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Transcript of © Milberg 2010 1 USING THE LAW TO PROTECT YOUR FUNDS ASSETS: The Role of Institutional Investors in...
© Milberg 20101
USING THE LAW TO PROTECT YOUR FUND’S ASSETS:
The Role of Institutional Investors in U.S. Shareholder Litigation
Prepared for:
The Tel Aviv Institutional Investor ConferenceMay 24, 2010
Todd Kammerman, Esq.Associate
Benjamin Kaufman, Esq.Partner
© Milberg 20102
Protection of Future Income
Litigation to Prevent or Recover Institutional Investor Losses through:
•Securities Litigation;
•Derivative Litigation; and
•Transactional Litigation
© Milberg 20103
Securities Fraud Class Action Cases in the United States
© Milberg 20104
“This Court has long recognized that meritorious private actions to enforce federal antifraud securities laws are an essential supplement to criminal prosecutions and
civil enforcement actions brought, respectively, by the Department of Justice and the Securities and Exchange
Commission (SEC).”
-- Justice Ruth Bader Ginsburg in the opinion of the Supreme Court in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007), which was litigated by
Milberg LLP
© Milberg 20105
Traditional Securities Class Action Litigation
Historically, as fiduciaries, institutional investors have actively sought to recover fund losses due to fraud
© Milberg 20106
Institutional Investors Role Private and public funds dominate the market
and have vested interest in:
Maintaining integrity of financial markets
Assuring corporate accountability
Maximizing returns
Increasingly stepping forward to seek recoveries for losses due to securities fraud
Fulfill fiduciary duties to take action when necessary
Serve as Lead Plaintiff and/or Class Representative
© Milberg 20107
U.S. Securities Class Actions with Union/Public Pension Fund As Lead Plaintiff
Sources: PricewaterhouseCoopers 2008 Securities Litigation Study (April 2009) and PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010)Final 2009 data was not available; the full-year projections were based upon filings through June 30, 2009.
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© Milberg 20108
U.S. Securities Class Actions with Any Institutional Investor As Lead Plaintiff
Sources: PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010)Final 2009 data was not available; the full-year projections were based upon filings through June 30, 2009.
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© Milberg 20109
Institutional Investors Account for Vast Majority of Settlements 91 total settlements valued at $3.1 billion in 2009
57% of cases settled in 2009 had an institutional investor as lead plaintiff
However, the value of the cases led by an institutional investor that settled in 2009 accounted for 85% of the value of total 2009 settlements
Nine of the top ten settlements in 2009 had institutional investors as the lead plaintiff
Sources: PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010)
© Milberg 201010
Recent Jury Verdict: In re Vivendi Universal, S.A.
Recent trial ended with a jury verdict finding Vivendi liable on all counts
Retirement System for the General Employees of the City of Miami was a lead plaintiff
Class includes foreign institutional and individual investors
Investors estimated to recover up to $9.3 billion
© Milberg 201011
Transactional and Derivative Litigation – Protecting Assets From Future Losses
Comverse Derivative Litigation $62 million in cash + significant corporate governance reforms
(subject to court approval at June 21, 2010 hearing)
Southwest Airlines Improved reporting procedures
Anheuser Busch Litigation Settled for additional disclosures in proxy statement concerning
merger with InBev, protections for certain AB employees and an increase in the merger consideration
Madoff Litigation Brought on behalf of feeder funds that invested with Madoff Alleges that the funds’ managers failed to conduct adequate
