Corporate Securities Law Blog

In New York City Employees’ Retirement System v. Jobs, No. 08-16488, 2010 WL 309028 (9th Cir. Jan. 28, 2010), the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a class action lawsuit against Apple, Inc. (“Apple”) and fourteen of its officers and directors for the alleged false and misleading proxy solicitation of a stock option plan on the ground that plaintiff-appellant did not adequately plead economic loss in the form of “dilution to shareholder interests.”  This decision provides yet another instance where courts have strictly applied the “loss causation” principles set forth in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 342-48 (2005), in describing the contours of “loss” in private actions under the federal securities laws.
 

The United States Securities and Exchange Commission (“SEC” or the “Commission”) recently made changes that could affect the speed and efficiency with which investigations are handled and enforcement actions are brought. Stung with allegations of investigative failures in the wake of revelations regarding the Bernard Madoff Ponzi scheme, the SEC is centralizing its intake of tips, complaints and referrals. It is adding specialized “units” within its Division of Enforcement. It also announced an “Enforcement Cooperation Initiative,” indicating that it will be more receptive to making deals with insiders in order to better understand potential securities violations.
 

In Edward J. Goodman Life Income Trust v. Jabil Circuit, Inc., No. 09-10954, 2010 WL 154519 (11th Cir. Jan. 19, 2010), the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of securities fraud and insider trading claims arising out of options backdating. This decision represents the most recent effort by the Eleventh Circuit to apply the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (“Reform Act”) and the Supreme Court’s decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) [see blog article here], to allegations of securities fraud arising from options backdating.
 

In Konkol v. Diebold, Inc., No. 08-4572, 2009 WL 4909110 (6th Cir. Dec. 22, 2009), the United States Court of Appeals for the Sixth Circuit applied the United States Supreme Court’s decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (see blog article here), to hold that securities fraud plaintiffs must plead an inference of scienter that is both “cogent and at least as compelling as any opposing competing inference.”  The Sixth Circuit clarified that, under Tellabs, the inference of defendants’ scienter be “cogent” requires plaintiffs to plead “with particularity” facts supporting each individual allegation of scienter. Additionally, the Sixth Circuit held that Tellabs does not impose any burden on defendants to set forth a competing, non-fraudulent inference of scienter at the pleading stage. In reaching its decision, the Court attempted to harmonize Tellabs with the Sixth Circuit leading pre-Tellabs decision on the topic, Helwig v. Vencor, Inc., 251 F.3d 540 (6th Cir. 2001) (en banc).
 

NERA and Cornerstone Research (in cooperation with Stanford Law School’s Securities Class Action Clearinghouse) recently issued their respective assessments of securities litigation for 2009. (Their findings and analyses are summarized in press releases here: NERA, Cornerstone.) Both report that federal securities class action filings decreased from 2008, due to the easing of the financial crisis and reduced stock price volatility since the first quarter of 2009. (We previously reported on mid-year 2009 assessments here.)  One notable trend: an increasing number of cases are being filed six months or more after the end of the putative class periods, instead of immediately after a stock price drop, suggesting that plaintiffs’ counsel have turned to “clearing out inventory” of potential cases.

For further information, please contact John Stigi at (213) 617-5589.

The following is a brief summary of certain tax provisions included in President Obama's budget proposal. Following this summary is a list of certain tax provisions that expired at the end of 2009 or will expire at the end of 2010 if Congress doesn't act to extend them.
 

1. Lower Thresholds For HSR Filings

On January 19, 2010, the Federal Trade Commission announced revised, lower thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product. For the first time, the thresholds have been reduced. They will be effective thirty days after publication in the Federal Register. Publication is expected to occur this week. Thus the new thresholds will most likely become effective late February 2010. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions. The HSR Act imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
 

Third Thursday Emerging Company Webinars
February 18, 2010
LiveMeeting

You're Served!  What do you do?

When your company gets sued, what steps should you take immediately and what do you need to be concerned about in the first 30 days of the case. 

Although cases take a long time to get to trial (and most never make it that far), the beginning of litigation is a critical time where several important issues must be considered.  During this time, you must:

• Consider insurance issues.
• Take steps to preserve evidence.
• Identify counsel.
• Consider the effects of litigation upon personnel decisions.
• Consider procedural advantages available to defendants at an early stage.

This Webinar will covert these issue and much more for anyone whose job may occasionally include managing the defense of claims against the company.