John C. Coffee, Jr.: The Blaszczak Bombshell and What It Will Mean

United States v. Blaszczak[1] has long been a one-off case that did not fit the mold of the traditional insider trading prosecution, but now — following a 2-1 decision of the Second Circuit in December, reversing most of the convictions in the case — it may destabilize the law on insider trading for some time to come. Such reversals are rare, and Blaszczak has multiple implications, some ominous and some ironic.

At the outset, it must be understood that Blaszczak was distinctive in two important respects:

First, it involved the leaking of confidential information by gossipy government bureaucrats to … Read more

ISS Discusses the Largest Class Action Settlements of 2022

In a remarkable year of class action activity, investors across the globe agreed to settlements totaling over $7.4 billion[1] in 2022, a greater than 75% increase from 2021. (A substantive year in review for the U.S. market will be documented in the ISS Securities Class Action Services “Top 100 U.S. Class Action Settlements of All-Time” report published later this month.)

In this overview, ISS Securities Class Action Services reviews the largest shareholder-related settlements of 2022. A number of high-profile cases dominated the landscape, including Twitter and Teva in the United States, while the Steinhoff International mega-settlement commanded much of

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ISS Discusses Dell’s $1 Billion Top-20 Settlement of Shareholder Lawsuit

On November 16, 2022, Dell Technologies Inc. reached a $1 billion settlement with shareholders, according to a recently filed 8-K filed with the U.S Securities and Exchange Commission. The announced agreement looks to resolve investors’ allegations that they were short-changed billions of dollars for their Class V stock in connection with a 2018 transaction that turned Dell into a public company. The settlement comes as the shareholder lawsuit alleging various breaches of fiduciary duties against Michael Dell, Silver Lake, and others was set to go to trial next month in the Delaware Court of Chancery.

In the asserted transaction valued

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A New Approach to Measuring Litigation Risk

Securities litigation is a major and costly source of corporate risk that can affect many aspects of companies’ operations. The task of identifying the causes and consequences of this risk is, however, challenging because researchers observe only companies that are sued and not companies that risk being sued. Moreover, surprisingly little is known about how plaintiffs’ lawyers identify which companies to sue. We use scrutiny of companies’ SEC filings by plaintiffs’ lawyers to improve estimates of litigation risk and provide new insights into why certain companies face risk.

We exploit the plaintiff-lawyer need for public information to monitor companies after … Read more

Cooley Discusses Looming Trial of SEC’s Reg FD Case Against AT&T

Reg FD cases rarely get to court, but here’s one that, barring a settlement, appears to be headed to trial. In a 129-page opinion in SEC v. AT&T, 9/08/22, the federal district court for the SDNY denied summary judgment for both sides in a case the SEC brought in March of 2021 against AT&T and three members of its Investor Relations Department for violations of Reg FD. (See this PubCo post.) The SEC alleged that, in March 2016, AT&T learned that, as a result of a “steeper-than-expected decline in smartphone sales,” AT&T’s first quarter revenues would fall short … Read more

Gibson Dunn Offers 2022 Mid-Year Securities Litigation Update

The number of securities lawsuits filed since January has remained steady compared to the first half of 2021. We have already seen many notable developments in securities law this year. This mid-year update provides an overview of the major developments in federal and state securities litigation in the first half of 2022:

I.           Filing And Settlement Trends

 According to Cornerstone Research, although new filings remain consistent with the first half of 2021, the number of approved settlements is up over 30% from the same time last year, and the median settlement amount has rebounded from the low that we reported … Read more

ISS Discusses Proposed $810 Million Settlement in Twitter Shareholder Class Action

What a long, strange trip it’s been for Twitter shareholders since the company’s November 7, 2013 Initial Public Offering on the New York Stock Exchange.

Aside from the current litigation dominating today’s headlines between Twitter and Elon Musk – which includes a handful of shareholder class actions – investors from early 2015, have potential eligibility in a previously announced settlement, depending upon the timing of their purchases.

