Around The Web

A few items of interest:

(1) With Vigour and Zeal has a post, including a link to a related article in Legal Week, on the filing of derivative actions in U.S. courts against non-U.S. companies.

(2) WSJ Law Blog has coverage of a humorous D. of Minn. decision denying the motion to dismiss in the UnitedHealth securities class action. As noted in the comments to the post, however, the defendants presumably were not amused by the court's heavy reliance on a pleading standard repudiated by the U.S. Supreme Court two weeks ago.

(3) And just in case you cannot get enough of the Stoneridge case, Best In Class has a post on some chatter that appears to have arrived a bit late.

Stop Chattering?

According to an article in the Washington Post this weekend (which has been picked up by a number of other media outlets), the suspense is over. The SEC reportedly has asked the Solicitor General to file an amicus brief in support of the investor plaintiffs in the Stoneridge (a.k.a. Charter Communications) case on scheme liability that will be heard by the U.S. Supreme Court next term.

Two notes:

(1) Although some reports have suggested that the amicus brief will be filed in support of Enron's investors (and the original Washington Post article is not very clear on this point), that appears unlikely unless, as advocated by the attorneys for Enron's investors, the Supreme Court decides to hear the Enron and Stoneridge appeals together.

(2) Presuming the amicus brief is filed, it will be interesting to see if the SEC/Solicitor General deviates in any way from the earlier position on scheme liability taken by the SEC in a 9th Circuit case.

Charter Chatter Continues

Just when you thought it was safe to read about something else on this blog, here are a few more pieces on the Stoneridge (a.k.a. Charter Communications) case pending before the U.S. Supreme Court.

(1) The Harvard Law School Corporate Governance Blog has a post with further speculation (see here) about whether Justice Alito could be the deciding vote. The post also discusses how the granting of cert in the related Enron's banks case might alter the outcome.

Quote of note: "[I]f the Court grants review in Credit Suisse [the Enron's banks case], it could well mean that Chief Justice Roberts and Justice Alito are inclined to take a narrow view of primary liability, and that The Chief Justice will be in a position to assign the opinion to a wavering Justice Alito. If Credit Suisse is granted, look for the case to be a 5-4 decision, with liability under Section 10(b) not extended to vendors and investment bankers, even where they know the transaction is a sham and will be used to effect a financial fraud."

(2) The Los Angeles Times ran an editorial on Wednesday urging the SEC to support the investor plaintiffs in the Stoneridge and Enron's banks cases.

Quote of note: "So far, the SEC has remained silent. But with its mandate to 'maintain fair, orderly and efficient markets and facilitate capital formation,' the SEC is uniquely suited to speak out when legal interpretations undermine confidence in the stock market's fairness."

(3) Meanwhile, the Washington Examiner has an op-ed urging the SEC to take the opposite position.

Quote of note: "The SEC’s support, expressed through a U.S. government friend-of-the-court brief in Stoneridge, would well tip the balance in the Supreme Court. For the sake of our capital markets and American shareholders, let’s hope the commission does the right thing. The SEC’s mission of 'investor protection' cannot be achieved by further empowering plaintiffs’ lawyers."

More Charter Chatter

The battle to win the hearts and minds of the American people (or at least the SEC) on the issue of scheme liability, which is currently before the U.S. Supreme Court in the Stoneridge (a.k.a. Charter Communications) case, shows no signs of slowing down. This week has seen three publications of note:

(1) In its Tuesday edition, the Wall Street Journal had a feature article (subscrip. req'd) on the pressure being put on the SEC to side with the plaintiff investors.

Quote of note: "[A plaintiffs attorney] won the support of aspiring Democratic presidential candidate and former plaintiffs lawyer John Edwards, who said: 'I urge the SEC to fulfill its historic mission of protecting investors. Silence, or even worse, siding with fraud participants, would be a betrayal of that mission.'"

(2) The Wall Street Journal also has an op-ed (subscrip. req'd) in today's edition urging the SEC to support the defendant corporations.

Quote of note: "Unfortunately, we cannot be certain why the Supreme Court has taken the case, or if it will do the right thing. While Chief Justice John Roberts and Justice Stephen Breyer have spoken of the need for judicial modesty, both have recused themselves from the case. All the more reason for Treasury and the SEC to stand firm and ask the solicitor general to urge the Supreme Court to keep liability circumscribed."

