On Tuesday, February 6, 2018, United States District Judge Jed S. Rakoff denied class counsel’s request to file under seal three supplemental agreements to a $2.95 billion settlement in the Petrobras Securities Litigation, and made the side agreements part of the public record. (See Memorandum Order – Petrobras (2-6-18)). This included making public the supplemental agreement that Petrobras could back out of the settlement if more than 5% of the class members opted out. In his order denying the request, Judge Rakoff could not help but find irony in the fact that plaintiffs’ counsel, “who have premised their claim of fraud on defendants’ alleged failure to disclose material information,” was “seeking to keep secret three agreements that are a material part of the settlement.” However, the existence of the supplemental agreements, and the fact that Petrobras could terminate the settlement if an undisclosed “Opt-Out Threshold” was met, were disclosed publicly in the stipulation of settlement. Keeping secret the percentage of opt-outs needed to “blow up” a settlement is standard practice, and publishing it can embolden opt-out proponents and threaten the stability of settlements.
Kevin Mortimer is an Associate in the firm’s Boston office. Kevin engages in an expansive array of litigation matters. With prior experience as a project management operational consultant at a boutique mechanical engineering subcontracting firm and a large commercial real estate company, he provides a well-informed perspective for groups concentrated on real estate disputes, land use law, and construction law. Kevin employs his educational background in the field of economics in his contributions to matters concerning institutional class action recovery, securities litigation, commercial litigation, and complex insurance coverage issues.
On November 4, 2016, Judge Keith Ellison of the United States District Court for the Southern District of Texas granted preliminary approval of a $175 million settlement in the federal securities class action In re: BP p.l.c. Securities Litigation between BP and Lead Plaintiffs for the “post-explosion” class. While the settlement is still subject to final approval, it resolves allegations that BP misrepresented the seriousness of the Deepwater Horizon explosion and its aftermath—covering investors who purchased BP shares between the date of the first alleged misrepresentation about the amount of oil being released as a result of the explosion (April 26, 2010) and the date on which it was revealed that BP initially misrepresented the spill’s severity (May 28, 2010). In granting preliminary approval of the settlement, Judge Ellison also: (1) rejected 135 institutional investors’ request for exemption from opt-out procedures; and (2) allowed some plaintiffs who timely requested exclusion from the class to withdraw their requests and opt back into the settlement. Continue Reading Court in the BP p.l.c. Securities Litigation Upholds Opt-Out Procedures But Then Allows Individual Action Plaintiffs to Opt Back Into $175 Million Settlement
On June 29, 2016, the Dutch Court of East Brabant dismissed a foundation’s claims against Rabobank Group for alleged unlawful selling of interest rate swaps because it failed to meet the requirement of the Dutch Claim Code that a foundation sufficiently safeguard the interests of its members. While it is a lower court decision likely to be appealed, this dismissal depicts the increased scrutiny that foundations may face, particularly in the wake of the €1.2 billion settlement reached by the foundation in the Fortis case earlier this year. There will likely be an increase in the number of defense challenges to the ability of foundations to pursue litigation on behalf of members. Therefore, before joining a Dutch foundation, institutional investors should carefully scrutinize the foundation’s organizational documents and governance structure.
Following up on our December 15 post on the debate over the best strategy to recover foreign securities losses, a collection of Dutch Foundations (known as Stichtings) negotiated a substantial collective settlement with Ageas SA/NV, the successor-in-interest to Fortis Holdings. The settlement was publicly announced on March 14, 2016, and the total settlement will be €1.204 billion, or approximately $1.337 billion. Though pending approval by the Amsterdam Court of Appeal, the settlement would reportedly end all civil proceedings between Ageas and the claimants’ organizations. Ageas will not admit to any wrongdoing as part of the settlement. In February of 2010, even before the U.S. Supreme Court had decided the Morrison case, the United States District Court for the Southern District of New York dismissed the U.S. class action against Fortis, holding that the Court lacked subject matter jurisdiction over the case under the old “conduct” and “effects” tests developed by the Second Circuit pre-Morrison, and leaving the foreign action as the only vehicle for recovery. Details of the settlement are below. Continue Reading Dutch Foundations Negotiate €1.204 billion Settlement with Ageas, formerly Fortis.
A December 22, 2015 decision of the U.S. District Court of the Southern District of Florida in In re Ocwen Financial Corporation Securities Litigation illustrates the impact that an investigation and order of the Securities Exchange Commission (“SEC”) may have on a plaintiff’s ability to allege actionable false statements by an issuer regarding its internal controls.
The Executive Chairman of Ocwen Financial Corp. (“Ocwen”) also acted as Chairman for Home Loan Servicing Solutions (“HLSS”). Prior to the SEC publicly announcing the settlement of charges relating to Ocwen and HLSS, on September 4, 2015, the Court granted the Ocwen defendants’ motion to dismiss in its entirety the Consolidated Amended Complaint (“CAC”) filed against Ocwen. The CAC alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The class plaintiffs, consisting of those who purchased Ocwen securities between May 2, 2013 and December 19, 2014, alleged that Ocwen made false statements claiming that its Executive Chairman recused himself from all transactions in which he has a conflict of interest and false statements claiming that Ocwen had internal controls in place to prevent its Executive Chairman from participating in the approval of related-party transactions. For example, in Ocwen’s Form 10-K for 2012 and 2013 it claimed to have “robust” policies in place to prevent conflicts of interest in the approval of related party transactions. The class plaintiffs alleged that these were material misstatements because, due to Ocwen’s allegedly inadequate internal controls, the Executive Chairman did not properly recuse himself from transactions in which he had a conflict of interest. However, the Court held that the CAC failed to allege material falsity or a strong inference of scienter, in part because it did not allege that he personally approved any related-party transactions.
Continue Reading SEC’s Charges Provide Support for Class Plaintiffs’ Allegations in the Ocwen Securities Litigation
Recently, in Lawrence E. Jaffe Pension Plan v. Household International, Inc., the United States District Court for the Northern District of Illinois granted the defendants’ Rule 39 motion for appellate costs and ordered the plaintiffs to pay a total of $13,281,282. Judge Alonso’s decision is noteworthy for institutional investors and their attorneys. Despite the Court’s view of the potential for shifting risk of costs to the class, imposing such a costly burden on representative plaintiffs may chill future securities litigation. In this case, the plaintiffs now have to pay over $13 million in costs simply because they were successful at trial in obtaining a multi-billion dollar judgment.