Securities Litigation

Skadden, Arps, Slate, Meagher & Flom LLP and affiliates (“Skadden”) handles some of the most challenging, high-stakes securities litigation matters — “bet-the-company” cases demanding a full range of skills, from experience with civil and criminal proceedings and internal investigations to an understanding of the workings of the SEC and other federal and state regulators. The outcome of these cases can be vital to a company’s future, and Skadden’s approach of assembling collaborative teams of advisers with deep and relevant experience across a range of disciplines is key to our successful track record on behalf of clients.

We have been selected as lead defense counsel in several of the largest and most important securities class actions in U.S. history, including representing Alcatel, Cendant Corporation, DaimlerChrysler AG, McKesson Corporation, Sunbeam Corporation, Waste Management, Inc. and the underwriters in the WorldCom bondholder litigation, among others. Skadden has successfully represented clients before the U.S. Supreme Court, including Merrill Lynch in a unanimous win in Merrill Lynch v. Dabit. We also represented Merrill Lynch in Lentell v. Merrill Lynch, in which the U.S. Court of Appeals for the Second Circuit adopted a standard for pleading noncausation that has been cited hundreds of times.

Our work includes representing financial institutions in matters related to subprime loans and the credit crisis, such as mortgage-backed securities litigation, securities class and derivative actions, and ERISA-related litigation. We also handle the broad range of issues that arise when a corporation, director or officer faces securities-related claims.

Skadden plays an active role in addressing and resolving litigation claims in the M&A context. In the last several years, our attorneys have defeated challenges to hundreds of billions of dollars in deals, in cases filed in Delaware and across the United States.

We advise on a wide variety of securities-related regulatory matters at the federal and state levels, and provide assistance in connection with investigations and proceedings before the SEC, the Commodity Futures Trading Commission, the Department of Justice, the offices of various state attorneys general, the Financial Industry Regulatory Authority and the New York Stock Exchange. We also have advised boards of directors and special committees in investigations of shareholder demands, accounting issues and other corporate governance matters. Many of our attorneys have valuable knowledge and experience from previous government service with the DOJ, the SEC and the CFTC.

Our Clients

We handle securities litigation matters for clients in a wide range of industries. Our successes include the representation of:

Energy

• Allegheny Energy, Inc. in the favorable settlement of suits filed by plaintiffs in Maryland and Pennsylvania state and federal courts challenging a proposed stock-for-stock merger between Allegheny and FirstEnergy Corp. and claiming that the directors had breached their duties by approving the merger. The matter involved issues of first impression under Maryland law regarding the duties of Maryland directors. In January 2011, Skadden achieved a global settlement that ended the challenge to the merger and secured a full release for Allegheny at essentially no cost.
• Anadarko Petroleum Corporation and its subsidiary, The Kerr-McGee Corporation, in the dismissal of a putative securities class action in the U.S. District Court for the Southern District of New York asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act based on allegedly false and misleading statements issued by Tronox, Inc., a former subsidiary of Kerr-McGee. Skadden also advised Anadarko Petroleum on the dismissal with prejudice of a shareholder derivative action brought in connection with the Deepwater Horizon oil spill in the Gulf of Mexico.
• 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, and then obtained dismissal. The U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal with prejudice.
• Chevron Corporation in the dismissal of a shareholder derivative action in the Superior Court of the State of California arising out of the settlement of alleged violations of federal law, including the False Claims Act, in connection with leases for oil and natural gas production on federal and Native American lands.
• Exelon Corporation in the dismissal of a class action brought by shareholders of Constellation Energy Group, Inc. in connection with its $7.9 billion merger with Exelon.
• Occidental Petroleum Corp. and its directors in the settlement of a shareholder suit in the U.S. District Court for the District of Delaware, asserting direct and derivative claims pertaining to director compensation.
• 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 lead plaintiffs’ counsel had made frivolous allegations in violation of Rules 11(b)(2) and 11(b)(3) of the Federal Rules of Civil Procedure.