(3) Finally, the Legal Times has an op-ed, written by attorneys who represent investors in a scheme liability case against Enron's banks, urging the Supreme Court to adopt a broad interpretation of the relevant statutes.

Quote of note: "At bottom, Section 10(b) and Rule 10b-5 have long proscribed any scheme or artifice to defraud, as well as any conduct that operates as a fraud on investors. Enron's banks worked hand-in-hand with Enron to design and implement sham transactions with the sole purpose of hiding debt and generating fake revenue. If that's not participating in a scheme to defraud, what else can we call it?"

In The News

Bloomberg has a feature article discussing the recent criticisms of the SEC's investor protection efforts. Of particular note for readers of this blog, the article states that Chris Cox, Chairman of the SEC, has denied that the SEC is considering a proposal or rule to allow corporations to mandate arbitration of shareholder claims. (Just last month, the Wall Street Journal reported that the SEC was exploring this proposal.)

The American Lawyer has an article on the possible emergence of U.S.-style securities class actions in Europe. The article notes, based on numbers from the recent issued PwC 2006 Securities Litigation Study, that the number of filings against European companies in U.S. courts has actually fallen over the past few years. On the other hand, more European countries are adopting some form of group litigation.

Charter Chatter

Some interesting tidbits from around the web on the Stoneridge (a.k.a. Charter Communications) case on scheme liability set to be heard by the U.S. Supreme Court next term.

Whether, and on which side, the SEC will participate in the case has been a hot issue. SCOTUSblog reports that there are two dates to keep in mind: (1) amicus briefs urging the Supreme Court to hear a similar Enron-related case on scheme liability (maybe in tandem or consolidated with Stoneridge) are due on June 1; and (2) amicus briefs in support of the investor plaintiffs in Stoneridge are due on June 11.

Meanwhile, Point of Law speculates that Justice Alito may be the swing vote in the Stoneridge case. Justices Breyer and Roberts are recused because of stockholdings, leaving seven justices to consider the case.

Enron's Banks

Last week, the Washington Post ran an op-ed criticizing the Fifth Circuit's decision to deny class certification in the securities fraud case against Enron's banks. Point of Law has a response.

Tyco Settles

The recent string of notable settlements (see here and here) reached its crescendo yesterday. Tyco International Ltd. (NYSE: TYC), a diversified global company, has announced the preliminary settlement of the securities class action pending against the company in the D. of N.H. The case was filed in 2003 and alleges an enormous accounting fraud scheme (which has led to related criminal law convictions for individual Tyco officers).

The settlement is for $2.975 billion and is being heralded as the largest payout ever by a single corporate defendant in a securities fraud lawsuit. As part of the settlement, Tyco has agreed to assign its related claims against PricewaterhouseCoopers, its former auditor, to the plaintiffs. Press coverage can be found in the Associated Press, the New York Times, and Business Week.

It's A Small World

Institutional Shareholder Services has issued an interesting (and blessedly pithy) paper on the growing role of international investors in U.S. securities class actions. The highlights include:

(1) Since 1999, international institutional investors have sought to serve as lead plaintiffs 182 times in 98 different cases.

(2) The international institutional investors that filed lead plaintiff motions were from 17 different countries. Germany, Canada, and Israel were the countries with the largest number of movants.

Cardinal Health Settles

Cardinal Health, Inc. (NYSE: CAH), an Ohio-based healthcare company, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of Ohio. The case was filed in 2004 and alleges that the company made false or misleading statements concerning its financial results.

The settlement is for $600 million, but is still subject to approval by the lead plaintiffs. MarketWatch has an article on the settlement. (The 10b-5 Daily has previously posted about the lead plaintiff, discovery stay, and motion to dismiss decisions in the case.)

Priceline Settles

Priceline.com, Inc. (Nasdaq: PCLN), a Connecticut-based online travel service, has announced the preliminary settlement of the securities class action pending against the company in the D. of Conn. The case was originally filed in 2000 and alleges that the company misrepresented its financial condition. Discovery in the case was scheduled to have been completed by the end of this year. The settlement is for $80 million, with $30 million being paid by the company's insurance carriers.