Class Action Litigation
The Class Action Group at Skadden, Arps, Slate, Meagher & Flom LLP and affiliates (“Skadden”) defends some of the world’s largest, most influential corporations and individuals against the most significant complex class actions. In recent years, we have represented major insurers, manufacturers, pharmaceutical companies and financial services companies, among others, on a broad range of class actions, including those alleging antitrust, consumer financial services, employment, mass torts/products liability, consumer fraud and securities law claims. We have handled some of the most highly visible class actions in the United States, including representing the underwriters in the WorldCom bondholder litigation, and major actions for clients such as Anheuser-Busch, Bank of America, Cendant Corporation, Citigroup, Farmers Insurance, Intel Corp., JPMorgan Chase, McKesson Corporation, Merrill Lynch, Pacific Life, Praecis Pharmaceuticals, Sprint, Sunbeam Corporation and Verizon.
The attorneys in our group have defended thousands of class actions in federal and state courts throughout the country and have served as lead counsel in numerous precedent-setting cases, including the U.S. Supreme Court’s Dabit decision, won on behalf of Merrill Lynch, which closed a loophole in securities law that allowed additional classes to bring litigation. We also are often hired as appellate counsel after a company has been unsuccessful in the trial court.
Additionally, we have been involved in numerous developments in class action law. For example, several attorneys in our group were instrumental in the passage of the Class Action Fairness Act, which expanded federal jurisdiction over class actions and prevents plaintiffs from “forum shopping” by filing their claims in state courts known to be plaintiff-friendly. We also regularly represent the Product Liability Advisory Council and the U.S. Chamber of Commerce as amici in appeals involving important class action principles. For example, we successfully represented the U.S. Chamber of Commerce in Wal-Mart v. Dukes, a massive employment discrimination case in which the U.S. Supreme Court reversed class certification.
Our attorneys have been among the lead proponents of expanding the use and application of the “no injury” doctrine, which holds that a plaintiff fails to state a legally cognizable injury when he or she is merely seeking recovery for the alleged heightened risk of physical or economic injury. Also, we have developed and implemented the “classwide proof” concept in scores of class actions, persuading federal and state court judges to deny certification because the plaintiffs could not properly try their claims on a classwide basis. Further, we have combated efforts to water down the “injury” and “causation” elements of many causes of action through the use of “presumed reliance” and “market fraud” arguments.
Members of Skadden’s Class Action Group have received numerous accolades for their work, including recognition as leaders in their field by Chambers USA: America’s Leading Lawyers for Business. Chambers USA 2012 recognized the firm for its antitrust, commercial, M&A-related, products liability and mass torts, and securities litigation practices, and listed numerous class action litigators as leading lawyers in their respective areas. We were named as one of only three “Class Action and Tort Litigation Powerhouse” law firms in a survey of corporate counsel conducted by BTI Consulting and published by Law360 in 2012, and listed among the publication’s antitrust, class action, product liability and securities groups of 2011. Skadden also was selected as a finalist by The American Lawyer in the products liability section of its Litigation Department of the Year contest (January 2012).
Increasingly, a company facing a class action must navigate a number of concurrent challenges. For example, a products liability issue may give rise to securities lawsuits, government investigations, disputes with suppliers and crisis communications issues. How the company addresses any one of those issues can have a dramatic impact on the others. With approximately 600 litigators experienced in virtually every area of business law, we provide seamless representation, assembling interdisciplinary teams to handle the most complex cases; with 23 offices worldwide, we are able to field skilled counselors quickly to any location, no matter how remote. Our resources, combined with our extensive experience in class action litigation, uniquely position us to achieve efficiencies without compromising our commitment to excellence.
Skadden stands out for its depth, breadth and innovative strategies in defending class actions. We handle consolidated, multidistrict litigation and competing state and federal class actions. We also have extensive experience handling class matters along with parallel government enforcement actions. Our general philosophy in defending class actions is to respond very aggressively, taking a number of steps at the outset to eliminate or at least narrow litigation as soon as possible. This approach includes motions to dismiss to the extent they are available, motions for summary judgment following oral and written discovery, and motions to oppose class certification or to partially strike the class allegations.
Our lawyers counsel clients on initiatives to address litigation risks and exposure, thus reducing the potential for future class actions. We have a strong record of streamlining document collection, preservation, review and production — including conducting witness interviews and collecting documents from our clients’ offices anywhere in the world. Often, however, our team is successful in having class actions dismissed on the merits before any discovery begins.
