Thursday, August 31, 2006

Yet Another Settlement from N.D. California

Cerus Corporation (NASDAQ: CERS) today announced an agreement to settle the securities class action litigation pending against the company and certain current and former directors and officers. The litigation is pending before Judge Jeremy D. Fogel in the United States District Court for the Northern District of California.

Judge Fogel previously appointed Gaeton and Lionel Carnot as lead plaintiffs and Lerach Coughlin Stoia Geller Rudman & Robbins LLP as lead counsel in the Cerus litigation. A copy of that order can be found here.

The company's press release also indicates that derivative litigation pending in the Superior Court for the County of Contra Costa was also settled. A review of the docket reveals that Robbins Umeda & Fink, LLP is counsel for the plaintiff in both of the derivative actions pending there.

While the press release does not indicate the value of the settlements, an 8-K filed by Cerus gives some insight:
Under these settlement agreements, the Company's directors' and officers' liability insurance policy will fund a cash settlement amount and the Company has agreed to take or continue certain corporate governance measures.
The corporate governance measures to be taken, include:
  • Making a good faith effort to add one or two independent directors to the company's board by September 1, 2007;
  • If the company is unable to add these independent directors by that time, retaining a professional search firm to assist in the identification candidates, with the company using best efforts to add one or two independent directors to the board by December 31, 2008;
  • Unless otherwise required by law, two thirds of the company's board of directors will consist, through January 1, 2009, of independent directors.
On an interesting side-note, a number of complaints were filed in the litigation, including two different amendments to complaints that had been filed just one or two months prior.

For example, on May 24, 2004, the plaintiffs filed a consolidated complaint, followed shortly thereafter on June 17, 2004, by an amended consolidated complaint (link unavailable) which added certain allegations attributed to a confidential witness.

On January 20, 2005, the Court dismissed the complaint with leave to amend within 60 days. On March 21, 2005, the plaintiffs filed a second amended consolidated complaint, and on May 24, 2005, the plaintiffs filed a third amended consolidated complaint.

Cerus is a Concord, California based bio-technology firm focused on developing blood safety systems and, more recently, immunotherapies for cancer and infectious disease.

Morrison & Foerster LLP is counsel for defendants in the litigation.

Daily Trivia: Morrison & Foerster has undergone 14 name changes in the firm's history and can trace it roots back to 1883. Brobeck, Phleger & Harrison LLP, the formerly omnipresent securities litigation powerhouse (and now defunct) law firm, was formed in 1925 by lawyers that left Morrison & Foerster.

Wednesday, August 30, 2006

Umm...yeah, I'm going to need to you to come in on Saturday alright?

The close relationship between plaintiffs' lawyers and labor unions (specifically their pension funds) is well documented, and often criticized.

A press release issued today by the law firm of Wolf Haldenstein Adler Freeman & Herz LLP piqued my interest, with a unique example of that relationship.

The firm announced that it was one of the prime sponsors of the Fifth Annual "DC Labor Film Festival," produced by the Metropolitan Washington Council of the AFL-CIO. The festival "was established as a part of a project to use the arts to highlight the plight of workers and their efforts to secure better conditions of employment."

While the festival features a number of independent films with serious themes, it also features one of my favorite comedies - Office Space, the 1999 cubicle comedy directed by Mike Judge.

For fellow devotees, this fan site has a number of memorable sound clips from the film.

Wolf Haldenstein opened its Washington, DC office on July 1st of this year, with the addition of Reuben Guttman, formerly of Milberg Weiss Bershad & Schulman, LLP. The Washington Business Journal has a story on the office opening here and the WSJ Blog has a post here.

Less is More?

A recent ruling in the CV Therapeutics, Inc. (NASDAQ: CVTX) securities litigation highlights some of the interesting issues that are filtering through the courts with respect to electronic discovery (e-discovery).

The case is pending in the United States District Court for the Northern District of California before Judge Susan Illston.

The parties had previously agreed on the entry of a stipulated order governing the discovery of material restored from defendant's backup tapes. The backup tapes contained approximately 425,000 documents.

Defendants applied a "de-duplication process" to the tapes, which reduced the number of documents to approximately 129,000. Defendants then produced about 4,000 documents. Plaintiffs objected to the de-duplication as well as the withholding of documents.

The defendants argued that it would be unduly burdensome and expensive to produce the remaining 125,000 documents, and asked the magistrate to require plaintiffs to select slightly less than half of the documents.

A virtual treasure trove of court filings from the litigation can be found on the Stanford website, here. Interestingly, Lerach Coughlin's "Designated Internet Site," is nearly bereft of filings from the CV Therapeutics litigation.

Magistrate Edward M. Chen found that de-duplication was an acceptable method of reducing the size of the production and ordered the defendants to apply search terms to narrow the remainder of the production.

A copy of Magistrate Chen's opinion is available here. The case can be cited as In re CV Therapeutics, Inc. Sec. Litig., 2006 WL 2458720 (N.D. Cal. Aug. 22, 2006).

In November 2003, Judge Ilston appointed David Crossen as lead plaintiff and Lerach Coughlin Stoia Geller Rudman & Robbins LLP (at the time, Milberg, Weiss, Bershad, Hynes & Lerach, LLP) as lead counsel in the CV Therapeutics litigation. A copy of the order appointing lead plaintiff and lead counsel is available here.

A copy of the consolidated amended complaint is available here.

Defense counsel in the case is Latham & Watkins, LLP.

Daily Trivia: Magistrate Chen is the first Asian-American to serve on the bench of the United States District Court for the Northern District of California.

Tuesday, August 29, 2006

No Pay, No Pal

According to news reports ( - registration required), a Cyprus based investment company is suing Clarium Capital Management, a hedge fund headed by PayPal founder Peter Thiel, alleging that it was defrauded out of millions of dollars over a period of eight years.

The suit was filed earlier this week by Amisil Holdings Ltd. of
Cyprus in the United States District Court for the Northern District of California.

According to news reports, Amisil first invested in Clarium in 1998. At that time, Clarium was known as Thiel Capital Management. Amisil's investment is thought to be equivalent to a 1% interest in the hedge fund.