due diligence Alleges that the funds’ auditors failed to conduct proper
audits
© Milberg 201012
Foreign Fund Trends and Statistics
© Milberg 201013
A Foothold in 2000-2010 Two of Top 10 securities class action settlements of all time
have been against foreign corporations
Nortel (two cases brought in 2001 and 2004): $2.2 billion
Royal Ahold N.V. (2003): $1.1 billion
Cross-border transactions
Globalization of the securities marketplace
Outreach by U.S.-based securities class action firms
Education and marketing efforts of U.S.-based securities litigators
Growing relationships between U.S. class actions firms and international institutional investors
© Milberg 201014
Non-U.S. Institutional Investor Lead-Plaintiff Applicants Trend
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2%
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16%
18%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Non-U.S. Movants as a Percentage of Newly Filed Cases
Source: ISS Research (Dec 2008)
© Milberg 201015
Growing Geographic Distribution 234 instances of international institutional investors moving for
lead plaintiff status (1996 through 2007)
134 different cases
25 different countries
31 different law firms represented the international institutional investors
Top 5 Countries:
Germany, Canada, Israel, Italy and United Kingdom
Included public pension funds, asset managers, mutual funds, union pension plans, and hedge funds
© Milberg 201016
Non-U.S. Institutional Investor Lead Plaintiff Applicants by Country: 1996 - 2007
Source: ISS Research (Dec 2008)
Rank Country No. of Movants Percentage of Total1 Germany 56 23.9%2 Canada 42 17.9%3 Israel 25 10.7%4 Italy 15 6.4%5 United Kingdom 14 6.0%6 Austria 13 5.6%7 Sweden 12 5.1%8 British Virgin Islands 7 3.0%9 Netherlands 7 3.0%10 Belgium 6 2.6%11 France 6 2.6%12 Luxembourg 6 2.6%13 Mexico 5 2.1%14 Denmark 4 1.7%15 Ireland 4 1.7%16 Switzerland 3 1.3%17 Bahamas 1 0.4%18 Bahrain 1 0.4%19 Bermuda 1 0.4%20 Cayman Islands 1 0.4%21 Czech Republic 1 0.4%22 Finland 1 0.4%23 Greece 1 0.4%24 Isle of Man 1 0.4%25 Netherlands Antilles 1 0.4%
Total 234 100.0%
© Milberg 201017
Foreign Participation Contributions in U.S. Securities Class Actions Maximize shareholders’ returns
Nortel Networks cases
Help achieve important corporate governance changes
Increase credibility of cases
Steer class definition to include Eurobond purchasers and/or shares purchased on foreign exchanges
Increased participation by non-U.S. investors in U.S.-based securities class actions may drive legal reforms in their own countries
Structure settlements to include international institutional investors
© Milberg 201018
Attractiveness of U.S. Lawsuits Ability to sue on behalf of other similarly situated persons is
largely unique to the United States
Availability of contingency fee arrangements
Absence of “loser pays” fee-shifting rules
Confidentiality Order
Scheduling Orders, which move the litigation
Right to expansive discovery after Motion to Dismiss phase
Well-developed system for certifying class actions
Potential for a large jury verdict
© Milberg 201019
Lead Plaintiff Incentives Submit claim forms in a timely fashion
30-70% of institutional investors fail to file claim forms in cases where they have losses
Extraordinary percentage in light of $6.9 billion in securities class action settlements finalized in 2007
Unaware of lawsuits until after the LP deadline
Increased attention to the filing process may lead to more active involvement by international institutional investors
© Milberg 201020
Opting-Out of Class Actions Depends on the particulars of a plaintiff’s claims and
the strengths of those claims connected to the plaintiff’s purchases
Typically reserved for plaintiffs with substantial losses and financial and structural wherewithal to pursue its own claims
The ability of defendants to pay damages
Advantages of opting-out The ability to select the venue in which to file
The power to select counsel
The ability to direct settlement unimpeded by the court or class issues
Possibility of obtaining a recovery many times larger than what would have been obtained in a class recovery
No need to seek class certification
Risks
Opt-out plaintiff runs the risk of non-recovery- opting out forever bars that plaintiff in participating in the class settlement or judgment
© Milberg 201021
The Milberg Difference
© Milberg 201022
Milberg LLP: Setting the Standard Expertise
Lead Counsel in 29 of the Top 100 Settlements Co-lead counsel in more of the 100 largest settlements than any
other plaintiff law firm Top 10 plaintiff’s law firm based on total settlements in 2008 Leadership in landmark cases (e.g., Tellabs, Inc. v. Makor)
Resources Financial and human resources to oppose defense firms Top-tier attorneys supported by in-house experts Forensic accountants and investigators Litigation technical support
Results 40 years of unparalleled recoveries on behalf of investors
Sources: RiskMetrics SCAS 100 for 2009 and SCAS 50 for 2008
© Milberg 201023
Recent and Notable Milberg LLP Securities Class Action Results
Date Case Recovery ($)
January 29, 2010 In re Vivendi Universal, S.A. Securities Litig., No. 1:02-cv-05571-RJH-HBP$9,300,000,000
(est)
August 9, 2009 In re Initial Public Offerings Sec. Litig., No. 21 MC 92 (SAS) (S.D.N.Y.) $586,000,000
January 14, 2009 Carlson v. Xerox Corp. et. al., No. 3:00-CV-1621 (D. Conn.) $750,000,000
January 6, 2009 In re Chiron Corp. Sec. Litig., No. C 04-4293 (N.D. Cal.) $30,000,000
August 8, 2008 In re Biovail Sec. Litig., No. 03-CV-8917 (S.D.N.Y.) $138,000,000
December 19, 2007
In re Tyco Int’l, Ltd. Multidistrict Litigation, No. 02-1335 (D.N.H.) $3,200,000,000
September 6, 2007
In re CMS Energy Sec. Litig., No. 02-72004 (E.D. Mich.) $200,000,000
July 18, 2007 In re American Express Fin. Advisors Sec. Litig., No. 04-1773 (D.N.J.) $100,000,000
June 8, 2007 In re Martha Stewart Living Omnimedia, Inc., Sec. Litig., No. 02-6273 (S.D.N.Y.) $30,000,000
January 29, 2007 In re Nortel Networks Corp. Sec. Litig. (Nortel I), No. 01-CV-1855 (S.D.N.Y.) $1,142,000,000
January 8, 2007 In re Sears, Roebuck & Co. Sec. Litig., No. 02-7527 (N.D. Ill.) $215,000,000
September 7, 2005
In re CVS Corp. Securities Litigation, No. 01-11464 (D. Mass.) $110,000,000
June 14, 2005 In re Deutsche Telekom AG Securities Litigation, No. 00-9475 (S.D.N.Y.) $120,000,000
© Milberg 201024
Milberg LLP Practice Areas Institutional Investor Services
Portfolio Monitoring
Quarterly Reporting
Case Evaluation
Corporate Governance and Shareholder Rights Advice
Litigation
Bankruptcy
Pro Bono Litigation
False Claims – Qui Tam
Mass Torts
Class Action Litigation
Securities Fraud
Consumer Fraud
ERISA
Insurance
Antitrust
Human Rights and Labor Practices
Derivative
Madoff
Transactional
Governance and Fees
© Milberg 201025
Thank You
© Milberg 201026
Benjamin Y. Kaufman, Esq.E [email protected] Admitted: States of New York and New JerseyT 212.631.8641 Education: B.A., Yeshiva University, 1985F 212.273.4378 J.D., Benjamin N. Cardozo School of Law of Yeshiva
University, 1988 Beklin Fellow, Belkin Scholar M.B.A., Stern School of Business of New York University, 1999
Mr. Kaufman focuses on class actions on behalf of defrauded investors and consumers. Mr. Kaufman’s successful securities litigations include In re Deutsche Telekom AG Securities Litig., No. 00-9475 (S.D.N.Y.), a complex international securities litigation requiring evidentiary discovery in both the United States and Europe, which settled for $120 million. Mr. Kaufman was also part of the team that recovered $46 million for investors in In re Asia Pulp & Paper Securities Litigation, No. 01-CV-7351 (S.D.N.Y.) and $43.1 million, with contributions of $20 million, $14.85 million and $8.25 million from Motorola, the individual defendants, and defendant underwriters respectively, in Freeland v. Iridium World Commc’ns, Ltd.
Mr. Kaufman’s outstanding representative results in derivative and transactional litigations include: In re Trump Hotels Shareholder Derivative Litigation (Trump personally contributed some of his holdings; the company increased the number of directors on its board, and certain future transactions had to be reviewed by a special committee.)He recently argued the appeal in In re Comverse Technology, Inc. Derivative Litig., 56 AD3d 49 (2008) which led to the seminal New York Appellate Division opinion which clarified the standards of demand futility, and held that a board of directors loses the protection of the business judgment rule where there is evidence of self-dealing and poor judgment by the directors; and In re Topps Company, Inc. Shareholder Litig. which resulted in a 2007 decision which vindicated the rights of shareholders under the rules of comity and doctrine of forum non conveniens and to pursue claims in the most relevant forum notwithstanding the fact that jurisdiction might exist as well in the state of incorporation.
Mr. Kaufman is also at the forefront of consumer litigations with a recently-filed litigation brought on behalf of paid e-mail subscribers against web hosting and e-mail service providers in Golf Clubs Away LLC v. Hostway Corporation, et al., Case No. 09-29596 (Fl. Cir. Ct., Broward County).In addition, Mr. Kaufman represents many of the firm's corporate clients in complex commercial litigation matters and arbitrations, including Puckett v. Sony Music Entertainment, No. 108802/98 (New York Cty. 2002) (a complex copyright royalty class action) and in arbitrations on behalf of oppressed minority shareholders in both public and privately held corporations. Prior to joining Milberg in August of 1998, Mr. Kaufman was a Court Attorney for the New York State Supreme Court, New York County (1988-1990) and Principal Law Clerk to Justice Herman Cahn of the Commercial Division of the New York State Supreme Court, New York County (1990-1998).
© Milberg 201027
Todd Kammerman, Esq.E [email protected] Admitted: States of New York and New JerseyT 646.733.5692 Education: B.A., Brandeis University, 1999 cum laude with honorsF 212.273.4339 J.D., Benjamin N. Cardozo School of Law of Yeshiva
University, 2002 Alexander Fellow
Mr. Kammerman focuses his practice on litigation involving defrauded investors and consumers. Mr. Kammerman’s successful litigations include In re CMS Energy Securities Litigation, No. 02-72004 (E.D. Mich.) ($200 million recovery); In re Royal Dutch/Shell Transport ERISA Litigation, No. 04-1398 (D.N.J.) ($90 million recovery); Scheiner v. i2 Technologies, et al., No. 01-418 (N.D. Tex.) ($87.8 million recovery); and In re Collins & Aikman Corporation Securities Litigation, No. 03-71173 (E.D. Mich.) ($10.8 million recovery).
Mr. Kammerman played a pivotal role in the In re Comverse Technology, Inc. Derivative Litigation ($62 million recovery), particularly in drafting the appellate briefs which led to the seminal New York Appellate Division opinion, reported at 56 A.D.3d 49 (2008), clarifying the standards of demand futility, and holding that a board of directors loses the protection of the business judgment rule where there is evidence of self-dealing and poor judgment by the directors. He was also a member of the team that litigated the appeal in Tellabs, Inc. v. Makor Issues & Rights, Ltd. before the United States Supreme Court, in which the Supreme Court issued an opinion defining the pleading standard for scienter in all federal securities fraud cases, and is reported at 551 U.S. 308 (2007). While at Cardozo, he was named an Alexander Fellow, through which he worked as a judicial intern in the chambers of the Honorable Joseph A. Greenaway, Jr., U.S.D.J. in Newark, New Jersey. Mr. Kammerman is a member of the bars of the States of New York and New Jersey and is admitted to practice before the United States District Courts for the District of New Jersey, Southern District of New York, Eastern District of Michigan and the Eastern District of New York and the United States Courts of Appeals for the Third and Eleventh Circuits.
© Milberg 201028
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