Recently, a final fairness hearing was scheduled for November 17, 2022, where Judge Jon S. Tiger in the Northern District of California is expected to officially approve the $809.5 million settlement. If, as

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ISS Discusses Five Non-U.S. Class Actions Investors Should Pay Attention To

As institutional investors know, a vast majority of shareholder related class actions take place in the United States. This is accurate in terms of both newly filed cases and settlements.

However, non-North American shareholder litigation is significantly important to investors looking to recoup lost assets, while at the same time keeping companies accountable for violations of local securities laws. In fact, the largest non-North American settlement of all-time was resolved earlier in 2022… a €1.4 billion settlement with Steinhoff International.

Here is a look at five current non-North American cases investors should keep their eye on:

The A2 Milk

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Arnold & Porter Discusses California Challenge to Rulings Rejecting Board Diversification

The California Secretary of State has appealed a decision by the Los Angeles County Superior Court striking down the second of California’s two board diversity laws, which required all publicly traded companies headquartered in California to include a minimum number of female directors. The appeal will challenge the court’s finding that the board diversity legislation violates the Equal Protection Clause of the California Constitution because its classification of director candidates based on gender does not further a compelling government interest.

In addition, the same court—acting through a different judge—has also overturned California’s other board diversity statute, which required boards of … Read more

ISS Discusses Class-Action Settlements Requiring Investor Action

Investors have a significant number of opportunities to participate in class actions during the upcoming 3-month period. Specifically, 39 North American settlements valued at $1.14 billion have a claim deadline date from August 1, 2022 – October 31, 2022.

The 39 settlements range from a high of $200 million (General Electric Company) to a low of $250,000 (ABTCOIN LLC). 32 of the 39 settlements occurred in U.S. Federal Court, three with the U.S. Securities and Exchange Commission, two in U.S. State courts, and two in Canadian courts. Not surprisingly, the highest quantity of cases – 12 of the 39 (or

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How Does Delaware Do It? Judges Alone Don’t Explain Chancery’s Speed

On July 19, 2022, in the Twitter v. Musk litigation, Chancellor Kathaleen McCormick presided over what was likely the most widely observed hearing on a motion to expedite in the Delaware Court of Chancery’s history. While deal bust-ups are front page fare for the financial press, the high profile of this case brought the Court of Chancery further into the national consciousness than usual (though who among us hasn’t asked “what is a chancery?”). On the day of the hearing, the public access telephone line was, indeed, “lit,” hitting its maximum capacity with merger arbs (and other interested Read more

Twitter v. Musk: Where Are the Arbs?

Every pundit and commentator has by now analyzed the ongoing battle between Elon Musk and Twitter over Musk’s attempt to walk away from their deal. Almost all of these evaluations have rated Twitter as having a considerably stronger case, because (among other reasons) Musk did no due diligence, was well aware of the “bot” (or fake user) problem, negotiated no contractual protections directly addressed to these risks, and generally behaved inequitably, disparaging Twitter and toying with the SEC’s rules. Okay, but that raises an interesting puzzle: If the facts favor Twitter, and if Musk’s offer was for $54.20 a share … Read more

ISS Discusses Securities Class-Action Settlements in First Half of 2022

The value of U.S. shareholder class action settlements in the first half of 2022 totaled $2.32 billion, the exact amount as the same period in 2021. However, the quantity of settlements in the first six months of the year increased by 23.7%, from 59 in 2021 to 73 in 2022. The average value of settlements in 2022 was $31.8 million (or 19.1% less than the $39.3 million average in 2021).

The largest settlement so far in 2022 was with Teva Pharmaceutical Industries at $420 million, accounting for 18% of the total value of settlements. Interestingly, the largest settlement from the

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Issuer Liability: Ownership Structure and the Circularity Debate

In many countries, investors can hold publicly traded companies liable for public misstatements. Issuer liability is intuitively appealing because statements are generally made on behalf of the company by its representatives. Moreover, large companies typically have deep pockets, which ensures compensation for investors who incurred losses because they traded during the period when stock prices were distorted by false information.