Financial Institutions

• American Express Company, certain of its current and former officers and officers of its American Express Financial Advisors subsidiary in the dismissal of a putative 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 Generally Accepted Accounting Principles. The judge found no fraudulent intent on the part of Amex. The U.S. Court of Appeals for the Second Circuit affirmed the dismissal.
• the underwriting syndicate of billions of dollars of Deutsche Bank securities in the August 2012 dismissal with prejudice in the U.S. District Court for the Southern District of New York of a federal class action alleging that Deutsche Bank failed to adequately disclose its exposure to subprime and other residential mortgage-backed securities.
• Robert Hussey, a former Bank of America executive, in the affirmance of the dismissal in the U.S. Court of Appeals for the First Circuit of a Section 10b-5(b) market timing claim brought by the SEC. The en banc court rejected the SEC’s argument. The matter was subsequently settled in the U.S. District Court for the District of Massachusetts.
• Merrill Lynch in the first class action arising from the collapse of the auction rate securities market to be decided by an appellate court. The U.S. Court of Appeals for the Second Circuit affirmed a dismissal by the U.S. District Court for the Southern District of New York in connection with Merrill Lynch’s alleged manipulative conduct related to the ARS market.
• Morgan Stanley & Co. Incorporated in a securities action in the U.S. District Court for the Southern District of New York brought by Ashland and its affiliate, AshThree, alleging securities fraud and related state law claims in connection with Ashland’s purchase and retention of various auction rate securities (including student loan auction rate securities). The district court twice dismissed Ashland’s claims, and the U.S. Court of Appeals for the Second Circuit affirmed the dismissal. This was the first ruling by the Second Circuit in an ARS case.
• Société Générale in the dismissal of a Section 10(b) shareholder class action alleging that SocGen knowingly understated its exposure to subprime mortgages through its CDO 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.
• UBS and Société Générale in connection with lawsuits filed by the Federal Housing Finance Agency against 17 of the world’s largest banks. The suits seek to recover billions of dollars in compensation for alleged mortgage-backed securities losses suffered by Fannie Mae and Freddie Mac during the financial crisis.
• UniCredit S.p.A., Pioneer Alternative Investments, Tremont Group Holdings, Inc. and others in more than 25 actions stemming from the Bernard Madoff scandal. These have included litigation in federal trial and appellate courts in New York, and state court actions in New York, California, Delaware, Massachusetts, Florida, Colorado, New Mexico and Washington. For example, Skadden secured the dismissal of $60 billion in trebled RICO claims and common law claims brought against UniCredit S.p.A. by Irving Picard, the trustee for the Securities Investor Protection Act liquidation of Bernard L. Madoff Investment Securities LLC.

Health Care

• Amerigroup Corporation in settling shareholder litigation in the Delaware Court of Chancery seeking to enjoin its proposed $4.9 billion acquisition by WellPoint, Inc. After engaging in expedited discovery in advance of a scheduled preliminary injunction hearing, the parties negotiated a successful resolution of the litigation in exchange for modification to the merger termination fee and additional disclosures.
• Baxter International Inc. in an ERISA case arising out of Baxter’s announcement of its financial results for the second quarter of 2002 and its announcement in 2004 that it would restate its financial results for the years 2001 through 2003 and the first quarter of 2004. The U.S. District Court for the Northern District of Illinois ruled in favor of Baxter and its former CEO and CFO, holding that the defendants were protected from liability under the ERISA Section 404(c) safe harbor defense.
• Express Scripts, Inc. in the settlement of class action litigation in the U.S. District Court for the District of New Jersey brought by shareholders of Medco Health Solutions, Inc. related to Express Scripts’ acquisition of Medco. Skadden also obtained a dismissal of antitrust claims brought in the U.S. District Court for the Western District of Pennsylvania.
• Gilead Sciences, Inc. in shareholder litigation in Delaware and New Jersey state court in connection with its $11 billion acquisition of Pharmasset, Inc. Plaintiffs alleged that the Pharmasset board of directors, aided and abetted by Gilead, breached its fiduciary duties by approving the merger and failed to disclose material information. Counsel for the parties reached an agreement in principle to settle the actions and, after confirmatory discovery, the court approved the settlement and dismissed the actions with prejudice.
• Merck KGaA in litigation brought by a shareholder of Millipore Corporation alleging that Millipore’s board of directors breached their fiduciary duties to shareholders by approving Merck’s acquisition of Millipore. The Massachusetts Superior Court denied a preliminary injunction motion seeking to enjoin a shareholder vote.
• Pharmaceutical Product Development, Inc. (PPD) and its board of directors in consolidated class actions in North Carolina state and federal court in connection with PPD’s $3.9 billion acquisition by affiliates of The Carlyle Group and Hellman & Friedman LLC. Plaintiffs alleged that the PPD board of directors breached its fiduciary duties by entering into the merger and by favoring certain bidders, as well as failing to disclose material information. Defendants and plaintiffs in the federal action and lead plaintiffs in the state action reached an agreement in principle to settle the actions and, after extensive confirmatory discovery, submitted it to the North Carolina state court for approval. The North Carolina state court judge approved the settlement over the objection of a plaintiff who had refused to participate in the settlement, and dismissed the action with prejudice.
• Stryker Corporation in putative class actions in the U.S. District Court for the Eastern District of Pennsylvania and Pennsylvania Court of Common Pleas in connection with Stryker’s tender offer to acquire all of the outstanding shares of Orthovita, Inc. Plaintiffs alleged that Orthovita’s directors breached their fiduciary duties in connection with the decision to enter into the merger agreement and that Stryker aided and abetted those breaches of fiduciary duties. Plaintiffs also alleged that Orthovita’s SEC filings in connection with the transaction contained material omissions and misstatements. The parties in the actions reached agreements to settle and the matters were voluntarily dismissed.

