February 2014 Newsletter

INSIDE THIS ISSUE

•  Scott+Scott Appointed Lead Counsel in Davita Healthcare Partners Derivative Litigation

 Scott+Scott Attorneys Appointed Lead Counsel in Edwards Lifesciences Class Action

•  Target Corporation Embroiled In One of the Largest Data Security Breaches in American History

•  U.S. Supreme Court Expands States’ Ability to Enforce Antitrust and Consumer Protection Claims

•  On The Record

•  Conferences and Educational Seminars

 

Scott+Scott Appointed Lead Counsel in Davita Healthcare Partners Derivative Litigation

            On January 7, 2014, the HonorableJudge William Martinez of the United States District Court for the District of Colorado appointed Scott+Scott, Attorneys at Law, LLP as lead counsel over the consolidated action, In re DaVita Healthcare Partners Derivative Litigation, Case No. 12-cv-2074-WJM-CBS.  The suit alleges that the Board of Directors of DaVita Healthcare Partners, Inc. (“DaVita”) breached their fiduciary duty to shareholders and the Company by instituting a litany of improper business practices that violated the False Claims Act and Anti-Kickback laws.

            Based in Colorado, DaVita is a healthcare company that specializes in kidney dialysis services for its patients.  Being a dialysis company, its financial success is heavily dependent on government reimbursements from Medicare and Medicaid.  As described in DaVita’s own filings with the Securities and Exchange Commission, DaVita is embroiled in a series of interlocking federal investigations and lawsuits that implicate the Company’s top management and Board of Directors.  These lawsuits and investigations allege that, among other things, DaVita violated the False Claims Act by submitting false and fraudulent billing statements to Medicare related to different types of dialysis medications that DaVita gives to its patients.  Other investigations allege that DaVita’s joint ventures with physicians do not comply with the anti-kickback laws or False Claims Act.  As a result of the directors’ and officers’ unfaithful conduct, DaVita has already incurred costs of $89 million to settle claims relating to how it billed the Government for dialysis medication.  DaVita has also established a “loss contingency reserve” of $397 million in in an attempt to settle the civil and criminal investigations relating to the violations of the anti-kickback laws.  Other lawsuits and investigations also remain pending.

            Scott+Scott, on behalf of a long term institutional shareholder, first filed suit in May of 2013.  Prior to filing, Scott+Scott conducted a books and records investigation, obtaining documents and materials from DaVita’s Board of Directors pursuant to a mechanism in Delaware state law, the state where DaVita is incorporated.  Some of the materials that were obtained were then incorporated into the Complaint against the board members.  The inclusion of these materials was a factor that Judge Martinez used in deciding to appoint Scott+Scott as Lead Counsel, finding that the “Complaint makes particularized allegations with respect to the connection between the board and the alleged corporate trauma[.]”  Further, in deciding to appoint Scott+Scott over a competing firm, the Court stated that “counsel worked more vigorously to identify and/or investigate potential claims in the action, weighing in favor of appointing Scott+Scott as Lead Counsel.”    

           

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Scott+Scott Attorneys Appointed Lead Counsel in Edwards Lifesciences Class Action

    On January 8, 2014, Scott+Scott, Attorneys at Law, LLP attorneys Joseph P. Guglielmo, Donald A. Broggi, and Joseph D. Cohen were appointed lead counsel in a putative class action pending in the U.S. District Court for the Southern District of California against Edwards Lifesciences Corporation (“Edwards”) and senior officers of Edwards, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 10b-5 promulgated thereunder.  Scott+Scott represents lead plaintiff City of Omaha Police and Fire Retirement System, among other institutions, in the action, which charges that Edwards Lifesciences withheld material information from investors during the class period extending from April 25, 2012 to April 23, 2013.

    Founded in 1999 and headquartered in Irvine, California, Edwards markets and sells medical products and technologies for the treatment of structural heart disease, among other indications.  The Company offers surgical heart valve therapy products, which are used to replace or repair diseased or defective heart valves.  Among other products, Edwards markets the SAPIEN valve, a collapsible aortic heart valve that can be introduced into the body without traditional open-heart surgery via a minimally invasive, catheter-based delivery system.

