The Conglomerate includes this recent post picking up from from the SEC accusing New Jersey of securities fraud. Among other things, the post ask whether the US may soon see a wave of securities suits against sovereigns regarding their statements when selling debt.
Are you still wondering whether there is more litigation around the globe? Either way, consider this post from D & O Diary regarding the tremendous increase in the damages awards for securities litigation in Japan. The post starts out with the following strong statement:
"The amount of damages awarded in 2009 Japanese securities cases exceeded "the aggregate amount of securities litigation damages determined by court decisions in Japan for the entire previous decade," according to a new study of Japanese securities litigation from NERA Economic Consulting. The report, dated August 2, 2010 and entitled "Trends in Japanese Securities Litigation: 2009 Update," and which can be found here, updates the NERA report released last year that surveyed Japanese securities litigation from 1998-2008."
Kevin LaCroix's blog, D & O Diary, includes informative recent posts that provide a point-counterpoint on plaintiff and defense views on the Supreme Court's recent Morrison uling on jurisdiction and global securities litigation.
Some argue the CDO financial fiasco years is the biggest mass tort in history. Towards that view, the ratings agencies suffered a major loss on a motion to dismiss in a case before the well-known and well-regarded Judge Schira Scheindlin.
D & O Diary covers the opinion here, and includes links to the opinion and other articles. In short, the court rejected a causation based argument that sought dismissal of the claims on the theory that that there were larger causes of the investor losses. D & O also mentions and links to Judge Scheindlin's prior opinion rejecting a First Amendment defense to similar claims in a different case against ratings agencies.
The provocative question in the title of this post is a question posed by Erik Gerding in an insightful post at the Conglomerate. It's part of a collection of three good posts, with links to others. The Epicurean Dealmaker has been silent for a month; hopefully he or she will soon comment.
Here is a detailed review of 2009 securities class action, courtesy of Kevin LaCroix at the D & O Diary. Amazing, but not suprising, to see how much litigation is generated by companies that do not make anything tangible and instead are essentially finance companies.
Risk managers and lawyes have to think even more about divergent types of fallout from a corporate problems. The point is illustrated by this great post from Kevin LaCroix at D & O Diary. in the post, he airs various non-obvious liability, risk and D & O issues rising from Siemen's problems with corporate bribery. One of the non-obvious problems is a subsequent securities suit that arose from later statements by Siemens about the revenue impacts that would or would not follow from stopping the use of bribery.
It was just a matter of time. Seeking a civil remedy for the oft-criticized credit ratings issued by the various ratings agencies, The Ohio Attorney General retained private counsel and has filed suit "on behalf of the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, the Ohio Police & Fire Pension Fund, the School Employees Retirement System of Ohio and the Ohio Public Employees Deferred Compensation Program.""Attorney General Cordray is drawing on the expertise of the law firms Entwistle & Cappucci LLP; Lieff Cabraser Heimann & Bernstein LLP; and Schottenstein Zox & Dunn Co., LPA to assist with the litigation." The Lieff Cabraser firm is well-known for its class action work for plaintiffs. The Entwistle firm has significant experience in securities claims for pension funds and others. The Schottenstein firm is an Ohio commercial law firm. No doubt others will explore all the political connections. The complaint is here. The claims are for negligent misrepresentation and violation of Ohio statutes. The suit is in federal court, so one assumes the first issues will be Iqbal/Twombly motions. I went through the complaint this morning and it seems to this observer more than adequate in laying out a compelling and logical claim backed by evidence garnered during Congressional investigations.Big picture conclusions/thoughts/questions ? This suit is the latest example of how investigations by federal and state officials and agencies are increasingly used to generate evidence and facts to survive Iqbal/Twombly motions. Second, my personal belief is that there ultimately will be a flood of these lawsuits. with many filed by overseas entities. One question is whether and how these claims will be expanded to include "aiding and abetting" claims against law firms and other professionals. "Choice of law" questions also seem inevitable.
The WSJ Law blog includes this post yesterday that illustrates the virtues of e-discovery and the ever-expanding use of tort law in claims between businesses. The post, by Ashby Jones, reports on and includes a link to a Connecticut opinon in which the buyer of cdos sued the seller (UBS) for fradulent concealment of material facts regarding an impending downgrade of the rating for the cdos. The post includes a link to the trial judge's nicely written opinion granting a motion for prejudgment secuurity for about $ 35 million. The opinion lays the facts that caused the judge to grant the motion, and relies in material part on quotes from various internal e-mails at UBS in which the securities were internally disparaged at UBS - before sale - as "crap" and "vomit."
The entire post and opinion make for an easy read for those interested in the litigation arising out of the recent financial fiascoes. For those who are not inclined to scan it all, here's a key quote that illustrates why paying for e-discovery can be worth it and why tort claims are seeing increasing use in litigation between businesses:
"But the court finds there is more to this case than that. Through direct and circumstantial evidence, Pursuit has established probable cause to sustain the validity of a claim that the UBS defendants were in possession of material nonpublic information regarding imminent ratings downgrades on the Notes it sold to the Plaintiffs, information UBS withheld from the Plaintiffs.
The use of the term "triggerless," which was used by UBS to entice the Plaintiffs to purchase the same Notes they had earlier rejected, is akin to a representation by UBS that a gun being handed to the Plaintiffs is not loaded, when in fact UBS knew the gun was not only loaded, but was about to go off. The court takes UBS employees at their word when they referenced their Notes, these purported "investment grade" securities which they sold, as "crap" and "vomit", for UBS alone possessed the knowledge of what their product, their inventory, was truly worth. While UBS would argue that such descriptors lack a precisemeaning, the true meaning of these words and the true value of UBS's wares becameabundantly clear when the Plaintiffs' multi-million dollar investment was completely wiped out and liquidated by UBS shortly after the last of the Note purchases was consummated.
That is the difference between a risk that something might happen to change the value of an investment, which is both a fact of life and a risk shared by all parties to any securities transaction, and the undisclosed knowledge that something will happen. That type of nondisclosure, whether it is on the part of a seller or a buyer, can cross the line into actionable securities fraud, and the court finds probable cause to sustain a finding that in this instance, it did. "
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