Retail

• American Apparel Inc. in derivative and class actions filed in California federal and state court alleging violations of the Securities Exchange Act related to misstatements in American Apparel’s press releases and a failure to maintain internal controls. The federal derivative action was dismissed, and the plaintiffs have appealed to the Court of Appeals for the Ninth Circuit. The state court has twice granted motions to dismiss in part, with a third motion pending. Skadden also represented American Apparel in connection with investigations by the SEC and the Department of Justice. The SEC ended its investigation without intention to take enforcement action.
• the special committee of the board of directors of The Gymboree Corporation in the settlement of shareholder litigation in connection with Bain Capital LLC’s acquisition of Gymboree.
• Oakley, Inc. in obtaining an appellate victory limiting the awards of attorneys’ fees for shareholder class actions alleging breaches of fiduciary duty in connection with mergers. Following the announcement of the sale of Oakley, Inc. to Luxottica S.p.A., a shareholder filed a complaint challenging the merger and claiming certain omissions from Oakley’s proxy statement. The plaintiff did not oppose Oakley’s demurrer, but instead filed a motion for attorneys’ fees. The trial court denied the plaintiff’s fee motion entirely, and the ruling was upheld on appeal by the California Court of Appeals.
• Retail Ventures Inc. and certain of its directors in a consolidated class action in Ohio state court against RVI and its directors, and DSW Inc., in connection with a February 2011 merger agreement between RVI and DSW. Plaintiffs alleged that RVI and its directors breached their fiduciary duties by approving the agreement and failed to disclose certain alleged material information, and that DSW aided and abetted these alleged breaches of fiduciary duty. Counsel for the parties reached an agreement in principle to settle the actions and, after confirmatory discovery, the court approved the settlement and dismissed the action with prejudice in December 2011.

Technology

• Current and former directors of Cadence Design Systems, Inc. in two shareholder derivative actions alleging breach of fiduciary duty in connection with an earnings misstatement and a stock value drop in the Superior Court of the State of California and the U.S. District Court for the Northern District of California. The U.S. District Court approved a favorable settlement in April 2012.
• Qwest Communications International, Inc. and its board of directors in the successful settlement of a class action in the U.S. District Court for the District of Colorado brought by plaintiffs seeking to enjoin Qwest’s $22.4 billion merger with CenturyLink, Inc. and alleging breach of fiduciary duties by Qwest board members and aiding and abetting by CenturyLink.
• Research in Motion Limited (RIM) and certain of its officers in several purported class action lawsuits in the U.S. District Court for the Southern District of New York, two of which have been voluntarily dismissed. Shareholders alleged that, from December 2010 through June 2011, RIM made materially false and misleading statements regarding RIM’s financial condition and business prospects and sought unspecified damages. In March 2013, the court granted Skadden’s motion to dismiss the claims, agreeing that the plaintiff failed to plead scienter and materiality as to the alleged misstatements and omissions.
• William Ruehle, former chief financial officer of Broadcom, Inc., in the successful defense of criminal and civil securities fraud charges brought by the DOJ and the SEC. After an eight-week trial, the U.S. District Court for the Central District of California dismissed all charges, including the entire SEC complaint against all the defendants, including Ruehle. Skadden also obtained a favorable settlement for Ruehle in which he agreed to dismiss an action he had brought against Broadcom.
• Travelzoo Inc. and certain of its officers in securing the dismissal of a securities class action lawsuit brought in the U.S. District Court for the Southern District of New York challenging certain statements related to the company’s growth and its Getaways business and alleging that the officers and directors sold stock while in possession of materially adverse nonpublic information. In March 2013, the court dismissed the claims, ruling that the plaintiffs failed to allege any underlying securities violation by Travelzoo and the individual defendants.
• Yahoo! Inc. in the settlement of a consolidated shareholder and derivative class action in the Delaware Court of Chancery in connection with a 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.

Accolades

Our Securities Litigation Group, which has received many top rankings and recognitions, was:

• for the second consecutive time named a member of the “Fearsome Foursome” — the four elite law firm litigation practices — and named as one of only two “powerhouses” for Securities Litigation in a survey of corporate counsel conducted by BTI Consulting and published by Law360 in 2012. We also were named as one of Law360’s Securities Groups of 2012.
• ranked in the top tier for securities litigation by U.S. News — Best Lawyers “Best Law Firms” 2013.
• ranked in the top tier in securities litigation in Chambers USA 2013 and the U.S. Legal 500 2012. According to Chambers, “The team … has played a prominent role in the defense of securities claims for some of the most significant corporations and financial institutions.” while Legal 500 said Skadden is “the top choice for ‘make or break’ litigation.”
• selected by The American Lawyer as a top firm in its 2010 Litigation Department of the Year issue.