INSIDE THIS ISSUE
Median Settlement Value Of Securities Class Actions Reaches All Time High In 2012
As 2012 came to a close, two publications summarized the important trends in securities class action litigation. On December 11, 2012, National Economic Research Associates, Inc. (“NERA”) released a publication entitled, “Flash Update: Trends in Securities Class Actions.” On January 23, 2013, Stanford Law School’s Securities Class Action Clearinghouse, in cooperation with Cornerstone Research, released its semiannual report, Securities Class Action Filings – 2012 Year in Review. One important trend noted was that the median settlement value of securities class action cases was the highest reported figure since NERA began tracking such data in 1996.
According to both publications, the total number of securities class action filings was down in 2012 compared to 2011. This decline was attributed, in part, to a sharp reduction in filings associated with merger and acquisition transactions. Only 13 cases were filed in 2012, compared with 43 such cases in 2011, and 40 in 2010, according to the Stanford publication. Another factor in the reduced number of filings was a decline in filings against Chinese issuers listed on U.S. exchanges through reverse mergers. Although there were as many as 31 Chinese reverse mergers cases in 2011, this number shrank to only 10 such filings in 2012 according to the Stanford report.
In conjunction with a reduced number of securities class actions filings, only 60 cases were dismissed in 2012, the lowest level since 1998, the NERA publication reported. In comparison, there were 124 dismissals in 2010 and 123 dismissals in 2011. One possible factor in such a drastic reduction in dismissals could be due to the fact that some resolutions have been delayed while the U.S. Supreme Court considers the Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds case. At issue in Amgen is whether securities plaintiffs, before being allowed to proceed with a class action lawsuit, have to demonstrate that a company’s alleged misrepresentations materially affected share prices, an issue which has the potential to impact several pending securities class actions.
Despite the fact that securities class action dismissals were down near record lows, the number of securities class action settlements was unusually low as well. Although the total number of settlements was low, the average settlement value was $36 million, up from $23 million in 2011. The median settlement value of securities class actions was at an all-time high at $11.1 million (surpassing $11.0 million from 2010), which was only the second time that the median settlement value exceeded $10 million since NERA began collecting data in 1996.
On January 9, 2013, Scott+Scott Partner Joseph Guglielmo was part of a Sedona Conference panel that presented on various topics concerning electronic discovery. The distinguished panel included the Honorable Michael M. Baylson, district court judge for the U.S. District Court for the Eastern District of Pennsylvania.
Electronic Discovery (or e-discovery) refers to discovery in litigation in electronic format, i.e., stored emails and computer files. As businesses and corporations quickly transitioned from paper documents to electronic documents, the Federal Rules of Civil Procedure did not similarly transition to the updated realities as quickly. In 2006 and 2010, the Federal Rules of Civil Procedure were amended in an attempt to reduce the amount of disputes over the subject of electronic discovery. One of the goals of the panel is to advocate further changes to the Federal Rules of Civil Procedure that incorporate new law that has come out of cases involving discovery disputes regarding electronic discovery.
The primary topic of the panel was proportionality in electronic discovery, a concept meaning that the burdens of cost of producing electronic information in litigation should be weighed against the potential value and uniqueness of the information. The commentary on the proportionality is a project of The Sedona Conference’s Working Group on Electronic Document Retention & Production. The panel identified the following six “Principles of Proportionality:”
1. The burdens and costs of preserving potentially relevant information should be weighed against the potential value and uniqueness of the information when determining the appropriate scope of preservation.
2. Discovery should generally be obtained from the most convenient, least burdensome, and least expensive sources.
3. Undue burden, expense, or delay resulting from a party’s action or inaction should be weighed against that party.
4. Extrinsic information and sampling may assist in the analysis of whether requested discovery is sufficiently important to warrant the potential burden or expense of its production.
