allegations.  The vast majority of these allegations pertain to domestic companies and involve domestic whistleblowers.  However, 3.8 percent of the whistleblower allegations reported in 2012 related to allegations involving the Foreign Corrupt Practices Act (“FCPA”), meaning that the underlying issues in those cases involved a foreign entity and/or a foreign whistleblower.

That raised the question of whether Dodd-Frank’s whistleblower protections applied to foreign entities and foreign whistleblowers.  Nevertheless, the question remained unanswered because no U.S. court had been presented with such a situation.  However, the U.S. District Court for the Southern District of New York recently answered this question, ruling that Dodd-Frank’s protections do not apply outside of the United States. 

In so ruling, U.S. District Judge William Pauley granted a motion to dismiss by Munich-based Siemens AG, tossing a suit brought against it by a former Siemens compliance officer in China who claimed he was fired for exposing the fact that Siemens’ Chinese subsidiary utilized allegedly illegal kickbacks to boost medical equipment sales. The case, Meng-Lin Liu v. Siemens AG (No. 1:13-cv-00317), alleged that Siemens former compliance officer, Meng-Lin Liu (“Liu”), was fired for blowing the whistle on an alleged kickback scheme in which Siemens China submitted inflated bids to sell medical imaging equipment to public hospitals in North Korea and China.  These sales would allegedly proceed through third-party intermediaries, which bought the equipment from Siemens at significantly lower prices, and then resold it to the subject hospital for the original inflated bid price and paid off the officials who signed off on the bids.  Liu subsequently reported Siemens for FCPA violations and was thereafter terminated by Siemens.

Liu then sought protection from Dodd-Frank by bringing action against Siemens under Dodd-Franks’ anti-retaliation provision, arguing that while the language of Dodd-Frank was silent on its extraterritorial application, the United States Congress intended to protect whistleblowers wherever they were.  For their part, Siemens moved to dismiss the action, arguing that Dodd-Frank’s whistleblower protections were not applicable outside the United States.

Ultimately, Judge Pauley dismissed Liu’s action against Siemens because he concluded that Dodd-Frank’s protections extended only within the United States and Liu’s case had no substantial connection to this jurisdiction.  As Judge Pauley reasoned, Liu’s case involved a Taiwanese resident who brought suit against a German company over alleged corruption in China and North Korea, and that when a “statute (like Dodd-Frank) gives no clear indication of an extraterritorial application, it has none.”  Thus, Judge Pauley ruled that Dodd-Frank could provide Liu with no whistleblower protection.

Such an opinion will no doubt bolster employers’ confidence that the U.S. courts will not entertain whistleblower retaliation claims that center on wholly foreign disputes.  Whether this decision will be tested in other courts remains to be seen, but some commentators have stated that without further challenges, this decision may cause a chilling effect on the number of whistleblower reports in the future.      

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District Court Grants End-Payor Plaintiffs’ Motion For Class Certification In Nexium Case

The United States District Court, for the District of Massachusetts, has granted End-Payor Plaintiffs’ motion for class certification, in a case alleging anticompetitive conduct by manufacturers of the drug Nexium. In the case captioned In re Nexium (Esomeprazole) Antitrust Litigation, No. 12-md-02409-WGY, (D. Mass.), plaintiffs alleged that drug manufacturers stalled the market entry of generic Nexium to inflate the price of the branded product. End-Payors— including one of the lead plaintiffs represented by Scott+Scott—brought a class action complaint alleging defendants’ conduct violated state and federal antitrust and consumer protection laws. End Payors filed their motion for class certification on July 26, 2013, and the Court held a hearing on the motion on September 17, 2013.  Judge Young, for the District of Massachusetts, Boston Division, rendered his decision on November 14 2013.

Under Federal Rule of Civil Procedure 23(a), plaintiffs must meet the four requirements of numerosity, commonality, typicality, and adequacy in order to pursue a case as a class action. Additionally, plaintiffs must prove they can proceed with the case under Rule 23(b) requirements regarding certain types of relief a class may seek. In Nexium, End-Payors sought money damages, under Rule 23(b)(3), for which they were required to demonstrate that (i) the class action was the superior mechanism of trying their state claims, and (ii) that common factual and legal elements of those claims predominate over any individual issues.

In its written opinion, the Court laid out various bases for granting End-Payors’ motion. First, the Court granted End-Payors’ motion on the basis of the Rule 23(a) requirement, holding that there were no conflict of interest issues—as between third party payors and consumers that are both members of the End-Payor class—that would defeat class certification. Accordingly, the named plaintiffs constituted “adequate” class representatives.

The Court also rejected Defendants’ arguments that End-Payors could not establish the elements of predominance and superiority, under Rule 23(b)(3) because of variations between the state law claims brought by End-Payors. Because the relevant antitrust, consumer protection, and statutes of limitations laws contained few variations, these differences did not defeat class certification.

The majority of the Court’s decision, however, focused on the Rule 23(b)(3) issue of predominance, particularly in light of several recent Supreme Court decisions, including Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013).  In their opposition to End-Payors motion, the Defendants argued that common questions did not predominate over individual questions, because of the variance in injury among putative class members, including some class members suffering no injury at all.

The Court rejected this argument, finding that End-Payors’ expert had adequately demonstrated that prices for Nexium products were artificially high, as a result of Defendants’ anticompetitive conduct, and that, as a result, all class members were exposed to overcharges for Nexium or its generic equivalents. In the “de minimis number of instances where individual class members may not have been actually injured – because of rebates, contracts or brand-loyal purchasing – this did not defeat class certification. Rather, the Court found, these class members are merely unable to claim damages from foreclosure of a generic version of Nexium to the market, and could be excluded from the class definition.

The Court further found, consistent with the requirement in Comcast, that End-Payors’ theories of liability against Defendants all arise from the same conduct. Each theory of liability was consistent with—and caused—End-Payors’ alleged “damages”; i.e., overcharges to the class. The damages, themselves, were capable of being ascertained by a single aggregate damages methodology, proffered by the End-Payors’ expert witness. Accordingly, End-Payors had met the Rule 23(b)(3) predominance requirement, that they could demonstrate antitrust impact, with evidence common to the entire class.

In rendering its decision, the Court reminded the parties that it was not making ultimate findings of fact; but noted that it was “indeed ironic that we today routinely impose lengthy prison sentences based on nothing more than uncorroborated hearsay, but are exhorted to apply ‘rigorous analysis’ to citizens seeking the benefits of collective action against a defendant.”

Trial on End-Payors’ claimsbefore the District Court is scheduled to proceed in March, 2014.

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“I saw one excellency was within my reach – it was brevity and I determined to obtain it.”
John Jay, DOB: 12/12/1745, First Chief Justice of the United States


December Events

Conferences and Educational Seminars


+December 3-5th, 2013

National Association of State Treasurers (NAST)

Issues Conference on Public Funds Management

Conrad Hotel

New York, New York

The 2013 NAST Issues Conference States face unprecedented fiscal challenges today: lean budgets, reduced federal assistance, and turbulent financial markets.  The NAST Issues Conference on Public Funds Management is the premiere meeting for public and private sector officials to discuss strategies that address these important issues.  National experts in the financial services industry and government will speak on pension fund investing, debt management, and new regulatory complexities.  This conference will provide public finance officials with the tools they need to successfully manage state funds while navigating through a recovering economy.


+December 8-10, 2013

Global Indexing & ETFs (Super Bowl of Indexing) Conference 

JW Marriott Camelback Inn

Scottsdale, AZ

Information Management Network (IMN) will produce its 18th annual investment management conference; the Global Indexing and ETFs conference formerly known as the Super Bowl of Indexing.  This year’s focus will be combining education filled with cutting edge content as presented by senior executive partners with networking opportunities.  The conference is well known for its keynote speakers, who have included Henry Kissinger, Madeleine Albright, Bill Bradley, Harvey Pitt, Robert Shiller, Christina Romer and Harry Markowitz among other Nobel Laureates.  Investment Management Network has developed long-term relationships with many of the largest and most influential investors around the globe.


+December 8-10th, 2013

Alternative Investing Summit and CLO Summit produced by Opal Financial Group

Ritz-Carlton, Laguna Niguel

Dana Point, CA

Opal Financial Group is an organization offering peer networking and educational conferences in numerous continents.  This year, the Alternative Investing Summit will run in conjunction with the CLO Summit which will provide additional opportunities for participants.  Opal Financial group works closely with small and mid-sized plans, as well as with national, state and local industry associations and trade groups that represent the institutional investor community.  Hundreds of pension professionals from around the country will come together to discuss the most pressing issues affecting funds including  fiduciary responsibility, plan funding and maximizing investments.


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Scott + Scott LLP is a nationally recognized law firm headquartered inConnecticut with offices in New York City, Ohio and California. The firmrepresents 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.

Scott+Scott’s PT+SM System is the firm’s proprietary investment portfolio tracking service. Carefully combining the firm’s proprietary computer-based portfolio monitoring software with Scott+Scott’s hands-on approach to client  relations is a proven method for institutional investors and their trustees to successfully

  • Monitor their investment portfolios  
  • Identify losses arising from corporate fraud    
  • Consider what level of participation any given situation requires   
  • Recover funds obtained on their behalf through investor litigation action  

To obtain more information about Scott+Scott’s PT+SM services or to schedulea presentation to fund trustees, fund advisors or asset managers, please contact:    David R. Scott + Toll Free: 800.404.7770     email: + UK Tel: 0808.234.1396