With Vigour and Zeal

Today Parmalat SpA (Milan: PLT) announced it has settled the securities class action pending against it (SDNY). It will issue 10.5 million shares - ‘new’ according to AP, ‘existing’ according to WSJ - worth approximately €24 million to the class. (press release, Forbes and see the FT, WV&Z archives)

The Guardian quotes Lead Counsel Grant & Eisenhofer PA’s Stuart M. Grant:

“We are very pleased with the settlement reached with the company, bringing total investor recovery obtained so far in the Parmalat case to approximately $90 million. […] We will also continue to press claims against other defendants whom we allege defrauded investors over a period of years prior to Parmalat’s ultimate collapse in 2003.”

So it’s not over yet for the class, nor for Parmalat that still is involved in other legal procedures of its own.

The laws have changed in Italy to allow for class actions (azione collettiva risarcitoria) from 30 June this year. Since it’s been in the works for years, a lot has been written about it already. WV&Z offers a few resources to get up to speed, starting with material produced by practitioners:

• PwC (study paragraph, p.65 of 77)
• Lovells LLP (bulletin article, p.7 of 20)
• DLA Piper LLP (The Lawyer article, p.29)
• Clifford Chance LLP (client briefing)

Prof Elisabetta Silvestri of the University of Pavia has written an extensive guide (report, supplement) on the legislation and its history (with thanks to GCAX). Also see this 2005 paper by two Italian professors on Parmalat (about which see the next post too). From the abstract:

[After a description of Parmalat’s frauds and governance, w]e subsequently analyse the causes of under-enforcement and the reasons why Parmalat generated litigation in the US rather than Italy. Drawing from economic analysis, we explain the role of private enforcement and consider the benefits of class actions. In this respect, we emphasize the importance of discovery and pleading rules. We also find that the interplay between public and private enforcement is missing in Italy and argue, by way of conclusion, that US securities regulation was transplanted into Continental Europe without sufficient modernisation as to civil procedure in the area of mass claims and complex litigation.

But is a change in the law enough? What about the judges presiding over these cases? These two papers examine just that:

• Do Corporate Law Judges Matter? Some Evidence From Milan (link)
• Off the Books, but on the Record: Evidence from Italy on the Relevance of Judges to the Quality of Corporate Law (link)

In the next four weeks there are no less than four conferences to go to, one a week. They are, in chronological order:

• Conference on Securities Litigation, 28, 29 April, London (programme)
• Corporate Governance and Responsible Investment, 6, 7 May, Copenhagen (programme)
• Global Shareholder Activism Conference, 15, 16 May, Paris (programme)
• Pension Fund Investment World Nordic 2008, 19, 20 May, Stockholm (programme)

London is more geared toward the topic of securities litigation for a legal practitioner audience, Copenhagen and Stockholm are more about corporate governance for investors and Paris is a mix of the two. (Also see this previous post.)

Three items of note this time, one bulletin, two articles.

Lovells LLP’s class action practice has published its latest bulletin (April 2008). Several members of the practice contribute to it, a number writing about the respective European and US jurisdictions in which they practice. Contributions cover the latest developments in France and the possibility of its adoption of a group litigation procedure, the scope of Germany’s KapMuG and the European Commission and ‘collective redress’.

The first article is entitled Aggregate Litigation across the Atlantic and the Future of American Exceptionalism, by Prof Richard A. Nagareda, lecturer at Vanderbilt University School of Law. (With thanks to the Drug and Device Law blog.) From the abstract:

This article analyzes the emerging phenomenon of trans-Atlantic civil litigation on an aggregate basis - chiefly, though not exclusively, by way of class actions. European systems have shown a growing receptiveness for aggregate litigation, but treatments of this development have consisted largely of description. This article offers an analytical framework with which to anticipate the structural dynamics of transnational aggregate litigation in the twenty-first century.

For a quick reference of recent ‘developments in aggragate litigation’ in Europe, see the table from page 19 (20 of 47).

In the second article, in the The Times newspaper, Edwin Coe LLP’s David Greene politely warns ‘Hands off our claimants, please’. ‘Is there a head of steam building up to introduce US-style class action to Britain? Consumers will not be so lucky.’ Greene, partner and head of litigation, discusses among other things the export of cases by way of the US plaintiffs’ bar’s efforts ‘recruiting claimants in the UK’ and the corresponding growth of UK claimants’ participation in US actions. (In WV&Z’s view, ‘participation’ is moving to be and, once appointed, acting as lead plaintiff and not the just filling out and filing of a settlement claim form.) Cited cases include Vivendi, GSK and the English case MAN v Freightliner (opinion). He then goes on to discuss the flipside, the barriers of the development of ‘US-style class actions’ over here - ‘loser pays’, lack of contingency fees and ’simply the state of the law’.

Edwin Coe is the firm that represents 6,000 - the number is growing - private shareholders in the nationalised mortgage lender Norther Rock Plc. (Also see this article.) WV&Z waits with bated breath for that case to commence.

The post I wrote on 16 January 2007 about Converium Reinsurance Co being partially granted and partially denied its motion to dismiss the class action pending against it following its IPO never did find its way here. It was in the earliest days of WV&Z and on the basis of the case I actually went on a tangent about disclosure and the Transparancy Directive and never did finish the post properly. So, nudged by SLW (this post, with thanks), some of that material, the important stuff on the case itself, does find its way here now in updated form. (I’ll spare you the rest.)