We are skilled in negotiating settlements to resolve class cases at the optimum time in the life of a case. Our lawyers effectively use mediation and arbitration where appropriate. We also have extensive experience designing and negotiating global settlements. Our track record in successfully trying cases often contributes to our ability to secure the best possible settlements for our clients.
- CEMEX S.A. de C.V. of Mexico in connection with a price-fixing lawsuit brought by purchasers of cement and ready-mix concrete in the U.S. District Court for the Southern District of Florida. In October 2010, the court granted CEMEX’s motion in part, dropping all claims related to cement and limiting all other claims to a period encompassing less than two years.
- China National Minerals Co., Ltd. in the dismissal of a purported class action in the U.S. District Court for the District of New Jersey alleging China National, along with other Chinese magnesite producers and exporters, engaged in a conspiracy to fix the prices of magnesite exported from China to the United States. All of the defendants were Chinese nationals and all of the alleged illegal conduct occurred in China. The judge dismissed the action for lack of subject matter jurisdiction under the Foreign Trade Antitrust Improvements Act. The plaintiffs have appealed to the U.S. Court of Appeals for the Third Circuit, and Skadden is representing China National in the appeal.
- De Beers in its appeal of a $295 million settlement of seven antitrust class actions relating to gem diamonds; and in a treble-damage antitrust suit by a former sightholder, or diamond purchaser, alleging overcharges in the price of gem diamonds. In February 2010, the court dismissed claims against eight of the defendants represented by the firm on preliminary motions.
- Energy Transfer Partners, L.P. (ETP) and its affiliates in allegations that ETP unlawfully manipulated natural gas prices at Houston Ship Channel. The U.S. Court of Appeals for the Fifth Circuit offered two unanimous appellate rulings dismissing the class action, and the Court of Appeals for the First District of Texas affirmed judgments in favor of ETP and its affiliates. These victories prevented a flood of lawsuits against ETP that would have been brought by natural gas producers and traders if any one of the cases had been allowed to proceed.
- KLM Royal Dutch Airlines in the dismissal of putative antitrust class actions in the U.S. District Court for the Eastern District of Pennsylvania and the U.S. District Court for the Eastern District of New York. The plaintiffs in both cases alleged that KLM, along with several other airlines, conspired to fix prices for air passenger service.
- Merrill Lynch & Co., Inc. in the dismissal of class action suits brought in the U.S. District Court for the Southern District of New York by issuers and investors of auction rate securities alleging antitrust violations. The plaintiffs alleged that several major financial institutions had acted collectively to withdraw support for the auction rate securities market, in violation of Section 1 of the Sherman Act. The judge agreed with the defendants’ argument that the plaintiffs’ claims were impliedly precluded by federal securities laws.
- Merrill Lynch, Pierce, Fenner & Smith Incorporated in the U.S. Court of Appeals for the Second Circuit, which affirmed the dismissal of a putative class action alleging collusion among certain financial institutions that serve as “prime brokers” in connection with short sale transactions. Plaintiff-appellant Electronic Trading Group, LLC, a short seller, alleged that prime brokers arbitrarily had designated certain securities as “hard-to-borrow” and then fixed the price for borrowing them in violation of the Sherman Act. The U.S. District Court for the Southern District of New York had dismissed the complaint on the grounds that antitrust liability was impliedly precluded by the federal securities laws.
- Morgan Stanley in the settlement of a putative class action lawsuit in the U.S. District Court for the Southern District of New York by state, local and municipal government, independent government and private entities that alleged antitrust violations against Morgan Stanley and other banks and investment firms that purportedly conspired to fix, maintain or stabilize the price of municipal derivatives. Morgan Stanley was the first defendant in the multidistrict litigation to settle.
- National Football League (NFL) in the dismissal of a putative class action in the U.S. District Court for the District of New Jersey alleging tort, contract and Racketeer Influenced and Corrupt Organizations Act (RICO) claims in connection with the New England Patriots’ alleged videotaping of New York Jets coaches and players during a game at Giants Stadium. The U.S. Court of Appeals for the Third Circuit affirmed the dismissal, agreeing that the plaintiff received exactly what he paid for — the right to view an NFL football game at Giants Stadium — and could not maintain an action based on his subjective expectations about the fairness of the game. In 2011, the U.S. Supreme Court denied the appellant’s petition for a writ of certiorari.