The article contains a colorful quote from a representative of the plaintiff:

Amisil has not received a single distribution from Clarium, while he [Mr. Thiel] has skimmed tens of millions of dollars out of Clarium into his own pockets. There's been no pay for us, and he's been no pal.

Amisil is represented by Harvey L. Leiderman of Reed Smith LLP's San Francisco office. Leiderman is a recent addition to the firm, according to this announcement.

Daily Trivia: Mr. Thiel started as a derivatives trader at Credit Suisse Group and in 2003 nearly bought Martha Stewart's
Manhattan duplex condo. Ms. Stewart later sold the condo the day before she was sentenced for crimes related to her well-timed sale of Imclone Systems Inc. stock in late 2001.

Monday, August 28, 2006


According to an 8-K filed last week, The Sands Regent (NASDAQ: SNDS), has agreed in principle to settle a shareholder class action, which challenged the proposed merger of Sands Regent with Herbst Gaming, Inc., the operator of the Terrible's casino chain.

The litigation was pending in the Second Judicial District Court for Washoe County, Nevada. Counsel for the plaintiff included Lerach Coughlin Stoia Geller Rudman & Robbins LLP and Ademi & O'Reilly, LLP.

A review of the docket reveals that the settlement was reached just one day after an amended complaint was filed.

The settlement requires the defendants to: 1) make certain modifications to the merger documents; 2) amend the disclosures contained in the proxy statement; 3) pay $345,000 in attorneys fees to plaintiffs' counsel.

The proposed merger, which was announced on May 17, 2006 is valued at approximately $148 million.

According to an earlier 8-K, you guessed:
The Company believes the lawsuit is without merit and intends to vigorously defend the action.
Daily Trivia: Herbst Gaming began in 1987 as an offshoot of the family business, Terrible Herbst Oil Company, which now operates 80 gasoline stations and convenience stores throughout Nevada. Herbst Gaming serviced the slot machines located in the Terrible Herbst locations and is now one of the largest slot route operators in the State of Nevada.

Thursday, August 24, 2006

A Quick Trip Through The Blogosphere

A few interesting items from other blogs that you might find interesting.
  • Kevin LaCroix, over at The D&O Diary, has an interesting post here about the recently filed options backdating litigation against Zoran Corporation (NASDAQ: ZRAN) and ten of its past or present directors and officers. The Zoran litigation appears to be somewhat unique because it focuses on allegedly improper or misleading solicitation of shareholder proxies and consent.
  • The D&O Diary also has an interesting post here on the growing trend of activist hedge funds and their willingness to litigate to effectuate change. Not surprisingly, the post also has some thoughts on what this trend means for D&O liability.
  • Lyle Roberts, author extraordinaire of The 10b-5 Daily, has a post here on a brewing circuit split on the application of the "collective scienter" theory, which allows a plaintiff to establish the scienter of a defendant corporation based on the collective knowledge of the corporation's employees.
  • Michael Thomas, author of The Daily Caveat, has an update on the litigation swirling around Kirk Wright, and the failure of his hedge fund management company, International Management Associates here.
  • Broc Romanek, editor of, has a post here discussing a recent New York State court decision analyzing whether a fiduciary relationship exists between an underwriter and an issuer and whether such a fiduciary relationship should be imputed to underwriter's counsel.

Appeal is the "Genesis" of a Settlement

Today Wolf Popper LLP announced the proposed settlement of the securities class action pending against Genesis Microchip Inc. (NASDAQ: GNSS) in the United States District Court for the Northern District of California.

The $1.75 million settlement came after the case was dismissed by Judge Jeffrey S. White, but before plaintiffs appeal was heard by the United States Court of Appeals for the Ninth Circuit. A copy of the stipulation of settlement is available here.

Wolf Popper LLP and Alexander, Hawes & Audet, LLP are lead and liaison counsel, respectively. The lead plaintiff in the litigation appears to be former model (and current wife of Carl Bernstein) Christine Kuehbeck.

The PSLRA Nugget has a post about some interesting, though unrelated litigation involving Ms. Kuehbeck.

Readers may recall this recent post which discussed the local rules of the District, which require the posting of virtually securities fraud class action litigation complaints and pleadings to a "Designated Internet Site" such as Stanford Law School's Securities Class Action Clearinghouse or Lerach Coughlin Stoia Geller Rudman & Robbins LLP's Securities Class Action Designated Internet Site. A search of both of those websites reveals nary a mention of the Genesis Microchip litigation.

Daily Trivia: Genesis is the leading supplier of the video processors used in liquid crystal display (LCD) monitors, which today are the most widely used display technology for PC monitors.

Wednesday, August 23, 2006

Intermagnetics Abandons "Vigorous Contest"

As this blog is relatively young, it should not surprise readers that the majority of cases discussed herein are either just beginning or nearly ending as they are substantially older than this fair publication.

Thus it is with great pleasure that I note the settlement announced earlier this week by Intermagnetics General Corp. (NASDAQ: IMGC) of two class action complaints filed in the Supreme Court of the State of New York for Albany County, challenging the proposed $1.3 billion sale of Intermagnetics to Philips Holding USA Inc., a subsidiary of Koninklijke Philips Electronics N.V. (NYSE: PHG).

It was exactly one week ago that the Intermagnetics litigation was first discussed, here. In that post, we noted that:
Intermagnetics believes that these allegations are without merit and intends to contest them vigorously.
No further information about the settlement is available from the Intermagnetics website or the company's SEC filings.

Complaints Missed the "Marc"

According to this press release the consolidated securities class action lawsuit pending against Digimarc Corporation (NASDAQ: DMRC) and certain of its current and former executive officers was dismissed by Judge Anna J. Brown of the United States District Court for the District of Oregon.

The litigation arose from accounting errors disclosed by the company in 2004 and a restatement of prior financial statements that soon followed.

A copy of Judge Brown's opinion is available on the Digimarc website, here.

Rex Boggs, Kennard McAdam, and Glenn Thomas are lead plaintiffs in the Digimarc litigation. Milberg Weiss Bershad & Schulman, LLP and the Portland firm of Stoll Stoll Berne Lokting & Shlachter PC are is lead counsel and liaison counsel, respectively in the Digimarc litigation.

Stoel Rives, LLP is defense counsel in the securities litigation.

