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 22 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. (Mexico) in connection with an antitrust price-fixing lawsuit brought by indirect and direct purchasers of cement products in the U.S. District Court for the Southern District of Florida. In 2012, the court denied the plaintiffs’ motion for class certification, ruling that the plaintiffs failed to demonstrate that common issues in the suit would predominate over individual questions.
- De Beers SA (South Africa) in connection with the affirmance by the U.S. Court of Appeals for the Third Circuit of an appeal regarding a $295 million settlement that resolved seven nationwide price-fixing class actions. The Third Circuit agreed with the lower court’s decision to affirm class certification and approve the settlement, reversing an August 2010 panel decision vacating it.
- 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.
- HarperCollins Publishers L.L.C. in the settlement with the U.S. Department of Justice in its lawsuit against Apple and five of the country’s largest publishers alleging a conspiracy to fix the prices of electronic books. We also settled related parens patriae consumer cases brought by 33 states in connection with similar allegations regarding the sale of electronic books. In an innovative settlement, we settled the parens cases with 55 states and U.S. territories, thereby displacing the nationwide class action price-fixing cases brought by private plaintiffs. The settlements received court approval.
- JP Morgan Chase & Co. in its July 2012 class action settlement resolving allegations the bank artificially inflated the prices of interchange fees paid by merchants.
- KeySpan Corporation, now part of National Grid plc, in connection with an investigation by the U.S. Department of Justice, Antitrust Division, into allegations that KeySpan kept electricity prices artificially high by using a derivative transaction to take a financial stake in one of its main competitors, Astoria Generating Co. After KeySpan agreed to pay $12 million to settle the charges, a putative class action seeking at least $118 million in damages for alleged violations of federal antitrust law and New York state statutory and common law was filed in the U.S. District Court for the Southern District of New York. The court granted KeySpan’s motion to dismiss with prejudice and a panel for the U.S. Court of Appeals for the Second Circuit affirmed; the Second Circuit subsequently denied a petition for rehearing. A related putative class action was dismissed by the New York Supreme Court, Appellate Division, First Department; the New York Court of Appeals subsequently refused to hear an appeal of its dismissal of the case.
- 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 (ARS) alleging antitrust violations, and in the successful affirmance of the dismissal by the U.S. Court of Appeals for the Second Circuit. The plaintiffs claimed that several major financial institutions had acted collectively to withdraw support for the ARS market in violation of Section 1 of the Sherman Act. The Second Circuit found that the plaintiffs had not alleged a violation of Section 1 of the Sherman Act because the facts alleged did not support the inference that a conspiracy existed. The court found that the plaintiffs had pleaded only consciously parallel conduct, and that the alleged action in exiting the market very quickly “was not just a rational business decision, but the only rational business decision.”
- Morgan Stanley in a November 2011 class action settlement with a nationwide class of direct purchaser plaintiffs alleging bid-rigging among banks, insurance companies and brokers in connection with various forms of municipal bond derivatives.
- 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.
- Nissan Motor Co., Ltd. in the dismissal of a class action complaint in the U.S. District Court for the Northern District of California alleging that Nissan’s vehicles equipped with the “Intelligent Key” system violated the Federal Motor Vehicle Safety Standard. The plaintiffs alleged that because of the noncompliance, drivers could depart their vehicle when the automatic transmission was not in the “park” position, allowing the vehicle to roll away unattended. In August 2012, the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal. After remand, the plaintiffs filed an amended complaint, and in June 2013, the trial court dismissed that new complaint as well.
- Toyota Motor Corporation and Toyota Motor Sales, U.S.A., Inc. (as lead trial counsel) in the “economic loss” phase of a multidistrict litigation pending in the U.S. District Court for the Central District of California largely based on the claim of a defect in Toyota’s electronic throttle control system that can cause unintended acceleration.
- Anheuser-Busch Company, LLC in multiple class action lawsuits in Ohio, Colorado, Texas, California, New Jersey and Pennsylvania alleging that it overstates the amount of alcohol in its beer by adding extra water to the finished product in order to cut costs. In June 2013, the U.S. Judicial Panel on Multidistrict Litigation centralized the six putative class actions in the Northern District of Ohio.
- Bausch & Lomb Incorporated in the denial of class certification in a multidistrict litigation 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 later dismissed all claims from remaining class actions.
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 caused 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.
- 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.
Philip Morris USA Inc. in:
- the affirmance by the U.S. Court of Appeals for the First Circuit of a denial of class certification in four class actions that sought refunds of all money consumers spent on “light” cigarettes in California, the District of Columbia, Illinois and Maine.
- obtaining a denial from the U.S. District Court for the Northern District of California to certify a class of California smokers seeking medical monitoring. The court 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.
- Red Bull North America, Inc. and its corporate parent in defense of multiple putative nationwide class actions pending across the country. The actions challenge the nature and content of Red Bull’s advertising statements concerning its products’ benefits and the scientific support for its claims that Red Bull improves mental and physical performance. Skadden is simultaneously advising Red Bull in responding to congressional investigations into the energy drink segment and with respect to threatened actions by a consortium of attorneys general.