- Adaptive Marketing LLC, a subsidiary of Vertrue Incorporated, in the dismissal with prejudice of a class action complaint brought in the U.S. District Court for the Central District of California. The complaint asserted claims under California’s Unfair Competition and False Advertising Laws and alleged that Adaptive has used deceptive and misleading post-transaction Internet marketing practices to enroll plaintiffs and putative class members in discount membership programs without their knowledge. The court ruled that the practices were not deceptive as a matter of law and the plaintiffs failed to adequately allege reliance and other elements of their claims.
- Bausch & Lomb Incorporated in a lawsuit in a multidistrict class action in the U.S. District Court for the District of South Carolina, Charleston Division, brought by plaintiffs alleging economic losses as a result of purported defects in Bausch & Lomb’s ReNu with MoistureLoc contact lens solution. The court denied class certification to the plaintiffs, comprised of all California and Pennsylvania consumers, and later dismissed all claims from remaining class actions.
- BNP Paribas in a putative class action brought by the northern governorates of Iraq asserting RICO claims and other claims under New York law arising out of the alleged conduct of the Iraqi government in demanding kickbacks in connection with the United Nations Oil-for-Food Program. The plaintiffs alleged that participants in the program, including BNP Paribas, should have been held liable for the value of alleged kickbacks that Iraq demanded (allegedly at least $1.5 billion). The U.S. District Court for the Southern District of New York dismissed the lawsuit, and the dismissal was affirmed by the U.S. Court of Appeals for the Second Circuit on the grounds that the plaintiffs lacked standing and failed to allege any concrete and particularized injury as a result of the alleged kickbacks.
Electrolux Home Products, Inc. in:
- its defense of a class action brought by five named plaintiffs (on behalf of thousands of persons) alleging that the company’s front-loading washing machines had a design defect that causes mold and mildew in the machines. The plaintiffs claimed that the company fraudulently sold the machines with knowledge of the alleged defect. The U.S. District Court for the Southern District of Georgia (Augusta) denied the plaintiffs’ motion to proceed with the action on a class basis and dismissed most of the named plaintiffs’ claims; and
- its motion to dismiss in a case in California involving similar mold allegations under seven states’ laws. The U.S. District Court for the Central District of California dismissed the plaintiffs’ claims in part and denied class certification.
- The Guardian Life Insurance Company of America in allegations of fraud in connection with the sale of “vanishing premium” life insurance policies. After a three-week jury trial in Mississippi state court, the jury found in favor of Guardian. This was part of approximately 40 individual and class action cases.
Lincoln Electric Co. in a string of defense successes in welding rod fume litigation, including:
- the reversal and remand by the U.S. Court of Appeals for the Sixth Circuit of a $20 million jury verdict on the ground that the trial court improperly admitted speculative expert testimony. In 2011, the U.S. Supreme Court denied the appellant’s petition for a writ of certiorari; and
- the remand for a new trial on damages by the U.S. Court of Appeals for the Fifth Circuit on the ground that the trial court had erred in ruling that no fault could be apportioned to the plaintiff’s employer.
- MemberWorks, Inc. (MWI) (now known as Vertrue Incorporated) in the affirmance of a dismissal of a putative nationwide consumer class action in the U.S. Court of Appeals for the Ninth Circuit. The plaintiffs claimed they were fraudulently enrolled in MWI’s membership discount programs, but the Ninth Circuit adopted all of Skadden’s arguments that the plaintiffs had failed to adequately plead their individual claims, including those under RICO, the Unordered Merchandise Statute and the Electronic Fund Transfer Act.
- Merck & Co. in a class action lawsuit brought by the Texas attorney general alleging that Merck had engaged in Medicaid fraud in connection with the marketing and sales of the pain-relief drug Vioxx between 1999 and 2005. The state sought to recover reimbursements (totaling over $200 million) to Medicaid patients for use of the drug. Merck & Co. was granted summary judgment and the case was dismissed.