Additionally, the company announced that companion state and federal derivative litigations were also dismissed.

The first derivative lawsuit was pending in the Circuit Court of the State Oregon for Washington County, and was dismissed by this stipulation. Lead counsel for plaintiffs in the state litigation were Schiffrin & Barroway, LLP and Danziger Shapiro & Leavitt, P.C. The Portland firm of Layne & Lewis, LLP was liaison counsel for the plaintiffs.

The second derivative lawsuit was pending in the United States District Court for the District of Oregon, and was dismissed by Judge Ancer L. Haggerty. A copy of Judge Haggert's opinion is available here.

Interestingly, among the reasons for granting the motion to dismiss the federal derivative litigation was the prior dismissal by Judge Brown of the securities class action.

Lead counsel for plaintiffs in the federal derivative litigation were Robbins Umeda & Fink, LLP and Faruqi & Faruqi LLP. The Portland firm of Grenley, Rotenberg, Evans, Bragg & Bodie, P.C. was liaison counsel for the plaintiffs.

Perkins Coie, LLP was defense counsel in both of the derivative lawsuits.

Daily Trivia: Digimarc provides products and services that enable the annual production of more than two-thirds of U.S. driver licenses.

Tuesday, August 22, 2006

Star Gas Partners Securities Litigation Dismissed

Today, Star Gas Partners, L.P. (NYSE: SGU) announced the dismissal of a securities class action against Star, Star's general partner, several of Star's former officers and directors and three investment banks that underwrote the public offerings of Star's common units in September 2002 and August 2003. A copy of the company's press release is available here.

The Star Gas litigation was pending in the United States District Court for the District of Connecticut before Judge Janet Bond Arterton.

Judge Arterton's opinion on the motions to dismiss is available here, and her prior opinion appointing lead plaintiffs and lead counsel is available here.

John E. Wertin, RS Holdings LLC, and James Rosner are lead plaintiffs in the Star Gas litigation and Labaton Sucharow & Rudoff LLP and Schiffrin & Barroway, LLP are lead counsel. Shepherd Finkelman Miller & Shah, LLC is liaison counsel in the litigation.

Readers may recall that RS Holdings is also a lead plaintiff in the recently settled DHB securities litigation, discussed previously here.

Though Star Gas never put out a "vigorous defense" press release, they did indicate in the first 10-Q filed after the litigation was commenced that they "will defend against the Class Actions vigorously."

Daily Trivia: Star Gas (or its subsidiary, Petro, Inc. depending on the information source) is the nation's largest retail distributor of home heating oil.

Monday, August 21, 2006

Holding "Penalty", Ten Yards

An article from today's Washington Business Journal announced the resignation of Hugh Panero from the board of directors of Vonage Holdings Corp (NYSE: VG).

Readers will no doubt recall that Vonage and several of the company's officers and directors are currently defendants in a securities class action lawsuit stemming from the company's May 2006 initial public offering. The D&O Diary has a post on the Vonage litigation, here.

Panero is named as a defendant in the Vonage litigation.

Mr. Panero is far more well known for his regular job - as chief executive officer and a member of the board of directors at XM Satellite Radio Holdings Inc (NASDAQ: XMSR).

Readers may recall that XM is currently a defendant in several securities class actions and a shareholder derivative action.

You guessed it - Panero is also a defendant in the XM litigation.

Mr. Panero has some high caliber legal talent representing him in both the Vonage and XM litigations - Wilmer, Cutler Pickering Hale and Dorr LLP a/k/a WilmerHale - but I have some free life advice for him - don't join the board of any more companies with the word "holding" in their name.

A Forbes story on Panero's resignation from the Vonage board notes another interesting coincidence - the stock was up nearly 4% following the announcement of Panero's departure.

Daily Trivia: According to their most recent 10-Q, the so-called "access charges" that Vonage pays to other telephone companies to transfer or "terminate" calls back onto the public switched telephone network accounted for just under 60% of the company's direct cost of providing telephone services to subscribers.

Sunday, August 20, 2006

Parlux Redux

Well, it appears that The PSLRA Nugget's new law firm, Saxena White P.A. has finally decided to provide some fodder for this blog.

As noted here by Chris Jones, the author of The Nugget, the new firm is off to a fast start, having already been appointed leadership positions in a number of cases.

Last week, apparently hoping to add to the firm's success, Saxena White announced the filing of a class action complaint against Parlux Fragrances Inc. (NASDAQ: PARL).

Of interest to readers may be this little blurb at the end of the press release:
Saxena White P.A. has offices in Boca Raton, San Francisco, and Boston.
Unfortunately the firm's website is not yet fully functional, and as of press time, we had not heard back from Mr. Jones, so the new "office openings" will remain a Scooby Doo mystery for now.

Reuters has a story on the Parlux litigation, here.

Regular readers will note that this is the third trip to this fair blog for Parlux, with prior posts here and here.

Baked Alaska Pipeline

Last week, shareholders of BP p.l.c. (NYSE: BP) filed a derivative lawsuit in the United States District Court for the Southern District of New York. The case has been assigned to Judge Harold Baer.

The complaint alleges that BP had known for years about the severe pipeline corrosion that led to the shutdown of the Prudhoe Bay oil field earlier this month, but failed to adequately monitor and repair the oil transit lines that feed into the 800-mile Trans Alaska Pipeline System.

A copy of the complaint is available here.

In what can only be described as an unusual occurrence, the complaint lists but a single attorney as counsel for the plaintiff, Jules Brody of Stull, Stull & Brody.

Daily Trivia: The population of Prudhoe Bay is approximately 47 people, and a billion caribou.

Friday, August 18, 2006

Cisco Settles Shareholder Suits by the Seashore

Cisco Systems, Inc. (NASDAQ: CSCO) today announced an agreement to settle the securities class action litigation pending against the company and certain current and former directors and officers. The litigation is pending before Judge James Ware in the United States District Court for the Northern District of California.

Cisco's press release indicates that the settlement is for $91.75 million and will be paid by the company's liability insurers.

Press reports regarding the settlement are available here, (AP via Yahoo!), here (, and here ( via Yahoo!).