In her December 2006 opinion (via New York Law Journal), SDNY Judge Denise Cote dismissed the claims against former parent Zurich Financial Services and its underwriters UBS AG and Merrill Lynch International and certain claims against Converium Holding AG and three Converium officers, but not all. Even so, back then it was presented as if it was a dismissal (New York Law Journal, AFX News). (Converium was part of Zurich Financial Services before being spun off; it’s now known as SCOR Holding (Switzerland) AG, SWX: CHRN; NYSE: CHR) Far from that being the end, litigation of course continued on the basis of what was left, the Securities Act claims and the remaining Exchange Act claims. (Also see the consolidated amended complaint, September 2005.)

Fast forward a good year and Judge Cote has partially granted and partially denied a motion to certify the class in the action. (SLW has the March 2008 opinion.) She specifically denies ‘to include foreign investors who purchased shares on a foreign exchange’ (WV&Z archives) but includes ‘United States residents who purchased Converium shares on the SWX [and] any person who purchased Converium ADSs on the NYSE’. See the opinion from page 7 for the discussion on subject matter jurisdiction over non-US purchasers on the Swiss exchange in this case.

Notably, the certification denies Co-Lead Plaintiff Avalon Holdings Inc., an institutional investor based in Greece, being a member of the class. In response to SLW’s final observation then, WV&Z points to Avalon as most likely to lead that charge.

What’s more: Also see Prof Samuel P. Baumgartner’s 2007 paper Class Actions and Group Litigation in Switzerland.

One of the main themes of PricewaterhouseCooper’s 2007 Securities litigation study is in relation to foreign issues, involving both issuers and purchasers. In her introductory observation (page 1 of 77, all pages ‘of 77′), Grace Lamont, Partner and Leader of the Securities Litigation Practice, states among other things that ‘[w]ith the European Union and individual countries seemingly poised to consider collective litigation alternatives [to US class action litigation], 2008 could prove just as transformative in the foreign markets’.

Skip to the chapter ‘What a difference a year makes’ (p. 56) and the article ‘Global class actions’ (p. 70, contributed by Allen & Overy LLP) for the analysis. (Also see the Gibson Dunn & Crutcher LLP contribution, p. 45)

In short, the number of actions against foreign issuers is well up, to 27 from 14 in 2006. Of the 27, ten are European which is higher than the 2000 - 2006 average of 7. Settlement values too are up. The average settlement amount of the fifteen settlements was US$253.3 million (2006: US$149 million) or US$26.6 million (US$11.7 million) excluding outlier settlements. The Royal Dutch Shell Plc settlement (WV&Z archive) was not taken into account in these figures as that is a European settlement. (For the NAPF paper referred to on p. 66, see this previous post.)

For last year’s study, see this previous post and for more commentary on this year’s, see the D&O Diary and The 10b-5 Daily.

The European Commission has presented a White Paper on actions for damages, ’suggesting a new model for achieving compensation for consumers and businesses who are the victims of antitrust violations’. One of the key recommendations is that of collective redress in particular for small value claims.

‘However, safeguards to avoid that such actions would lead to unfounded claims need to be put in place. In the field of antitrust, the Commission therefore recommends allowing only representative actions led, for example, by recognised consumer groups and actions in which victims can choose to participate, as opposed to class actions run by law firms for an unidentified number of claimants.’ (press release, related documents)

The paper follows the Commission’s Green Paper (2005) on the same topic. (press release) See also SJ Berwin LLP’s latest Community Week, today’s The Lawyer for an article by Weil, Gotshal & Manges LLP’s Matthew Shankland and Competition Commissioner Neelie Kroes’ remarks on the White Paper.

John M. Gray holds several functions at public services union UNISON and is a pension representative at the Local Government Pension Scheme (LGPS). In addition, he keeps John’s Labour blog, on political and trade union issues. Bearing that in mind, to read his account of a Trades Union Congress seminar on class actions and plaintiffs’ lawyers in the UK see his post Class Action at the TUC.

Also of interest, an article by Barlow Lyde & Gilbert LLP (first published in The Banker) elaborating on the UK claimant situation following the ‘credit crunch’ after a brief comparison with the US.

And one off the shelf is a January article in The Lawyer, on Proskauer Rose LLP’s 2008 Trends and Developments report. (press release) One of the trends in the report is ‘[t]he continued (albeit lamented) “Americanization” of non-US legal systems’ (from page 11). (Subscribe to WV&Z.)

Henry M. Paulson Jr., Secretary of the Treasury was a last-minute addition to the roster of speakers last week at the US Chamber’s Capital Markets Competitiveness conference. (See previous post.)

Transcripts of most of the speeches, including Paulson’s, are available from the Chamber’s Center for Capital Markets Competitiveness section. The conference was webcast live and once the archive is ready, it will become available again (here). And finally, another report was launched on the day, with the same title as this year’s conference, namely Strengthening U.S. Capital Markets - A Challenge for All Americans.

BP Plc (LSE, NYSE: BP) has settled the derivative litigation pending against it. (3AN-06-11929CI, Unite Here National Retirement Fund et al vs. The Lord John Browne of Madingley et al; See WV&Z’s archive for previous posts). The notice of and terms of the settlement and more documents relating to the action can be found in BP’s Corporate Governance section and Lead Counsel Coughlin Stoia Geller Rudman & Robbins LLP’s settled cases section.

The action has not satisfactorily established that English corporations can be sued derivately in a US Court under the English Companies Act 2006, which allows for derivative claims. Instead, the Court had denied BP’s motion to dismiss on the grounds that Alaska law is applicable and that the case should not be dismissed on the basis of forum non conveniens.

The Court is to hold the settlement fairness hearing on 7 May 2008 at 2pm. The deadline to object to the settlement is 23 April. (Subscribe to WV&Z here.)