Merck Sharp & Dohme Corp., fka Merck & Co., in:
- a series of appellate victories in 2010. For example, the U.S. Court of Appeals for the Fifth Circuit agreed with Merck that plaintiffs lacked standing to challenge a Vioxx settlement agreement, because they had not participated in it. The plaintiffs had argued that it was a de facto class settlement that should have been subject to the requirements of Rule 23 of the Federal Rules of Civil Procedure. The Fifth Circuit also granted summary affirmance in two other cases based on the same arguments. Similarly, the Fifth Circuit upheld the trial court’s dismissal of a case in which the plaintiff’s counsel sought to extract his client from the Vioxx settlement agreement, arguing that the mandatory-withdrawal provisions of the agreement caused the client’s former lawyer to coerce him into settling. The Fifth Circuit agreed with Merck that there was no evidence of coercion;
- a case resulting in the grant of summary judgment in favor of Merck in a suit brought by the attorney general of Louisiana alleging Medicaid fraud in connection with the marketing and sale of Vioxx. The court granted Merck’s motion for summary judgment on many of the state’s claims in March 2010. Following a bench trial, the court ruled, based in substantial part on Merck’s briefing, that the state failed to establish causation because it did not prove that it could have — and would have — refused to pay for Vioxx prescriptions for Medicaid beneficiaries had it been provided more information about the alleged risks of Vioxx;
- a suit brought by Washington, D.C. resident Kenneth Walker, who sought more than $2 million in damages in connection with False Claims Act allegations brought in the District of Columbia alleging that Merck misrepresented the safety of Vioxx and caused the city to pay for Vioxx prescriptions it otherwise would not have covered. In March 2011, the federal court overseeing the multidistrict Vioxx proceedings dismissed the claim, holding that the allegations of fraud had been publicly disclosed prior to the suit, barring the action;
- opposing a petition to the U.S. Supreme Court by plaintiffs challenging the Vioxx resolution program, which settled more than 50,000 personal injury claims; and
- a case brought by the Michigan attorney general seeking a refund of the money the state spent reimbursing Vioxx prescriptions for beneficiaries of state programs. In March 2011, the appellate court found that, under Michigan law, the attorney general could not seek reimbursement of funds spent purchasing a prescription drug that was approved by the United States Food and Drug Administration and ordered the trial court to dismiss the case.
- Metropolitan Life Insurance Company in the dismissal of a putative class action lawsuit in the U.S. District Court for the Southern District of Texas. The plaintiffs alleged breach of contract by Metropolitan Life Insurance in connection with MetLife’s allocation of income from real estate investments during the 1970s and 1980s that resulted in lower dividends in the 1990s. In 2009, a panel of the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal.
- Nissan Motor Co., Ltd. in the dismissal of a class action complaint alleging that Nissan’s vehicles equipped with the “Intelligent Key” system violated the Federal Motor Vehicle Safety Standard. The plaintiffs alleged that because of that noncompliance, drivers could depart their vehicle when the automatic transmission was not in the “park” position, allowing the vehicle to roll away unattended. The U.S. District Court for the Northern District of California (Oakland) granted Skadden’s motion to dismiss the plaintiffs’ claims without leave to amend, taking judicial notice that the responsible federal agency had found the vehicles to be compliant with the applicable National Highway Traffic Safety Administration regulations.
- Pacific Life Insurance Company in securing two dismissals. The U.S. District Court for the Northern District of Texas first dismissed a proposed class action that had been brought against Pacific Life in connection with its sale of insurance contracts that were used to fund 412(i) retirement plans. The court also issued an opinion in a related action brought by an individual plaintiff granting Pacific Life’s motion to dismiss all claims against it in that case. The plaintiffs in these cases had set up 412(i) retirement plans in 2002 and 2003 as part of a tax strategy that became the target of new IRS regulatory actions in 2004.
- Philip Morris USA, Inc. in a putative class action in which the plaintiffs sought certification of a proposed class of California smokers seeking medical monitoring. Judge William Alsup of the U.S. District Court for the Northern District of California found that the proposed class definition was not ascertainable because it would require the court to engage in individual inquiries as to whether each proposed class member met the requirements for class membership; accordingly, class certification was denied.
- Priceline.com Incorporated and other major Internet hotel reservation services in the dismissal of hotel occupancy tax claims brought against the industry by the two largest local governments in Kentucky — the Louisville/Jefferson County Metro and Lexington-Fayette County Urban governments. Skadden is priceline.com’s lead counsel in more than 40 cases brought by cities and counties in 19 states against the major Internet hotel reservation services. The Firm has won dismissals in federal courts in cases brought by governments in California, Kentucky (affirmed by the U.S. Court of Appeals for the Sixth Circuit), North Carolina (affirmed by the U.S. Court of Appeals for the Fourth Circuit) and Texas. Skadden also has obtained summary judgment in Delaware and affirmance of that in the Delaware Supreme Court. In a related matter, the Los Angeles County Superior Court granted a request by priceline.com and the other Internet hotel reservation services to invalidate $21.3 million in taxes, interest and penalties assessed by the city of Anaheim over a nine-year period. Similarly, Skadden whittled down claims in the U.S. District Court for the Southern District of New York.