Lead plaintiffs in the Cisco litigation are the Plumbers & Pipefitters National Pension Fund, the Central States, Southeast and Southwest Area Pension Fund, the Carpenters Pension Fund of Illinois, and Alexander Nehring.

Lerach Coughlin Stoia Geller Rudman & Robbins LLP and Levin Papantonio Thomas Mitchell Echsner & Proctor, PA are co-lead counsel in the Cisco litigation.

Prior to the entry of this scheduling stipulation last month, the trial had been set to begin on October 4, 2006. Count Carton over at Securities Litigation Watch must be very disappointed.

Thanks to an anonymous reader for the tip.

Daily Trivia: One of the founding partners of Levin Papantonio was Reubin Askew, a two-term governor of Florida and candidate for President of the United States.

UPDATE: The 10b-5 Daily has a post on the settlement, here.

Thursday, August 17, 2006

Georgia on my Mind

Just when you thought I had exhausted every possible press release permutation that even tangentially related to securities litigation, this press release announcing the filing of an options backdating related securities class action against Witness Systems, Inc. (NASDAQ: WITS), provided a reminder of a peculiar quirk of the local rules in the United States District Court for the Northern District of Georgia.

But first, a brief detour.

Most securities practitioners are aware of the local rules of the United States District Court for the Northern District of California , which require the posting of virtually securities fraud class action litigation complaints and pleadings to a "Designated Internet Site."

Indeed, the enactment of those rules can be said to have spawned the creation of Stanford Law School's Securities Class Action Clearinghouse and its distant cousin, the Securities Class Action Designated Internet Site, operated by Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

The Northern District of California's local rules have provided, as previously noted here, a veritable treasure trove of securities class action litigation related filings.

Now back to our regularly scheduled posting.

Far fewer securities practitioners are aware of the pertinent local rule in the Northern District of Georgia, Local Civil Rule 23.1(C)(4)(a), or, more properly, LR 23.1(C)(4)(a), NDGa. That rule was implemented in June 2003, and provides as follows:
(i) Contents of the Notice

. . . following the filing of any Reform Act class action in this District, each law firm on a complaint may choose to publish a notice. Such notice shall have as its headline "Notice of Filing Securities Class Action Against [Defendant or Defendants]" and shall provide the following information as required by the Reform Act:

1) the pendency of the action;

2) the claims asserted therein;

3) the purported class period;

4) that, not later than sixty (60) days after the date on which the first notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class; and

5) contact information for the law firm issuing the notice, including the name of a contact person who is designated to discuss the lawsuit with putative class members, an address, a telephone number, and a website and e-mail address, if applicable. However, the notice shall not contain a promotional statement for any law firm.
The rule has further requirements:
(iii) Only One Notice Per Law Firm

Unless otherwise ordered by the court, there shall be only one notice per law firm regardless of the number of complaints filed in this Court arising out of the same or similar set of facts or circumstances.

No attorney seeking to represent the putative class shall initiate any other communication with putative class members unless approved in advance by the court. Such court approval will be granted if the communication is deemed by this Court to be reasonably necessary to achieve the purposes of the Reform Act.

This rule does not affect the rights or obligations of defendants to give notice of the pendency of the suit, nor does it preclude counsel for either party from contacting class members whom they believe to be fact witnesses or with whom they have an attorney-client relationship.
In deciding to implement the rule, The Court found that:
certain practices in Reform Act class actions have the potential to harm the interests of class members and/or defendants and can interfere with the orderly administration of justice.

For example, the court finds that numerous notices of the same litigation have been released, thereby creating the potential for confusion for potential class members and potential damage to the interests of shareholders and businesses.

The court finds further that the measures adopted herein are reasonably necessary to protect the interests of class members, realize the goals of the Reform Act, and balance the rights of those who wish to prosecute a Reform Act class action or communicate about it.
Arguably, the local rules would prohibit the use of "passive voice" press releases.

In case you were wondering, the notice issued by the law firm of Motley Rice LLC in the Witness Systems litigation does conform with the local rules outlined above.

But, that should come as no surprise. As noted several months ago by The D & O Diary, the securities litigation group at Motley Rice was substantially enlarged in February 2006 with the addition of four seasoned Atlanta-based lawyers from Chitwood Harley Harnes LLP.

Keep Those Doggies Rolling

Central Freight Lines, Inc. (NASDAQ: CENF) has reached an oral agreement in principle to settle the securities class action litigation pending against the company and certain of Central Freight's officers and directors in the United States District Court for the Western District of Texas.

According to a 10-Q filed earlier this week by the company, the agreement also settles two derivative actions arising out of the company's December 2003 IPO, as well as a third derivative action related to the January 30, 2006 announcement of a merger between Central and North American Truck Lines, LLC and Green Acquisition Company.

Jerry Moyes, the owner of North American Truck Lines, LLC and Green Acquisition Company is also both a defendant in the litigation and the former chairman of Central.

The settlement is for $2.6 million, inclusive of fees and expenses, and will be funded from the proceeds of Central's directors' and officers' liability insurance policy.

The Oklahoma Firefighters Pension and Retirement System is the lead plaintiff in the federal securities class action. Schiffrin & Barroway, LLP is lead counsel in that litigation and the Austin based firm of Smith, Robertson, Elliott, Glen, Klein & Bell, L.L.P. is liaison counsel.

Daily Trivia: Defendant Jerry Moyes is the majority investor in the Phoenix Coyotes Hockey Club and a limited partner of the Arizona Diamondbacks. Mr. Moyes is also a a member of the Board of Directors and the retired Chairman and CEO of Swift Transportation Co., a company he helped start with a single truck that has grown into the largest truckload fleet operator in the United States.

Institutional Investor Wire, No Longer Live

A number of readers have pointed out that in the short time between the post last night linking to Bernstein Litowitz Berger & Grossmann's new blog, the Institutional Investor Wire, and this morning, the blog has been removed.

No word on when (or if) Institutional Investor Wire will resume publishing.

Stay tuned.

Wednesday, August 16, 2006

Welcome To The New Kid On The Block

With little fanfare, a heavyweight from the securities litigation bar has arrived in the blogosphere.