- SiriusXM in the denial of class certification in a case involving SiriusXM’s practice of automatically renewing customers’ satellite radio subscriptions — a practice the plaintiff alleged violated New York consumer protection laws. In June 2013, the U.S. District Court for the Southern District of New York adopted a report and recommendation by the chief magistrate judge and denied the plaintiff’s motion for class certification.
- Lincoln Electric Co. (and other welding industry defendants) as lead counsel in federal multidistrict litigation and state court mass tort proceedings involving more than 12,000 products liability claims brought by individuals who allegedly suffered injuries caused by manganese inhaled during use of welding consumables. Once considered the “next asbestos,” with claims valued in the billions, defendants have been victorious in 26 of 31 individual cases that have gone to trial, and three of the plaintiff victories were later overturned on appeal. Over the eight-year history of the litigation, more than 85 percent of the claims have been voluntarily dismissed, and most of the few remaining were resolved in 2012 through a nominal settlement.
- Norfolk Southern Railway Company as defendant in the settlement of a class action lawsuit in the U.S. District Court for the District of South Carolina alleging personal injury claims resulting from exposure to chlorine following a train collision and derailment in South Carolina. Skadden also represented Norfolk Southern in a class action settlement in 2005 of property damage, evacuation losses and minor personal injury claims. The speed with which both of these settlements were reached was unprecedented in derailment accidents of this type. In connection with the accident, Skadden also secured a dismissal of a separate putative class action in the U.S. District Court for the District of South Carolina, which was affirmed by the U.S. Court of Appeals for the Fourth Circuit. This dismissal terminated as moot the fully briefed motion for class certification that had been pending.
- Guardian Life Insurance Company in obtaining the denial of a motion for class certification. The plaintiffs challenged marketing methods with respect to whole life insurance, and they sought certification of a class on claims of common law fraud and an alleged violation of a state deceptive trade practices statute. The Los Angeles Superior Court denied the plaintiffs’ motion, accepting Skadden’s argument that the unique facts and circumstances of each transaction would need to be litigated individually.
Pharmaceuticals and Medical Devices
Merck Sharp & Dohme Corp., fka Merck & Co., in:
- an appeal of a statute-of-limitations dismissal of multiple personal injury cases concerning Fosamax, an osteoporosis medicine. Finding the plaintiffs’ appeal presented a question of Virginia state law, the U.S. Court of Appeals for the Second Circuit certified the question to the Supreme Court of Virginia, which ruled in Merck’s favor.
- securing a rare All Writs Act injunction when a Louisiana federal court intervened in a state court proceeding to prevent plaintiffs from pursuing certain damages theories already addressed by earlier settlements. The order was directed at a $220 million Vioxx-related state consumer class action. On April 23, 2012 — the eve of trial — Judge Eldon Fallon of the U.S. District Court for the Eastern District of Louisiana ruled that “if subsequent state court proceedings can functionally interfere with or unsettle a completed settlement ... it would have a chilling effect on future settlements and interfere with the ability of this court and others to foster efficient global resolutions in complex multidistrict litigation.”
- 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.
- 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 two-part lawsuit brought by a Washington, D.C. named plaintiff. In one part, the plaintiff sought more than $2 million in False Claims Act damages, alleging that Merck misrepresented the safety of Vioxx and caused the city to pay for Vioxx prescriptions it otherwise may not have covered. In the second, the plaintiff sought to represent a class of other Washington, D.C. residents who purchased Vioxx. The federal court overseeing the multidistrict Vioxx proceedings dismissed the suit.
- 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 U.S. Food and Drug Administration and ordered the trial court to dismiss the case. The Michigan Supreme Court rejected the attorney general’s appeal.
Pfizer Inc. in:
- the dismissal (without leave to amend) of a civil consumer class action that alleged Pfizer had conspired to defraud consumers through its marketing, promotion and sales of 12 of its medicines. Plaintiffs alleged that Pfizer bribed doctors to push their drugs, promoted use of the drugs for unnecessary durations, lied about the safety and effectiveness of the drugs and promoted their “off-label” uses. The U.S. District Court for the Eastern District of Pennsylvania dismissed the case in its entirety, finding that, among other things, plaintiffs were unable to state a cognizable injury or demonstrate causation.
- its successful motion to dismiss RICO claims brought by Health Care Service Corporation alleging Pfizer improperly promoted off-label use for the drug Bextra. In August 2012, the U. S. District Court for the Northern District of California dismissed HCSC’s claims with prejudice.
- the dismissal of claims brought by Health Care Services Corporation alleging economic injury as a result of Pfizer’s alleged off-label marketing of the antipsychotic medicine Geodon and antibiotic Zyvox. In June 2012, the U.S. District Court for the Eastern District of Texas held that HCSC did not sufficiently allege injury or causation and dismissed the suit with prejudice.
- 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.
- 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.
- 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.