However, in the United States – the country where securities class actions are most prevalent –, many scholars are highly skeptical about the social value of issuer liability through securities class actions. The critique is usually framed under the rubric … Read more

Wachtell Lipton Discusses Important Supreme Court Business Cases

Last Thursday, the Supreme Court concluded its most tumultuous Term in recent memory.  The Term was marked by a number of closely divided decisions on contentious issues ranging from President Biden’s vaccination mandate to gun rights to religious liberty.  Anticipation of and speculation surrounding the Court’s decision in Dobbs, fueled by the leak of Justice Alito’s draft opinion, dominated headlines for months.  And the decision itself, overturning a half-century of precedent and eliminating the constitutional right to an abortion, has sent shock waves across the nation and is certain to trigger years of follow-on litigation.

The Court’s business docket … Read more

The Two-Front War on the Administrative State: How Far Will the Supreme Court Go?

The hostility of at least a plurality of the Supreme Court to the Administrative State has become increasingly evident. This faction has been pursuing a two-front war: First, it has significantly curbed (or seems about to curb) the enforcement powers of administrative agencies. Initially, it did this by finding that administrative law judges (“ALJs”) must be appointed by someone under presidential control[1]; more recently, it granted certiorari on the issue of whether ALJs must also be subject to a corresponding presidential removal power.[2] Second, it seems intent on overruling a longstanding “implied preclusion” doctrine under which defendants … Read more

Sullivan & Cromwell Discusses Supreme Court Decision on Exemption to Federal Arbitration Act

Among other things, the Federal Arbitration Act (FAA) authorizes U.S. courts to enforce arbitration agreements in “contract[s] evidencing a transaction involving commerce,” but excludes from its scope “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  On June 6, 2022, the U.S. Supreme Court ruled in Southwest Airlines Co. v. Saxon, 596 U.S. ___, 2022 WL 1914099 (June 6, 2022), that workers “who load cargo on and off airplanes belong to a ‘class of workers in foreign or interstate commerce’” to which the FAA does not apply.[1]  In … Read more

Katten Discusses Shareholder Litigation Risk in an Unstable Geopolitical Environment

Over the past two years, U.S. public companies faced an unpredictable risk environment.  Two geopolitical crises – the Covid-19 pandemic, and the Russian invasion of Ukraine – strained international supply chains and destabilized financial markets.

It is tempting to view these events as temporary departures from the stable climate for international commerce of the past 75 years.  There are reasonable grounds for that position.  After all, Covid-19 was the first global pandemic since 1919, and the conflict in Ukraine marks the first large-scale conventional conflict in Europe since World War II.  However, geopolitical instability may be the new normal, and … Read more

Does the Threat of Securities Class Actions Add Value for Shareholders? Evidence from China

Securities class actions (SCA) are an important governance mechanism in the U.S. securities market, but there is a significant debate about their costs and benefits to investors. SCA are intended to serve two key functions in investor protection: disciplining and deterring fraud and compensating aggrieved investors. On the one hand, SCA are more efficient and powerful than individual securities suits and, thus, can enhance investor protection. As for deterrence, there is growing evidence that lowering directors’ and officers’ (D&Os) liability risk using corporate charter provisions, D&O insurance coverage, or liability law changes can exacerbate agency problems by reducing managerial vigilance … Read more

To Remove or Not To Remove: Is that the Question in 1933 Act Securities Cases?

When the removal provisions of the Securities Act of 1933 (1933 Act) and the Class Action Fairness Act of 2005 (CAFA) conflict, the 1933 Act should prevail. The conflict arises in cases involving initial offerings of noncovered securities when plaintiffs file in state court, seek class treatment, and base their claims solely on alleged violations of the 1933 Act. In these cases, CAFA appears to broadly allow removal to federal courts, while the 1933 Act strictly prohibits it. Courts are currently split on which statute should prevail,[1] but the recent trend appears to be in favor of removal under … Read more