July 2015 Newsletter


Court Grants Final Approval of Settlement in Davita Healthcare Partners Derivative Litigation

Fines Mounting in Foreign Exchange Benchmark Investigations

Federal Judge Holds that Comcast Does Not Require a Class-Wide Method of Calculating Damages

California Considers Divestment Legislation for State Pension Funds

Conferences and Educational Seminars


Court Grants Final Approval of Settlement in Davita Healthcare Partners Derivative Litigation

On June 5, 2015, the Honorable Judge William Martinez of the United States District Court for the District of Colorado granted final approval of a settlement in In re DaVita Healthcare Partners, Inc. Derivative Litigation (Case No. 12-cv-2074-WJM-CBS).  The case was originally filed on May 17, 2013.  The suit alleged 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.  Scott+Scott, Attorneys at Law, LLP (“Scott+Scott”) was appointed lead counsel in the action in January 2014.

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.  Over the past several years, DaVita became embroiled in a series of interlocking federal investigations and lawsuits that implicated the Company’s top management and Board of Directors.  These lawsuits and investigations alleged 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 alleged that DaVita’s joint ventures with physicians did not comply with the anti-kickback laws or False Claims Act.  As a result of such conduct, DaVita incurred costs of $89 million in 2012 to settle whistleblower claims relating to how it billed the government for the dialysis medication Epogen.  A 2014 settlement with the U.S. Department of Justice regarding DaVita’s physician relationships and joint ventures required DaVita to pay $350 million to resolve the claims and also pay a civil forfeiture of $39 million.  Finally, in May 2015, DaVita announced that it would pay $495 million to settle a whistleblower lawsuit that alleged that DaVita purposefully wasted dialysis medications to receive excess government reimbursement.

The terms of the settlement require DaVita to institute a series of corporate governance reforms designed to promote corporate compliance and increase executive oversight over problematic business segments.  In the Court’s order granting final approval, Judge Martinez described the corporate governance reforms, as “appropriately designed to prevent the recurring of the alleged misconduct that formed the basis for the action” and that they “directly address[ed] the alleged cause of the harms suffered by shareholders[.]”  Prior to filing, Scott+Scott conducted a books and records investigation, obtaining documents and materials from DaVita’s Board of Directors regarding the investigations and whistleblower lawsuits, which were then incorporated into the Complaint that was ultimately filed.  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[.]”  Furthermore, 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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Fines Mounting in Foreign Exchange Benchmark Investigations

Fines levied against some of the world’s largest financial institutions for their role in the manipulation of the foreign exchange market now exceed $10 billion, breaking several records.  As reported in prior issues of Market+Litigation Monthly, major financial institutions and their affiliates, including Bank of America, Barclays, Citigroup, HSBC, JPMorgan, RBS, and UBS, agreed to pay fines to numerous regulatory agencies to settle allegations related to their misconduct in the foreign exchange market.  The alleged misconduct ranged from failing to maintain adequate controls over their respective FX businesses, to a criminal conspiracy to fix prices in the FX market. 

The first wave of fines was levied on November 11, 2014, when the U.S. Commodity Futures Trading Commission (“CFTC”), the U.S. Office of the Comptroller of the Currency (“OCC”), the U.K. Financial Conduct Authority (“FCA”), and the Swiss Financial Market Supervisory Authority (“SWISS FINMA”) announced settlements with various financial institutions or their affiliates, including Bank of America, Citigroup, HSBC, JPMorgan, RBS, and UBS.  The second wave of fines was announced on May 20, 2015 by the U.S. Department of Justice (“DOJ”), the Federal Reserve (“FED”), and the New York Department of Financial Services (“NYDFS”), including settlements with Barclays, Citigroup, JPMorgan, RBS, and UBS.

The fines imposed break a number of records.  Criminal fines of more than $2.5 billion are the largest set of anti-trust fines obtained by the DOJ.  The $925 million fine imposed on Citigroup by the DOJ was the largest single fine ever imposed for violating the Sherman Act.  The $1.7 billion in fines imposed by the FCA on November 11, 2014 were the largest ever imposed by the regulator, and the first time the FCA had pursued a settlement with a group of banks.  The $441 million fine imposed on Barclays by the FCA on May 20, 2015 was also a record for the regulator.  Similarly, the FED fines are among the largest ever assessed.

While investigations remain ongoing, total fines to date are as follows.  Bank of America was fined $455 million.  Barclays was fined over $2.2 billion, not including an additional fine of $60 million by the DOJ related to its LIBOR submissions.  Citigroup was fined almost $2.3 billion.  HSBC was fined $616 million.  JPMorgan was fined over $1.9 billion.  RBS was fined $1.3 billion.  UBS was fined over $1.1 billion, not including an additional fine of $203 million by the DOJ because its criminal misconduct related to its FX business violated a prior Non-Prosecution Agreement relating to UBS’s submissions of benchmark interest rates.




























































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Federal Judge Holds that Comcast Does Not Require a Class-Wide Method of Calculating Damages

In a recent opinion by the U.S. District Court for the District of Nevada, Fosbre v. Las Vegas Sands Corporation, 2015 WL 3722496 (D. Nev. June 15, 2015) (“Fosbre”), a federal judge granted the shareholders’ motion to expand a previously certified class, after finding that the decision of the Supreme Court in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), did not preclude a finding that common issues predominated in the case, even absent a class-wide method of calculating damages. 