- Recall Secure Destruction Services, Inc. in a victory in a putative class action in the San Francisco County Superior Court in California alleging violations of California’s Unfair Competition Law and False Advertising Act in connection with a “security administration fee” on customer’s invoices. A California appellate court affirmed in full a judgment in favor of Recall following a bench trial ruling that the fully disclosed fee was not a fraudulent business practice.
- Verizon Wireless Inc. and Sprint Nextel Corporation in a class action involving most cell phone manufacturers and service providers alleging that cell phones are unsafe because they expose users to dangerous amounts of radio frequency radiation. The U.S. Court of Appeals for the Third Circuit affirmed a dismissal of the multidistrict litigation, concluding that the claims were preempted by the Federal Communications Act and Federal Communications Commission regulations.
- Vertrue Incorporated in the dismissal of a putative class action in the U.S. District Court for the Central District of California brought against Vertrue affiliate FreeScore LLC under the federal Credit Repair Organizations Act (CROA). The plaintiff asserted that FreeScore was a “credit repair organization” and thus subject to the disclosure, cancellation, payment and other technical requirements of the CROA.
- Virgin Mobile USA, LLC in the dismissal of a putative class action alleging deceptive trade practices and breach of contract in the New York Supreme Court, Commercial Division. The plaintiff asserted that Virgin Mobile failed to adequately advise customers of certain terms and conditions of its “pay-as-you-go” service plan. The New York Appellate Division, Second Department, affirmed the dismissal, finding that, contrary to the plaintiffs’ assertion, Virgin Mobile had no obligation to disclose the relevant pricing terms on its product packaging, and that the disclosures Virgin Mobile did make were adequate under New York law.
- Wells Fargo Bank, N.A. as defendant in class action litigation in Los Angeles Superior Court involving allegations of “reverse redlining” in consumer mortgages during a period of more than four years. The complaint claimed pricing discrimination. Skadden won denial of class certification, successfully arguing that the elements of causation and damages under these claims gave rise to numerous individualized questions of fact that are not susceptible to classwide proof.
- Activision, Inc. in an amended shareholder suit related to the 2008 merger of Activision and Vivendi Games, Inc. The Delaware Court of Chancery ruled in favor of Activision, finding that the amended complaint failed to state a claim under Delaware law, thus dismissing all of the plaintiffs’ claims in their entirety. The Delaware Supreme Court upheld the dismissal. Subsequently, the Delaware Court of Chancery denied the plaintiffs’ petition seeking millions in attorneys’ fees and expenses.
American Express Company (Amex):
- and certain of its current and former officers, as well as officers of its American Express Financial Advisors subsidiary, in the dismissal of a securities class action in the U.S. District Court for the Southern District of New York. The plaintiffs alleged that the company misrepresented Amex’s high-yield exposure; failed to disclose the lack of risk management controls; and failed to disclose the fact that Amex’s accounting was not in accordance with General Accepted Accounting Principles. The judge found no basis of fraudulent intent on the part of Amex. The U.S. Court of Appeals for the Second Circuit affirmed the dismissal; and
- in the dismissal of a putative class action accusing the company of deceiving shareholders about its risks in expanding its share of the credit card market. The U.S. District Court for the Southern District of New York dismissed the case, ruling that the plaintiff investors, led by a union pension fund, failed to show that American Express’ CEO and CFO had committed securities fraud and their motives did not extend beyond the desire to maintain a strong credit rating as the country’s economy faltered.
- certain directors and officers, as well as certain former officers, of Apollo Group, Inc. who are defendants in a putative class action asserting violations of the federal securities laws arising from allegedly backdated stock options. Skadden successfully secured a dismissal with prejudice for several of the defendants. The firm also reached a settlement in a related class action in the U.S. District Court for the District of Arizona.
- Aspen Technology, Inc. in a victory in the Massachusetts Superior Court Business Litigation Session in a treble-damage securities fraud case following a bench trial. AspenTech had acquired the plaintiffs’ company in a cash-and-stock transaction in 2000, but, in 2005, AspenTech restated all applicable historical financial statements following an audit committee investigation of revenue recognition issues. The plaintiffs opted out of a class action settlement to pursue trebled $30 million claims against AspenTech and three of its former officers, claiming that the financial statements they relied upon in the acquisition transaction were materially false and fraudulent.
- the underwriters of certain American depositary shares of Barclays Bank PLC in the dismissal of a securities class action in the U.S. District Court for the Southern District of New York brought by U.S. investors seeking to recover losses stemming from alleged failure to disclose Barclays’ exposure to risky mortgage-backed assets. The court found that the plaintiffs failed to adequately allege violations of the Securities Act.