5. Nonmonetary factors should be considered when evaluating the burdens and benefits of discovery.
6. Technologies to reduce cost and burden should be considered in the proportionality analysis.
For several years, Mr. Guglielmo has participated in panels and conferences for The Sedona Conference, and is a member of the Working Group on Electronic Discovery Retention and Production. The Sedona Conference is a nonprofit research and educational institute dedicated to the advanced study of law and policy in the areas of antitrust, intellectual property, and complex litigation.
In December, regulators in the United States and the United Kingdom hit UBS with record $1.5 billion in fines for its part in the London Interbank Offered Rate (“LIBOR”) scandal. UBS, a Swiss multinational bank, was the second largest bank to be fined and sanctioned for its role in an alleged vast conspiracy to fix interest rates that are tied to trillions of dollars in loans and other financial products. The UBS fine was three times larger than the fine imposed on Barclays, a British multinational bank, which was fined in July for its role in the manipulation scandal.
LIBOR represents the average daily interest rate estimated by leading banks in London. It is the primary benchmark for short-term interest rates around the world. The allegations against the banks that set LIBOR claim they manipulated their submissions in order to benefit their trading positions and to mask their liquidity problems at the height of the financial crisis. Banks reporting LIBOR are specifically alleged to have made low submissions that falsely suggested they could borrow at very low rates even though they were reporting negative revenues, writing down assets, and having their credit ratings downgraded. As a result, investors who purchased financial products tied to LIBOR were likely deprived of the additional interest they would have received had LIBOR been reported accurately.
The documents released in connection with the UBS settlement demonstrate that the practice of manipulating LIBOR was even more persuasive than was previously known to the public. The U.S. Commodity Futures Trading Commission (“CFTC”), working in conjunction with the U.S. Department of Justice (“DOJ”) found that “UBS regularly tried to manipulate multiple benchmark interest rates for profit” for at least six years. The CFTC also found “[m]ore than 2,000 instances of unlawful conduct involving dozens of UBS employees, colluding with other panel banks, and inducing interdealer brokers to spread false information and influence other banks[.]” In addition to the $1.5 billion fine, two UBS traders were criminally charged by the DOJ for conspiracy, with one trader also facing charges of price fixing and wire fraud.
It is anticipated that Royal Bank of Scotland will be the next bank to be fined for its role in the LIBOR manipulation scandal and criminal charges are also expected. Several other banks, including JPMorgan Chase, Bank of America, and Citibank have received subpoenas over the scandal as well.
Scott+Scott has been on the forefront of prosecuting claims against the LIBOR manipulating banks. For more information on how the LIBOR scandal may have affected your portfolio, please contact David Scott at firstname.lastname@example.org or 1-800-404-7770.
The False Claims Act (the “FCA”) is proving to be every bit as relevant today as when it was first passed by Congress on March 2, 1863, and signed into law by President Lincoln. Originally enacted to curtail the sale of defective supplies and rancid rations to the U.S. government during the Civil War, the FCA has led to record recoveries for fraud perpetrated in the health care industry. And, many of these recoveries result from the efforts of private citizens.
According to a December 4, 2012 press release by the U.S. Department of Justice (“DOJ”), the federal government recovered $9.5 billion in health care dollars from January 2009 through fiscal year 2012. The FCA has been instrumental in recovering money for false claims attributable to Medicare and Medicaid abuse. The DOJ release further notes that some of the largest recoveries have come from pharmaceutical and medical device companies that unlawfully promoted off-label drug use and paid kickbacks to physicians. These companies received millions of dollars from federally-insured health programs as a result of their false claims.
In addition to recovering federal funds paid to companies that engaged in the unlawful marketing of off-label uses for prescription drugs and kickbacks, the FCA has been useful in recovering money for other types of false claims. Examples include billing for services not rendered (“phantom billing”), performing unnecessary services, billing for a more expensive service than was actually performed, and diagnosing patients with illnesses or conditions they do not have in order to qualify for Medicare or Medicaid reimbursement.
The press release also notes that private citizens are responsible for the majority of funds recovered by the federal government for false claims. Private citizens are authorized under the whistleblower (qui tam) provisions of the FCA to file a lawsuit on behalf of the federal government for false claims. The FCA imposes civil penalties of $5,000 to $10,000 per false claim “plus 3 times the amount of damages which the Government sustains” as a result of the false claim. If a private plaintiff (known as a relator) successfully recovers money on behalf of the federal government for false claims, the relator is entitled to an award of between 15% and 25% of the recovered proceeds. This is a powerful and necessary incentive because the false claims might otherwise go undetected and tax dollars unrecovered.
Conferences and Educational Seminars
+February 6-8, 2013
Opal Financial Group’s Investment Education Symposium in Conjunction with The Louisiana Trustee Educational Council (LATEC)
Astor Crowne Plaza
New Orleans, LA
LATEC develops and conducts educational programs and networking opportunities among trustees, administrators, and staffs of pension funds designed to foster and maintain the level of expertise demanded of fiduciaries under applicable law so that they may better serve their members and their respective funds. Opal Financial Group coordinates conferences for entities such as public funds, family offices, foundations, Taft-Hartley funds and endowments
+February 6-8, 2013
National Association of Public Pension Attorneys (NAPPA) Winter Seminar
NAPPA is a legal professional and educational association. NAPPA is a practical and valuable resource tool for attorneys in the public pension arena. Educational seminars provide peer-to-peer interaction in several practice areas, as well as up-to-date information regarding pertinent litigation and legislation.
+February 8, 2013
Michigan Association of Public Employee Retirement Systems (MAPERS) Educational Seminar
Sheraton Detroit/ Novi Hotel
Topics will include private equity investing, legislation that affects public pensions, practical administration of providing benefits pursuant to applicable court orders, and actuarial concepts associated with defined benefit plan funding. The MAP test will be offered at the conclusion of the seminar.
+February 10-13, 2013
Financial Research Associate, LLC’s 10th Annual Made In America: Taft-Hartley Benefit Summit
Tropicana Hotel and Convention Center
Las Vegas, NV
The 2013 Made in America Summit will be divided into multiple tracks; track “A” providing upfront education on pension investment issues, and track “B” health & welfare topics. Several sessions will feature domestic equity issues and explore asset recovery. The “get ready-to-use information on how to advance funding status” will be presented using numerous case studies.
+February 15-19, 2013
36th Annual National Labor and Management Conference
Westin Diplomat Resort & Spa
The National Labor and Management Conference has been described as the best labor-management meeting in the country. The six-day event offers seminars for both labor and management in the following areas: fiduciary & legal, pension fund investment, health & welfare, as well as general topics including prevailing wage, labor shortages, and safety issues. The program content is developed by a distinguished group of business executives, labor leaders, public officials, and academics.
+February 17-19, 2013
Opal Financial Group’s 25th Annual Police, Fire, EMS and Municipal Employee Pension & Benefits Seminar in conjunction with The National Association of Police Organizations (NAPO)
Encore Wynn at Las Vegas Hotel
Las Vegas, NV
NAPO has evolved into an organization that represents uniformed and non-uniformed public safety workers and their pension plans. Founded in 1978, NAPO is a coalition of police unions and associations from across the United States that serves to advance the interests of America’s law enforcement officers through legislative and legal advocacy, political action, and education.
+February 10-13, 2013
North American Ironworkers/IMPACT Labor-Management Conference
Las Vegas, NV
+February 11, 2013
Dallas Texas Building and Construction Trades Council
+February 26, 2013
West Virginia Building and Construction Trades Council
Government Finance Officers’ Association Conferences
+February 1, 2013
+February 7, 2013
Rocky Hill, CT
+February 27-March 1, 2013
Renaissance Montgomery Hotel & Spa
On The Record
“Laws made by common consent must not be trampled on
U.S. President George Washington
(Feb. 22, 1732 – Dec. 14, 1799)
Source of Quote Unknown
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: email@example.com + UK Tel: 0808.234.1396