Earlier this week, Bernstein Litowitz Berger & Grossmann LLP, a perpetual presence at the top of Bruce Carton's "SCAS 50," launched a blog, the Institutional Investor Wire, or iiWire.

Described as a "blog on current issues in securities litigation for institutional investors," the unnamed author indicates that their goal is:
to provide current news relating to institutional investors' involvement in securities litigation and corporate governance.
Sounds good to me.

Welcome to the blogosphere, BLBG!

Largest Customer Buys Supplier, Gets a Class Action As a Bonus

Shareholders of Intermagnetics General Corp. (NASDAQ: IMGC), a leading designer and manufacturer of magnetic resonance imaging (MRI) medical devices, have filed two class action complaints challenging the proposed $1.3 billion sale of Intermagnetics to Philips Holding USA Inc., a subsidiary of Koninklijke Philips Electronics N.V. (NYSE: PHG).

According to a 10-K filed last week by Intermagnetics, the complaints, filed in the Supreme Court of the State of New York for Albany County, allege that:
the directors of Intermagnetics breached their fiduciary duties, including by failing to publicly announce an open bidding process or otherwise seek additional offers to acquire Intermagnetics, and by failing to provide full disclosure of certain material financial information.
The complaints also allege that:
Intermagnetics (and, in one of the complaints, Philips) aided and abetted these alleged fiduciary violations. The plaintiffs seek equitable relief, including an injunction preventing us from proceeding with or consummating the merger.
Regular readers can guess what comes next:
Intermagnetics believes that these allegations are without merit and intends to contest them vigorously.
That's right, a close cousin of the "vigorous defense," the "vigorous contest."

The Albany Times Union has a story on the litigation here and The Business Review (Albany) has a story here.

The Times Union story indicates that the Albany law firm of O'Connell and Aronowitz is counsel for plaintiffs in both cases. Given the realities of securities litigation, it is likely that the firm is acting as local counsel for other more established members of the plaintiffs' bar. An attempt to review the dockets through the New York State Unified Court System's E.Court System proved fruitless.

Daily Trivia: Dr. Raymond V. Damadian is generally considered to be the father of MRI, though he was snubbed in 2003 when Paul Lauterbur and Sir Peter Mansfield were awarded the Nobel Prize in Medicine for their discoveries concerning MRI. Following the snub, Dr. Damadian took out this full-page advertisement in a number of newspapers, including the New York Times.

Tuesday, August 15, 2006

Flash Gordon, err, Flash Memory

According to press reports, two class action lawsuits have been filed in the Santa Clara County Superior Court by shareholders of msystems Ltd. (NASDAQ: FLSH), challenging the proposed acquisition of msystems by SanDisk Corporation (NASDAQ: SNDK).

According to a 10-Q filed by SanDisk this week, the complaints:
allege breaches of fiduciary duties by officers and directors of msystems relating to alleged option backdating and to allegedly furthering their own interests in connection with the merger, and that these alleged breaches were aided and abetted by the Company. The complaints further allege that the terms of the announced merger between the Company and msystems are not fair to msystems' shareholders.
So, Kevin LaCroix at The D&O Diary has a new case to add to his burgeoning list of options-backdating related litigation, perhaps even a whole new subcategory - "Merger-Related Options Backdating Derivative Litigation."

A review of the dockets reveals that plaintiffs' counsel include Lerach Coughlin Stoia Geller Rudman & Robbins LLP and Robbins Umeda & Fink, LLP.

Daily Trivia: msystems created the first of the now ubiquitous USB flash drives, also known as "thumb drives".

Monday, August 14, 2006

Northwest Airlines Securities Litigation Voluntarily Dismissed

Airplane! (1980)

Ted Striker
: Surely you can't be serious.

Rumack: I am serious . . . and don't call me Shirley.

According to this press release, last week, plaintiffs voluntarily dismissed the securities class action lawsuit pending against certain directors and officers of Northwest Airlines Corp. (OTC: NWACQ) Northwest was not named as a defendant in the litigation due to the company's chapter 11 bankruptcy filing in September 2005.

The litigation was pending in the United States District Court for the Southern District of New York before Judge Richard J. Holwell.

Lead counsel is Milberg Weiss Bershad & Schulman LLP.

Notably, the complaint was dismissed less than nine months after the initial complaint was filed and was done prior to the filing of an amended complaint or a motion to dismiss. The dismissal was without prejudice.

Daily Trivia: Of the 10 largest North American airlines (as of 2004), four (Northwest, US Airways, Continental, and America West) have been a defendant (or employed the defendants in the case of Northwest) in a securities class action.

Sunday, August 13, 2006

The Time Value Of Money?

Dynacq Healthcare, Inc. (NASDAQ: DYII) has announced the settlement of a securities class action pending against the company and two of its executive officers in the United States District Court for the Southern District of Texas.

The total value of the settlement, including all administrative costs and attorneys fees for class counsel, is $1.5 million. The press release indicates an interesting twist regarding the timing of the company's payment of the settlement:
The $1.5 million will be paid $100,000 within 30 days of final approval of the settlement by the court and the balance in 36 equal monthly interest bearing installments beginning 30 days thereafter.
That translates to a payment of just under $39,000 per month.

Dynacq's outside auditor, Ernst & Young, was previously dismissed from the litigation and is not a party to the settlement.

Chitwood Harley Harnes LLP and Milberg Weiss Bershad & Schulman LLP are lead counsel in the Dynacq litigation.

Daily Trivia: According to Forbes annual survey of the "Most Expensive Hotel Rooms," for $39,000, you could get one night in the penthouse suite at The Setai in South Beach, Miami and one night in the Presidential Suite at the Mandarin Oriental in New York.

The Setai's penthouse takes up the entire 40th floor of the hotel, with 6,500 square feet of interior space, and 3,000 square feet of balconies. Don't forget the private pool and your own butler, Andrew Marston, formerly of Buckingham Palace.

Thursday, August 10, 2006

Willbros Abandons Vigorous Defense

Today, Willbros Group Inc. (NYSE: WG), announced the settlement of the securities class action pending against the company and certain of its present and former officers and directors in the United States District Court for the Southern District of Texas. A copy of the company's announcement can be found in this 8-K.

Curiously, both the actual announcement and press reports regarding the announcement (AP and Reuters) do not mention the value of the settlement.

In another interesting sidenote, in the company's last 10-Q (filed yesterday), Willbros offered this description of the securities litigation:
While the outcome of such lawsuits cannot be predicted with certainty, the Company believes that it has meritorious defenses and is defending itself vigorously.
That's right - the day before they announced a settlement, the company reiterated it's intent to offer the vaunted "vigorous defense."

Bernstein Liebhard & Lifshitz, LLP is lead counsel in the Willbros litigation and ADAR Investments, LLC is the lead plaintiff.

Daily Trivia: Ok, this one may not strictly be trivia, but the Willbros logo bears a healthy resemblance to another, more well recognized corporate logo:

Wednesday, August 09, 2006

Yet Another Press Release Permutation.

First, we explored the "premptive" press release.

Next, we had the "passive voice" press release.

Then we had the "vigorous defense" press release.

That is when things started to get fun, with hybrids emerging left and right, such as the "premptive vigorous defense" press release.

Now, we have a new style - the "encouraging" press release.

Earlier this week, the Denver based law firm of Dyer & Shuman, LLP, issued a press release, headlined as follows:
Dyer & Shuman, LLP Encourages Persons Who Currently Own Blue Coat Systems Common Stock to Consider Their Legal Options Concerning Alleged Stock Option Backdating by the Company -- BCSI
A review of the PrimeZone website reveals that Dyer & Shuman has been issuing this style of press release since at least this June 2005 advisory to StockerYale, Inc. shareholders.

A hat tip to Kevin LaCroix, author of The D&O Diary, for encouraging us to explore this new (to us) press release style.

TASERs on Stun!

Today, TASER International, Inc. (NASDAQ: TASR) announced an agreement to settle the shareholder class action and derivative lawsuits pending in the U.S. District Court for the District of Arizona. The settlement will also resolve additional derivative lawsuits pending in both the Superior Court of Arizona for Maricopa County and the Delaware Court of Chancery, as well as a Section 220 lawsuit for production of documents also pending in the Delaware Court of Chancery.

TASER will pay $20 million to settle the federal securities class action litigation, consisting of approximately $4.1 million from insurance proceeds, $7.9 million in cash from the company, and $8 million in company stock or cash.

TASER also agreed to pay $1.75 million in stock for plaintiffs' attorney fees and to adopt certain corporate governance provisions consisting of the designation of a lead independent director who will be chosen from one of three independent directors now serving on the board, to settle the federal derivative lawsuit. As part of the settlement of that case, the two other derivative actions and the Section 220 action will also be dismissed.

Bernstein Liebhard & Lifshitz, LLP is lead counsel in the federal securities class action. The Weiser Law Firm, P.C. is lead counsel in the federal derivative litigation.

The good folks at TASER have been kind enough to post a whole page of actual police videos showing their products in action, here.

Daily Trivia: According to TASER's last 10-K at least 14 states and the District of Columbia restrict the possession and use of TASER weapons in some manner. Seven of those states (Hawaii, Massachusetts, Michigan, New Jersey, New York, Rhode Island, and Wisconsin) prohibit the use of TASER weapons by private citizens and one (New Jersey) prohibits their use by everyone, including law enforcement personnel.

Tuesday, August 08, 2006

But Do They Take American Express?

Earlier this week, the United States Court of Appeals for the Second Circuit reversed the March 2004 dismissal of the consolidated amended complaint in the In re American Express Co. Sec. Litig.

The Second Circuit's opinion is available here.

Judge Ralph K. Winter writing for the Court, found that certain claims in the amended complaint that were not alleged in the initial complaint nonetheless related back to the original complaint, and thus were not time-barred.

Noting that the there was some confusion as to the proper standard for appellate review of a district court's determination regarding relation back under Fed. R. Civ. P. 15, the Court held:
In our view, the relation back issue is more analogous to a dismissal on the pleadings than a balancing of factors involving the conduct of a lawsuit. If facts provable under the amended complaint arose out of the conduct alleged in the original complaint, relation back is mandatory. The proper standard of review of Rule 15(c)(2) decisions is therefore de novo and we so hold.
Milberg Weiss Bershad & Schulman LLP and Lovell Stewart & Halebian LLP are co-lead counsel in the American Express litigation. Milberg Weiss issued this press release regarding the Second Circuit's decision.

The District Court's original opinion is available here.

Catch Up Round Up - Part II

Today is the second installment of our roundup of news items that slipped through the cracks during the last few weeks.

Motion to Dismiss Largely Denied in Marsh & McLennan Securities Litigation

According to press reports, on July 20, Judge Shirley Wohl Kram has denied, in substantial part the motion to dismiss filed in the Marsh & McLennan Companies, Inc. Sec. Litig. pending in the United States District Court for the Southern District of New York. According to the article, Judge Kram dismissed the claims against Marsh's outside auditor, Deloitte & Touche LLP.

The Marsh & McLennan litigation arose after an investigation by the New York State Attorney General revealed the company was allegedly engaging in price-fixing, bid-rigging and accepting improper payments from other insurance companies for steering business without regard to the companies' clients interests. According to this press release from Ohio Attorney General Jim Petro, "[i]n the two days following the announcement of the investigation, Marsh & McLennan lost $9 billion in market capital as the company's stock dropped 50 percent."

The Ohio Bureau of Workers' Compensation (OBWC), State Teachers Retirement System of Ohio (STRS) and the Ohio Public Employees Retirement System (OPERS) were appointed as co-lead plaintiffs with the State of New Jersey - Department of Treasury - Division of Investment on behalf of the Common Pension Fund A, the DCP Equity Fund, and the Supplemental Annuity Fund.

Bernstein Liebhard & Lifshitz, LLP and Grant & Eisenhofer, P.A. are co-lead counsel in the Marsh litigation. The order appointing lead plaintiffs and lead counsel is available here.

A copy of the consolidate class action complaint is available here.

Motion to Dismiss Largely Granted in Ramp Corporation Securities Litigation

On July 21, Judge Denise Cote largely granted the motions to dismiss filed in the In re Ramp Corp. Sec. Litig., pending in the United States District Court for the Southern District of New York, for failure to allege loss causation.

As any discussion of loss causation these days invariably involves a discussion of Dura, and Chris Jones over at The PSLRA Nugget has cornered the market on such discussions, I'll defer to him for a substantive review of the opinion.

But there is something that caught my eye. Footnote 1, which reads in pertinent part:
The Consolidation Order appointed Murray, Frank & Sailer LLP as Lead Counsel. Among the responsibilities given to Lead Counsel was the responsibility to "[b]rief and argue motions." Despite the clear terms of the Consolidation Order, the plaintiffs' briefs list the following additional counsel . . . Adhering to the Consolidation Order, the only appearance of counsel for lead plaintiffs that will be recognized is that of counsel from Murray, Frank & Sailer LLP."
It is an interesting point, and one that in theory goes further than the Third Circuit's decision in Cendant from April 2005 (available here), which upheld the denial of an award of attorneys fees to certain law firms that had not been specifically asked by lead counsel to work on the case.

A copy of Judge Cote's opinion is available here.

Daily Trivia: According to this corporate description on the American Stock Exchange website, Ramp Corp., "is exploring the feasibility of using LifeRamp to commence a new business, making non-recourse loans to terminally ill cancer patients secured by their life insurance policies." If Ramp ever does enter that particular line of business, I would remind readers that the SEC believes that viatical settlements are not for everyone.

Underwriters Settle in Global Crossing for $99 million

According to news reports ( - registration required) underwriters for Global Crossing Ltd., agreed to settled claims in the securities class action pending in the United States District Court for the Southern District of New York for a total of $99 million.

Goldman Sachs Group Inc. will pay $42.1 million as part of the settlement, while Merrill Lynch & Co. Inc. will contribute $19.2 million and the Canadian Imperial Bank of Commerce (CIBC) will pay $17.3 million.

The rest of the underwriting syndicate, which included JPMorgan Chase & Co., Credit Suisse Group, Morgan Stanley, Bear Stearns Cos., Deutsche Bank AG, Lehman Brothers Holdings and ABN Amro Holding NV, agreed to contribute a total of $6.68 million to the settlement.

The lead plaintiffs in the Global Crossing litigation are the Public Employees' Retirement System of Ohio (OPERS) and the State Teachers' Retirement System of Ohio (STRS). Lead counsel is Grant & Eisenhofer P.A.

I previously blogged about the CIBC settlement, here.

Monday, August 07, 2006

Catch Up Round Up - Part I

Today's post is the first of several roundups of news items that slipped through the cracks during the last few weeks.

Class Certification Granted in SupportSoft Litigation

According to this press release, Judge Susan Illston of the United States District Court for the Northern District of California has certified the class in the securities litigation pending against SupportSoft, Inc. (NASDAQ: SPRT) and the company's CEO and CFO.

According to the release, the parties actually stipulated to certification of the class.

Lead counsel in the SupportSoft litigation are Labaton Sucharow & Rudoff LLP and Schatz & Nobel, P.C. and liaison counsel is Glancy Binkow & Goldberg LLP.

A full copy of the class notice can be found here and a copy of the corrected amended consolidated class action complaint can be found here.

Complaint Dismissed in Cyberonics Litigation

According to this press release, the securities class action pending against Cyberonics, Inc. (NASDAQ: CYBX) and certain of its officers and directors, was dismissed on July 20. The case was pending before Judge Gray H. Miller in the United States District Court for the Southern District of Texas.

According to the release, Judge Miller granted plaintiffs the right to amend their complaint within thirty days, but noted that "the deficiencies in Plaintiffs' complaint might well extend beyond the point of cure."

Scott+Scott LLC and Finkelstein & Krinsk are lead counsel and Emerson Poynter LLP is liaison counsel.

Daily Trivia #1: Finkelstein & Krinsk appears to remain of the very few plaintiff class action firms without a website.

Daily Trivia #2: Cyberonics has its worldwide headquarters in "The Cyberonics Building" which, you guessed it, is located on "Cyberonics Boulevard."

Van der Moolen Settles Securities Litigation

Van der Moolen Holding N.V. (NYSE: VDM) and Van der Moolen Specialists USA, LLC, its majority owned subsidiary, announced on July 24 that they have agreed to settle the securities class action pending against them before Judge Robert Sweet of the United States District Court for the Southern District of New York.

The Van der Moolen litigation was filed in the wake of the specialist scandal, in which numerous specialists on the New York Stock Exchange were accused of engaging in front-running or trading ahead of their clients, and interpositioning their trades between buyers and sellers, among other allegations.

Labaton Sucharow & Rudoff LLP and Schiffrin & Barroway, LLP are co-lead counsel in the Van der Moolen litigation.

The settlement is for $8 million, and, according to news reports, insurance will cover 60% of that amount. According to this blurb on the Labaton website, the settlement "represents a recovery of over one third of the damages suffered by the Class."

The investor education website,, has an interesting article here on the differences (or lack thereof) between NASDAQ market makers and NYSE specialists.

Sunday, August 06, 2006

Predicting Securities Class Actions

Last month, The Corporate Library (the "leading independent source for U.S. corporate governance and executive & director compensation information and analysis") released the 2006 update to their continuing study of the correlation between corporate governance ratings and the probability that a particular company will be the subject of a securities class action lawsuit.

While it isn't quite the "Pre-Crime Unit" that Bruce Carton has blogged about here and here over at Securities Litigation Watch, the study does present some interesting findings.

They include:
  • Companies rated in the bottom two categories ("D" or "F") are more than three times as likely to be the target of a securities class action lawsuit than those rated in the top three categories ("A," "B" or "C");
  • Excessive CEO compensation appears to be the single most predictive factor of being sued; and
  • Other predictive factors include director age, tenure, over-commitment and lack of independence.
Also of interest, according to the release, nearly all securities class action lawsuits are filed against companies with:
  • more than $485 million in market capitalization; and
  • average daily trading volume for target companies in the 52 weeks before being sued was between 2 and 25 million shares
The full report is available for purchase from The Corporate Library for $300, here.

Hat tip to Broc Romanek at

"Positive Political Theory" and the PSLRA

In a still unfinished draft paper, Professors Emerson H. Tiller and Albert Yoon (both from Northwestern University School of Law) attempt to "examine the role of legislative reform on judicially created legal doctrines relating to private securities litigation."