- Baxter International Inc. in the dismissal of a putative class action alleging violations of SEC Rule 10b-5 by Baxter and its former CEO and CFO arising out of a 26 percent, one-day decline in Baxter’s stock price in July 2002. The U.S. District Court for the Northern District of Illinois awarded summary judgment in favor of the defendants. Skadden successfully opposed the plaintiffs’ successive motions for class certification, and the case was carried on by two remaining plaintiffs, who alleged that the dramatic drop in the value of their Baxter shares was the result of securities fraud on the part of the remaining defendants. The U.S. Court of Appeals for the Seventh Circuit dismissed the plaintiffs’ appeal.
- BearingPoint, Inc. in a securities class action involving accounting fraud at Peregrine Systems, Inc. Peregrine investors filed a lawsuit against KPMG LLP and BearingPoint, among others, alleging that they had enabled Peregrine to improperly recognize revenue through parking transactions. The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of the U.S. District Court for the Southern District of California.
- Canadian Imperial Bank of Commerce (CIBC) in the dismissal of a putative class action brought in the U.S. District Court for the Southern District of New York by Plumbers & Steamfitters Local 773 Pension Fund alleging that CIBC and its officers misled investors about CIBC’s exposure to collateralized debt obligations backed by subprime residential mortgages in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
- the outside directors of Cano Petroleum, Inc. in the dismissal of a class action in the U.S. District Court for the Northern District of Texas alleging violations of the Securities Act in connection with a secondary offering of Cano stock. Skadden successfully moved to transfer the matter, originally filed in the U.S. District Court for the Southern District of New York, to the Northern District of Texas early on. The U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal with prejudice.
- CF Industries, Inc. in the dismissal of a putative shareholder class action in the Delaware Court of Chancery alleging CF’s directors breached their fiduciary duties in connection with the rejection of Agrium’s proposal to acquire CF. This case addressed the ability of a company’s board to evaluate possible merger options without interference from individual shareholders.
- Citigroup Inc. in several lawsuits involving a dispute regarding its Capital Accumulation Plan (CAP), an incentive compensation plan involving the award of discounted stock with a vesting requirement. The plaintiffs, former Citigroup employees who forfeited unvested stock options upon terminating employment with Citigroup, challenged whether the plan was a lawful investment of wages, as well as whether it violated the Wage and Hour Laws. The California Supreme Court, Illinois Court of Appeals, California Superior Court, U.S. District Court for the District of Massachusetts and New Jersey Supreme Court all ruled in favor of Citigroup.
- Deloitte & Touche LLP in a multidistrict class action litigation in the U.S. District Court for the Eastern District of New York alleging that American Home Mortgage Investment Corporation’s financial statements were false and misleading and misstated the quality of its loans and underwriting standard, subsequently causing that stock price to fall when the information was revealed. The matter settled for $37 million.
- DRS Technologies, Inc. and its chief executive officer, former general counsel and former directors in a putative class action lawsuit in the New Jersey Chancery Court that arose out of a $5.5 billion merger between defense contractor DRS and an Italian acquirer, Finmeccanica, SpA. In 2008, Skadden convinced the court not to enjoin the transaction. The court, however, had denied Skadden’s motion to dismiss the breach of fiduciary duty claims. The firm renewed its motion to dismiss the claims, explaining that a recent trilogy of deal-related opinions issued out of the Delaware Court of Chancery (all litigated by Skadden) clarified Delaware law with respect to loyalty claims against directors in the merger context. The New Jersey Chancery Court agreed and dismissed the action with prejudice.
- the estate of Edward Gotschall, co-founder, former CFO and board member of New Century Financial Corporation, a subprime mortgage lender, in a securities class action and a separate private action brought in the U.S. District Court for the Central District of California, a lawsuit brought by New Century’s Liquidating Trustee in the U.S. Bankruptcy Court for the District of Delaware and a related SEC investigation. The three lawsuits were settled and the estate received a no-action letter from the SEC.
- Fremont General Corporation, formerly one of the nation’s largest subprime lenders, in three dismissals of securities fraud claims in the U.S. District Court for the Central District of California arising from its collapse. The plaintiffs accused six of Fremont’s former officers of falsely touting the strength of the company’s underwriting standards.
- Heartland Industrial Partners, L.P., a private equity firm and a majority owner of Collins & Aikman Corporation, in the settlement of two securities class action lawsuits in the U.S. District Court for the Southern District of New York brought against Heartland, its co-founder and its former senior managing director by shareholders and bondholders of Collins & Aikman alleging violation of the Securities Exchange Act.