    During the launch of SAPIEN in the United States, Edwards consistently offered positive assessments of, among other things, the extent to which U.S. hospitals were moving to SAPIEN valves.  These statements, which indicated strong enthusiasm in the medical community, formed the basis for the Company's projections relating to sales, earnings, and the number of hospitals that Edwards was training to perform SAPIEN implants.

    The class action complaint, filed on September 18, 2013, alleges that the statements made during the Class Period regarding the prospects, projected sales, and adoption of the Company’s SAPIEN valve and related projections of financial performance for the Company’s operations were false and misleading.  Specifically, the complaint alleges that the defendants knew, but concealed from Edwards’ shareholders, that: (1) adoption of SAPIEN was weaker than the Company claimed, due to concerns among physicians over the risks and complexity of the procedure for implanting the valve; (2) Edwards’ actual outlook for sales and earnings per share was significantly weaker than the optimistic guidance defendants offered to investors; and (3) as a result, defendants lacked a reasonable basis for their optimistic statements concerning the Company’s operations, forecasts, and outlook.

    On April 23, 2013, the Company disclosed that approximately 20 candidate hospitals had postponed SAPIEN training, there was substantially no backlog of patients awaiting SAPIEN implants, and that the Company’s financial results had been and would likely continue to be weaker than previous estimates.  In response to this news, Edwards’ stock price sharply declined $18.21 per share, or 21.99%, to close at $64.60 per share on April 24, 2013 on extremely heavy trading volume.  Edwards’ shares are down nearly 30% from one year ago.

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Target Corporation Embroiled In One of the Largest Data Security Breaches in American History

            On December 18, 2013, the Target Corporation (“Target”) announced that between November 27, 2013 and December 15, 2013, millions of customers’ credit and debit card accounts were hacked in one of the largest data security breaches in American history.  Target stated that “customer name, credit or debit card number, and the card’s expiration date and CVV” may have been involved in the breach. 

            Initially, Target estimated that the data breach would impact approximately 40 million  customers.  Then, on January 10, 2014, Target nearly tripled its estimate, announcing that around 110 million customers’ information could have been taken.  In fact, Target acknowledged that the 110 million figure could include information from customers who did not even swipe their debit or credit cards during the November 27 to December 15 time frame, but who provided even basic information to Target over the past several years.

            On December 20, 2013, The New York Times reported that the black market for credit and debit cards saw a ten to twentyfold increase in the number of high-value stolen cards, from nearly every bank and credit union.  Sophisticated thieves can recreate credit or debit cards by burning the stolen information onto magnetic strips on counterfeit cards.  To help consumers whose data may have been stolen, banks and credit unions have been forced to reissue millions of credit and debit cards.  This process, which costs a several dollars per card, imposes substantial costs on these banks and credit unions.

            Most states have data security breach laws that impose duties on companies like Target to notify consumers if their personal information has been stolen and to not retain customers’ information after the credit or debit transaction is completed.  Presently, there is no federal law that requires disclosure of security breaches, although Congress has proposed a variety of measures. 

            A number of state attorneys general have combined to launch a multistate investigation into the data breach.  Connecticut Attorney General George Jepsen encouraged consumers to take advantage of the free credit monitoring program offered by Target, and urged shoppers to “be vigilant when it comes to unsolicited emails and phone calls seeking personal information.”  Jepsen also said that the incident “raises questions about the effectiveness of Target’s measures to protect the confidentiality and security of private information it receives from its customers.”

California Attorney General Kamala Harris advised customers to be cautious of phony websites promoting gift cards or compensation for the data breach, in exchange for personal information.  Several websites with “Target” in the name have recently been registered, such as “targetcreditfix.com” and “targetsecuritybreach.com.”

            In the wake of the breach, Target representatives have agreed to testify before Congress in early February.  Because the breach is under active investigation, however, it is unclear what level of detail will be discussed at the hearing regarding how the breach occurred and the direction of the investigation.  A Congressional official said that the main objective of the hearing would be determine how consumers were affected by the breach, and what they can do to protect themselves in the future.

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U.S. Supreme Court Expands States’ Ability to Enforce Antitrust and Consumer Protection Claims

    In a rare unanimous decision involving class actions, the U.S. Supreme Court ruled on January 14, 2014, that defendants cannot remove state attorney general lawsuits to federal court under the Class Action Fairness Act of 2005 (“CAFA”).  Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp., Case No. 12-1036, slip op. at 1 (U.S. 2014). 

    The case, which dates back to 2006, stemmed from the U.S. Department of Justice’s (“DOJ”) criminal investigation of a global conspiracy to fix the price of liquid crystal display units (“LCD”), which are used in televisions, laptops, monitors, and a wide variety of other electronic devices.  The DOJ put executives behind bars for criminal violations of the Sherman Act and obtained $1.39 billion in fines.  The probe led to the filing of numerous civil antitrust suits, which were consolidated into multidistrict litigation in the U.S. District Court for the Northern District of California and were settled for nearly $1.5 billion.  In addition to the numerous private civil actions, the attorneys general of 13 states, including Mississippi, brought actions.  State attorneys general have recovered $539 million in settlements to date.

    Mississippi, Illinois, California, and Washington commenced parens patriae actions in their respective state courts.  Parens patriae actions are lawsuits brought by state attorneys general to recover damages on behalf of consumers.  Defendant LCD makers removed the parens patriae actions to federal court the grounds of CAFA jurisdiction.  CAFA is a jurisdictional statute that extended federal court jurisdiction over certain class actions and specific mass actions.  Defendants argued the parens patriae actions were mass actions.

    In the lawsuits brought by California, Illinois, and Washington, the cases were remanded back to state court when the federal courts rejected CAFA jurisdiction.  The Mississippi case, however, remained in federal court as a mass action under CAFA.  The Fifth Circuit’s decision denying Mississippi’s request to remand to state court created a split in the appellate courts on the issue, precipitating the Supreme Court’s review.  The attorneys general of 46 states supported Mississippi in an amicus brief filed with the Court. 

    The Supreme Court held that parens patriae were not mass actions.  CAFA defines mass actions as monetary claims brought by 100 or more persons who propose to jointly try those claims, which in the aggregate are worth more than $5 million.  Defendants argued that the real parties in interest in Mississippi’s lawsuit were its citizens, which greatly exceed 100 in number.  The Supreme Court rejected this argument under a plain reading of the statute’s text, which allows removal when 100 or more “persons” propose to jointly prosecute their claims.  Because the State of Mississippi was the only named plaintiff in the action, the Court remanded the action to state court.

    Mississippi Attorney General Jim Hood released a statement praising the decision: “For far too long, large corporations have abused the federal judiciary by trying to drag every action filed by an Attorney General in state court to federal courts.”

    The Supreme Court’s definitive ruling is a victory for consumers who seek to obtain relief against corporations, such as the LCD makers, that violate antitrust and consumer protection laws.  Parens patriae lawsuits filed by a state in state court will remain there, rather than proceeding in federal courts, which are often considered friendlier to defendants.  Some experts say that the ruling will also encourage more state attorneys general to pursue parens patriae actions.

    The decision also has litigation consequences that favor consumers.  When there are parallel parens patriae and federal class action litigations, defendants will feel the pressure of having to simultaneously defend two lawsuits.  Parallel state and federal court proceedings also raise the potential of liability for damages to private plaintiffs in federal court and separate recoveries to state attorneys general.  Defendants will feel more pressure to own up to their malfeasance and compensate their victims.  Importantly, the Mississippi decision may allow state attorneys general to proceed with consumer claims that would otherwise be barred by the Supreme Court’s recent rulings upholding class action waivers and arbitration clauses in contracts of adhesion.  Those rulings do not apply to state attorneys general who may be able to pursue these otherwise barred claims on behalf of their citizens.

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ON THE RECORD:

 

“All that serves labor serves the nation.  All that harms is treason.  If a man tells you he trusts America, yet fears labor, he is a fool.  There is no America without labor, and to fleece the one is to rob the other.”

 

Abraham Lincoln,
United States President

 

 

DOB:
2/12/1809

 

 

February Events

 

Conferences and Educational Seminars

 

+February 7, 2014

Michigan Association of Public Employee Retirement Systems (MAPERS) Educational Seminar

Westin Hotel

Southfield, MI

 

Topics will include private equity investing, legislation that affects public pensions, practical administration of providing benefits pursuant to applicable court orders, actuarial concepts associated with defined benefit plan funding.  The MAP test will be offered at the conclusion of the seminar.

 

 

+February 8-10th, 2014

The 26th Annual Police, Fire, EMS, & Municipal Employee Pension & Benefits Seminar (NAPO) presented by Financial Research Associates LLC

             Caesars Palace

Las Vegas, NV

 

NAPO, National Association of Police Organizations 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.  Founded in 1978, NAPO remains the strongest unified voice supporting law enforcement officers in the U.S.  and represents more than 2,000 units and associations, 241,000 sworn officers, 11,000 retired officers, and more than 100,000 citizens who share a common dedication to fair and effective crime control and law enforcement.

 

 

+February 10-11th, 2014

 

11th Annual Made In America: Taft-Hartley Benefits Summit presented by Financial Research Associates (FRA LLC)

Lake Buena Vista Palace

Lake Buena Vista, FL

The 2014 Made in America Summit will be provide the most up to date developments in both the investment and health & welfare sides of fund administration.  Sessions will be devoted to healthcare reform, healthcare exchanges and their effect on funds.   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.  Thousands have attended Made in America and more than 60% of the attendees are Trustees/Administrators.  This year special appreciation will be given to the Advisory board and executive committee members who represent more than 10 union factions including the Teamsters, UFCW, IBEW, NECA, OLFBP, NCCMP, Plumbers’ Welfare Funds, and National Elevator Health & Pension Funds.

 

+February 13-18, 2014

37th Annual National Labor and Management Conference

Westin Diplomat Conference Center

Hollywood, Florida

 

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.  More than 400 attendees participate in the annual forum representing Union leadership, senior corporate management, Trustees, Fund administrators, Labor lawyers, Fund counsel and advisors as well as Labor relations professionals from both labor and management.  The program content is developed by a distinguished group of business executives, labor leaders, public officials and academics.  The meeting agenda is designed for meaningful interaction and networking opportunities.

 

 

+February 19-21, 2014

National Association of Public Pension Attorneys (NAPPA) Winter Conference

Capitol Hilton

Washington, DC

 

The National Association of Public Pension Attorneys is a legal professional and educational association.  The NAPPA organization 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 26-28, 2014

The Louisiana Trustee Education Council (LATEC) in conjunction with Investment Education Symposium by Opal Financial Group

Astor Crowne Plaza

New Orleans, LA

 

 The purpose of the Louisiana Trustee Education Council (LATEC) is to encourage and facilitate the education of its membership in all matters related to their duties as the holders of trust assets by those bearing a fiduciary responsibility for such assets.  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

 

 

Union Conferences

 

+February 9-12, 2014

National Ironworkers IMPACT Meeting

Las Vegas, NV

 

+February 25-26, 2014

10th District International Brotherhood of Electrical Workers (IBEW)

Nashville, TN

 

 

Government Finance Officers’ Association Conferences

 

+February 6, 2014

             Connecticut Government Finance Officers’  (GFOACT)

            Waters Edge Conference Center
            Westbrook, Connecticut

 

           +February 24-26, 2014

            Government Finance Officers’ Association of Alabama (30th Annual conference)

            The Battle House Renaissance Mobile Hotel Convention Center

            Mobile, Alabama

            http://www.gfoaa.org 

 

            +February 18-22, 2014

            California Society of Municipal Finance Officers (CSMFO)

            Renaissance Hotel

            Palm Springs, CA

            http://www.csmfo.org

   

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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: drscott@scott-scott.com + UK Tel: 0808.234.1396