The paper is titled Private Securities Litigation and the Courts: Positive Political Theory and Evidence and is available here.

The study examines "the effect of the Private Securities Litigation Reform Act of 1995 on the use of the "Group Pleading Doctrine" and "Fraud on the Market" theory. It does so in the context of the so called "Positive Political Theory," which according to the authors examines "the general question of how Congress can influence the use of legal doctrines within a judicial hierarchy."

The authors suggest:
Positive political theory is a useful lens to analyze private securities litigation and the effects of the PSLRA. In the context of private securities litigation, the theory suggests that federal district court judges (1) are influenced by their policy preferences in deciding on a defendant's motion to dismiss as to whether the plaintiff-investors have met the pleading requirements of Rule 9(b) and the PSLRA - essentially a decision about whether the plaintiffs will be given the leverage to force a large financial settlement with the defendant; and (2) make summary motion decisions on pleading requirements in anticipation of the likely response of the overseeing circuit court of appeals.
They have some interesting statistical interpretations regarding the impact that the political party of the president that nominated a particular judge may have on typical securities litigation motion practice at the end of the article, though they appear to be works in progress.

Thursday, August 03, 2006

Planes, Trains, and Efficient Markets

Earlier this week, in the Bombardier class action, Judge Shira A. Scheindlin denied plaintiff's motion for class certification, finding that the putative class was not entitled to the efficient markets presumption, and as a result, common issues did not predominate the litigation.

A copy of the opinion is available here.

The lead plaintiff in the Bombardier litigation is the Teamsters Local 445 Freight Division Pension Fund and lead counsel is Schoengold Sporn Laitman & Lometti, P.C.

Bombardier, Inc. (TSE: BBD) is a Canadian based manufacturer of regional aircraft, business jets, and rail transportation equipment.

True to form, Judge Scheindlin has provided a thorough analysis of the standards for class certification and a detailed review of the efficient markets theory. I have previously blogged about Judge Scheindlin's thorough securities litigation opinions, here.

Alert readers may recall that earlier in the Bombardier litigation, Judge Scheindlin required the lead plaintiff, after filing an amended complaint that both expanded the class period and added additional securities to the class definition, to issue a new press release and restart the 60 day period for investors to move for appointment as a lead plaintiff.

The PSLRA Nugget had previously blogged about the reopened lead plaintiff period, here.

Daily trivia - Bombardier was founded by Joseph-Armand Bombardier, the inventor of the snowmobile.

Wednesday, August 02, 2006

The End is Nigh?

Want to have your article reviewed (torn apart) in this blog?

Start with an eye catching title:
The End of Securities Fraud Class Action?
Then add a provocative subtitle:
Diversified investors lose more than they gain from securities class actions.
That identifies this recent article (also available from SSRN, here) from Prof. Richard A. Booth of the University of Maryland School of Law.

His thesis:
a securities fraud class action should be dismissed for failure to state a claim unless it appears that insiders (including the company itself) have captured gains from trading during the fraud period.

Only those actions that involve insider trading or the equivalent entail genuine financial harm to the plaintiff class because only those actions involve an extraction of wealth from the public market.
I think that the shareholders of any number of scandal ridden companies would take pause with Prof. Booth's central idea.

Additionally, though he does not define "insiders," a fair interpretation would exclude auditors, underwriters, and others that are proper defendants under the current statutory scheme.

Prof. Booth goes on to state:
At best, an award from [a securities fraud class action] is nothing more than an expensive rearrangement of wealth from one pocket to another (minus a cut for the lawyers). Diversified investors are equally likely to sell an overpriced stock as to buy one. For diversified investors, gains and losses wash out.
This second premise, which is detailed in substantial depth, in effect suggests inflicting a double penalty on investors that are unfortunate enough to have bought artificially inflated shares of a publicly traded company if those shares are part of a portfolio that does NOT contain at least 20 different stocks.

A third premise:
The prospect of payout by the defendant company causes its stock price to fall by more than it otherwise would-even in a perfectly efficient market-and triggers a positive feedback mechanism that has the effect of magnifying the potential payout, sometimes with devastating effects. Indeed, about 30 percent of target companies end up bankrupt.
I think this premise is a bit flawed. Companies that are in serious financial trouble already are potentially more likely to resort to conduct that would be considered securities fraud to prop up their stock price. When the truth emerges, the bottom falls out and all sorts of ills may befall that company, including a death spiral into bankruptcy, as institutional investors bail out, debt obligations may be in default, and credit may be cut off. This will happen with or without the filing of a securities fraud class action. Though Ken Lay and Jeff Skilling suggested in their defense a number of other factors that caused Enron to spiral into bankruptcy, they did not blame the class action lawyers.

Prof. Booth's article appears in the Summer 2006 issue of Regulation, a publication of the Cato Institute. The think tank describes that publication as:
the only magazine accessible to the intelligent layman that brings together the latest academic research on the nature and effects of regulation. It offers cutting-edge analysis of the industries that affect your livelihood, covering nearly every sector of the economy, from agriculture and banking to legal reform and transportation.

Tuesday, August 01, 2006

The Scarlet Letter

Yesterday, the law firm of Klafter & Olsen LLP issued a press release announcing the filing of a securities class action against Rambus, Inc. (NASDAQ: RMBS).

Several class actions had already been filed against Rambus, following the May 30 and June 27 announcements that Rambus was investigating (and had found problems with) historical option granting practices at the company.

This was no ordinary press release though. The title screamed:
Klafter & Olsen LLP Files Class Action Lawsuit Against Options Backdater Rambus, Inc.
The choice of language leapt out as most PSLRA press releases tend to sprinkle the word "allegedly" before any factual allegations are presented. As an example, see this earlier press release from another firm that filed a complaint against Rambus. The necessity of the introductory "allegedly" was negated for the Klafter & Olsen release however, as Rambus had already admitted to the conduct with their June 27 announcement.

I'm looking forward to future press releases colorfully announcing the filing of complaints against admitted "GAAP Violators" and "Premature Revenue Recognizers," among others.

The Rambus litigation is pending in the United States District Court for the Northern District of California.