- Horizon Lines, Inc. in a putative securities class action in the U.S. District Court for the District of Delaware alleging Horizon fraudulently inflated its value by entering into illegal price-fixing arrangements with competitors. The court dismissed the claims that Horizon Lines, its subsidiaries and its current or former executives violated Section 10(b) of the Securities Exchange Act, holding that the complaint failed to plead scienter. In a related derivative complaint filed by a shareholder alleging that the company’s outside directors and officers breached their fiduciary duties by knowingly permitting Horizon Lines to engage in the alleged price-fixing conspiracy, the North Carolina Business Court dismissed the complaint for failure to make a demand on Horizon Lines’ board of directors as required by Delaware law.
- the special committee of the board of directors of Kinder Morgan Inc. in connection with shareholder litigation challenging the Kinder Morgan leveraged buyout in 2006. A Texas state district court dismissed a shareholder derivative lawsuit challenging the merger in 2008, and the Texas Court of Appeals (First District) affirmed this summary judgment dismissal in 2009. In 2010, the special committee defendants were dropped from the action, and the plaintiffs and remaining defendants subsequently reached a settlement. Skadden also represented the special committee in related class action lawsuits in Kansas and Texas state court.
Merrill Lynch & Co., Inc. in:
- the dismissal of a putative securities fraud class action brought by purchasers of auction rate securities (ARS) in the U.S. District Court for the Southern District of New York. This was the lead case in a multidistrict litigation arising out of the collapse of the ARS market in February 2008. The plaintiffs were so-called downstream purchasers of ARS who did not acquire the securities directly from Merrill Lynch. They alleged that Merrill Lynch’s practice of routinely supporting auctions to prevent them from failing was manipulative conduct in violation of the federal securities laws. In November 2011, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal. Since then, the case has been cited in more than 20 other cases.
- the settlement of class and ERISA-related litigation concerning its holdings of collateralized debt obligations and subprime mortgages. A related derivative lawsuit was dismissed without prejudice for lack of standing. The court ruled that, as a result of the acquisition of Merrill Lynch by Bank of America, the plaintiffs were no longer Merrill Lynch shareholders and lacked standing to pursue the derivative action;
- a shareholder class action lawsuit in the U.S. District Court for the Southern District of New York against Merrill Lynch and four other brokerage firms (Morgan Stanley, Citigroup, Charles Schwab and Wachovia) alleging that $186 billion in customer-invested funds had been impacted by deceptively made changes to the firms’ respective “Cash Sweep Programs,” which offered investors the option of having uninvested funds in their brokerage accounts placed into other types of investments. The court dismissed the claims on the basis that the plaintiff did not have a plausible theory as to why the brokerages’ statements were materially misleading; and
- the approximately $5 billion settlement of a putative class action brought in the U.S. District Court for the Southern District of New York by purchasers of Tyco International Ltd. stocks alleging that Merrill made false and misleading research reports on the stocks.
- Merrill Lynch, Pierce, Fenner & Smith Incorporated in the affirmed dismissal of shareholder class action challenges to investments made in the Philadelphia Stock Exchange (PHLX) by six Wall Street firms. In March 2007, the U.S. District Court for the Eastern District of Pennsylvania dismissed claims brought under the Securities Exchange Act challenging the demutualization of the PHLX and subsequent investments by the Wall Street firms, which included Merrill Lynch. The plaintiff appealed. In October 2007, the Delaware Court of Chancery approved the settlement of a lawsuit challenging the same transactions under Delaware law and, in March 2008, the Delaware Supreme Court affirmed the approval of that settlement. In August 2010, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal of the federal action on the grounds that those claims were released by the Delaware settlement.
- Merrill Lynch & Co., Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated in a securities putative class action in the U.S. District Court for the Southern District of Texas, Houston Division, arising out of Merrill’s alleged underwriting of auction rate securities that were sold to Amegy Bank. The putative class, consisting of purchasers of auction rate securities from Amegy, alleged that Merrill Lynch arbitrarily excluded them from an auction rate securities tender offer because they were indirect purchasers. The plaintiffs filed a voluntary notice of dismissal without prejudice on March 9, 2009.
- Oracle in litigation in the Massachusetts Superior Court in connection with Oracle’s merger with Phase Forward. The shareholder class action challenged the sale process and merger proxy statement disclosures under Delaware law of the proposed deal. The court denied the motion for preliminary injunction, allowing a special shareholders’ meeting and vote to proceed as scheduled.