In their 122-page amended class action complaint, the plaintiffs alleged that the defendant, casino operator Las Vegas Sands Corporation, made false and misleading public statements regarding its development plans, liquidity, and equity offerings to artificially inflate the price of its stock in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. 

The plaintiffs originally requested, and the court certified, a class for the period between February 4, 2008 and November 6, 2008.  At this time, the court indicated its willingness to entertain a motion to expand the class period if the plaintiffs amended their pleadings with sufficient particularity.  See Fosbre, 2015 WL 3722496, at *1.  Thus, in their amended complaint, the plaintiffs pled damages for shareholders who bought their shares during an earlier period, alleging misconduct dating back to as early as August 2, 2007.  

Defendants not only challenged the certification of the expanded class, but also sought decertification of the existing class on the ground that Comcast required the “plaintiffs to identify a method of calculating damages on a class-wide basis and in a manner that fits the plaintiffs’ theory of liability in the case.”  Id., at *2.  The court disagreed with defendants’ broad interpretation of Comcast, explaining that Comcast neither required that every plaintiff seeking to certify a class present a method of calculating damages on a class-wide basis, nor that the proponents of class certification must rely upon a class-wide damages model to demonstrate predominance.  Id., at *3.  In so holding, the court relied on the Supreme Court’s decision in Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194-95 (2013), in which the Court held that plaintiffs seeking class certification are not required to show that each “elemen[t] of [their] claim [is] susceptible to a class-wide proof.”  Id. at 1196. 

Accordingly, the court found that common issues predominated “[e]ven assuming there will be individualized damages calculations,” because reliance could be presumed through the fraud-on-the-market theory first recognized in Basic Inc. v. Levinson, 485 U.S. 224 (1988).  See Fosbre, 2015 WL 3722496, at *4.  The issues of falsity, materiality, scienter, and control person liability were also common to the class.  Id., at *4-*5.  Because Comcast does not require a damages methodology on a class-wide basis as a prerequisite for predominance, the court certified the expanded class.

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California Considers Divestment Legislation for State Pension Funds

In June of 2015, the California State Senate made history regarding the state’s management of pension funds when it voted in favor of legislation dictating that its largest pension funds could not maintain investments in thermal coal companies.   

The bill, introduced by Senate President pro tempore Kevin de Leon, still needs to pass a vote in the California State Assembly to become law.  Nevertheless, the landmark legislation known as “coal divestment legislation” calls on California’s two largest pension funds, the $296 billion California Public Employees’ Retirement System (CalPERS) and the $186 billion California State Teachers’ Retirement System (CalSTRS) to divest their investment portfolios of positions in coal companies by June 1, 2017.

While similar legislation has been attempted, and remains pending in Massachusetts and Vermont, California is the first state to advance such a bill towards law.  The apparent legislative goal or legislative intent behind the bill is to promote green and environmentally friendly policies by investing valuable pension fund investment dollars in companies that espouse a similarly earth friendly corporate character.  By requiring the state’s two largest pension funds to invest in eco-friendly energy companies, California is sending a strong message to the rest of the nation regarding the state’s environmental posture. 

According to the proposed legislation in California, a state board will be given the authority to determine whether a company that CalPERS or CalSTRS has invested in, or is looking to invest in, derives more than fifty percent of its profits from coal.  If more than fifty percent of the target company’s revenue is derived from the mining of thermal coal, then the pension funds will have to divest themselves of that investment or be barred from investing in it to begin with.  However, the board will have some discretion. 

In apparent acknowledgement of the importance that investing in the energy sector has to pension fund bottom lines, the proposed California legislation does allow the board to work with a company to determine if it is “transitioning” or “adapting” to cleaner energy generation.  If so, and the board determines that a company is actually reducing its reliance on thermal coal as a primary revenue source, then allowances will be made for pension fund investments.  Such an accommodation appears to be directed at pension fund asset managers, who are simply trying to maximize the return on their fund’s investments, which are often prudently invested in energy sector companies that produce solid returns.

Indeed, representatives from CalPERS and CalSTRS have gone on record prior as saying that they prefer engagement with energy companies as opposed to outright divestment.  However, CalPERS has indicated that it will not fight the proposed coal divestment legislation, and will cooperate if the divestment legislation becomes law.  Similarly, CalSTRS has indicated that it is already anticipating the divestment legislation becoming law, and is currently reviewing its investment portfolios to determine the impact that divesting from coal companies would have. 

Asset managers that currently run fossil-free investment strategies for other green investment groups caution that divestment from coal is tricky, but that it does not necessarily mean a death blow to returns.  With careful risk balancing and prudent investment in other, greener energy sectors, returns can continue even with divestment from coal, according to those managers.  However, as California comes closer to actually making coal divestment legislation the law, only time will tell if that investment strategy will pay dividends with regard to its two largest state pension funds. 

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July Events


National Conferences and Educational Seminars



+June 28 - July 1, 2015

Florida Public Pension Trustee Association’s 31st  Annual Conference (FPPTA)

Boca Raton Resort and Conference Center

Boca Raton, Florida


FPPTA’s primary purpose in conducting an annual educational forum is to provide the basis for improved financial and operational performance of the public employee retirement systems in the state.  FPPTA acts as a central resource for educational purposes forth public pension industry including topics such as the political reality of public pension plans and private sector public sector plans.



+July 10-13, 2015


National Association of County Organizations 80th Annual Conference (NACo)

Charlotte Convention Center

           Mecklenburg County, Charlotte, North Carolina

The National Association of Counties (NACo) is the only national organization that represents county governments in the United States.  Founded in 1935, NACo provides essential services to the nation’s 3,069 counties.  Forty-eight of the 50 states have operational county governments.  Connecticut and Rhode Island are divided into geographic regions called counties, but they do not have functioning governments.  Alaska calls its counties boroughs and Louisiana calls them parishes.  The population of counties varies from Loving County, Texas, with 140 residents to Los Angeles County, California, which is home to 9.2 million people. 


+July 15-17, 2015


Missouri Association of Public Employee Retirement Systems (MO-MAPERS)

Tan-Tar-A Resort

Osage Beach, Missouri


The Missouri Association of Public Employee Retirement Systems (MAPERS) began in October of 1987.  Since that time, the organization has worked to bring together individuals and organizations interested in expanding their knowledge of pension and investment issues.  The purpose of the association is to provide education, information, and ideas to strengthen and protect Missouri's public employee retirement systems.  Plan sponsor membership is open to trustees and administrators of all public pension funds in the State of Missouri.  Corporate membership is open to commercial financial and investment groups and associate membership is open to organizations affiliated with public retirement systems including unions, lobbying groups, etc.  MAPERS holds its annual conference each summer attended by members from all three membership categories.  The agenda includes nationally known speakers from the financial, legal and retirement arenas.


+July 19-23, 2015

National Association of Police Officers 37th Annual Convention (NAPO)

Westin Savannah Harbor Gulf Resort

Savannah, Georgia 

The National Association of Police Organizations, NAPO, serves to improve the working conditions of member organizations through legislative issues, awareness, and modification of the rights of law enforcement personnel.  It is also an effective mechanism to educate the public with regard to achieving improved public safety and crime reduction.  The objective of this Association shall be to unite all police officer organizations within the United States and surrounding nations, territories, and islands in order to promote and maintain federal legislation most beneficial to law enforcement in general and the protection of the citizens of this Nation.  The aim of this year’s conference is  to stimulate mutual cooperation between law enforcement organizations and to assist in the economic, social and professional advancement of all law enforcement officers, whether active or retired in various areas including issues regarding Pension and Healthcare Reform.


+July 19-23, 2015

Pennsylvania State Association of County Controllers 101stAnnual Conference (PSACC)

Crowne Plaza Reading Hotel

Berks County, Wyomissing, Pennsylvania 

The Pennsylvania State Association of County Controllers is an organization of county government finance professionals.  The organization’s 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.  PSACC is comprised of the County Controllers, or “fiscal watchdogs” from 38 counties across the state, their deputies, solicitors, and staff.

+July 20-22, 2015

Public Funds Summit East “Navigate the Future,” produced by Opal Financial Group

Marriott Conference Center

Newport, RI 

Opal Financial Group's annual public funds conference will address issues that are most critical to the investment success of senior public pension fund officers and trustees.  The Summit will cover among several additional fiduciary topics, the processes for selection and evaluation of service providers and legal concerns with fund investment and management policies as well as the benefits and pitfalls of a wide variety of investment strategies including investment policy statements. 


Government Finance Officers’ Association Conferences


+ July 8- 10, 2015

North Carolina Local Government Association 2015 Summer Conference

North Carolina Local Government Budget Association (NCLGBA)

Shell Island Resort

Wrightsville Beach, North Carolina




+July 16-19, 2015


Municipal Association of South Carolina

Marriott Hilton

Hilton Head Island, South Carolina




+July 19-21, 2015


North Carolina Government Finance Officers’ Association (NCGFOA) Summer  Conference

Holiday Inn Resort

Wrightsville Beach, North Carolina



+July 29-31, 2015


Arkansas Government Finance Officers’ Association

Fort Smith Convention Center

Fort Smith, Arkansas


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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 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.

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

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