- Playboy Enterprises, Inc. and several of its current and former officers and directors in the dismissal of a shareholder class action arising out of a proposal from Hugh Hefner to acquire all outstanding shares of the company’s common stock. Before the Playboy board could respond to the proposal, several putative Playboy shareholders prematurely filed more than 10 class action complaints in both the Circuit Court of Cook County, Ill., and the Delaware Court of Chancery. Skadden determined that the litigation would be better situated in Delaware, and the Cook County court agreed.
- Putnam Investments in allegations of improper market timing activities. In 2004, several cases were consolidated in the U.S. District Court for the District of Maryland as one of the largest multidistrict litigations in U.S. history. In 2009, the court granted summary judgment, finding that Putnam was not liable under SEC Rule 10b-5 because the plaintiffs could neither establish scienter nor overcome Putnam’s showing that its earlier regulatory settlements more than offset any damages. Skadden also won an interlocutory appeal in the Illinois Appellate Court that reversed a Madison County, Ill., court’s refusal to dismiss three putative class actions. The Fifth District Appellate Court held that the complaints alleged misrepresentations or omissions and were therefore precluded by the Securities Litigation Uniform Standards Act.
- Radian Group, Inc. in the dismissal of a subprime-related shareholder lawsuit in the U.S. District Court for the Eastern District of Pennsylvania. The lawsuit alleged that Radian (and several of its officers) made false and misleading statements regarding its investment in Credit-Based Asset Servicing & Securitization (C-BASS), a company that invested in subprime and Alt-A mortgages. The court dismissed the case for a second time in May 2010 after giving the plaintiffs’ opportunity to replead.
- Société Générale of France in the dismissal of a Section 10(b) shareholder class action alleging that SocGen knowingly understated its exposure to subprime mortgages through its collateralized debt obligations investments and knowingly misstated the strength of its risk management controls after a rogue trader in France circumvented these controls and put billions of euros at risk in unhedged trades. The U.S. District Court for the Southern District of New York dismissed the suit in entirety with prejudice.
- the independent trustees of SSgA Funds Management Inc. in the dismissal of a securities class action in the U.S. District Court for the Southern District of New York in connection with allegations that the offering materials of one of the mutual funds that invested in asset-backed and mortgage-related securities misled investors in connection with purported investments in securities backed by subprime mortgages in violation of Sections 11, 12(a)(2) and 15 of the federal securities laws.
- Star Gas Partners, L.P. in obtaining a dismissal with prejudice by the U.S. District Court for the District of Connecticut of a consolidated class action complaint alleging violations of Sections 11 and 12(2) of the Securities Act and Section 10(b) of the Securities Exchange Act. The complaint alleged that statements by Star Gas about its business made in SEC filings, press releases and conference calls were fraudulent. The district judge held that the plaintiffs failed to allege that Star Gas made any false or misleading representations. The U.S. Court of Appeals for the Second Circuit affirmed the district court’s decision. Subsequently, Skadden also secured a significant victory for Star Gas and its insurance carrier when the District of Connecticut ruled that the lead plaintiffs’ counsel had made frivolous allegations violating Rules 11(b)(2) and 11(b)(3) of the Federal Rules of Civil Procedure.
- certain outside directors of Toll Brothers, Inc. in the favorable settlement of a securities fraud class action in the U.S. District Court for the Eastern District of Pennsylvania brought against Toll Brothers and the individual members of its board of directors alleging that Toll Brothers made misleading statements regarding its financial condition during the housing slump.
- the underwriting syndicate, led by Morgan Stanley & Co. Inc. and Citigroup Global Markets Inc., of a March 2007 secondary public offering of TeleTech Holdings, Inc. securities in a putative class action filed in the U.S. District Court for the Southern District of New York. The plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act and Sections 11, 12 and 15 of the Securities Act alleging, among other things, that the offering documents were “false and misleading” and that the underwriters failed to conduct a reasonable investigation. A settlement was reached and all claims were dismissed with prejudice.
- Yahoo! Inc. in the settlement of a consolidated shareholder and derivative class action in the Delaware Court of Chancery in connection with the proposed $44.6 billion unsolicited acquisition by Microsoft Corporation. The shareholders alleged that Yahoo! and its board of directors breached their fiduciary duties to shareholders in resisting the takeover by Microsoft. Skadden also represented Yahoo! in the dismissal of a related purported derivative complaint alleging breach of fiduciary duty and Section 14(a) claims in the U.S. District Court for the Northern District of California. The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal.