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© Milberg 2010 1 USING THE LAW TO PROTECT YOUR FUNDS ASSETS: The Role of Institutional Investors in U.S. Shareholder Litigation Prepared for: The Tel Aviv Institutional Investor Conference May 24, 2010 Todd Kammerman, Esq. Associate Benjamin Kaufman, Esq. Partner
© Milberg 2010 2 Protection of Future Income Litigation to Prevent or Recover Institutional Investor Losses through: Securities Litigation; Derivative Litigation; and Transactional Litigation
© Milberg 2010 3 Securities Fraud Class Action Cases in the United States
© Milberg 2010 4 This Court has long recognized that meritorious private actions to enforce federal antifraud securities laws are an essential supplement to criminal prosecutions and civil enforcement actions brought, respectively, by the Department of Justice and the Securities and Exchange Commission (SEC). -- Justice Ruth Bader Ginsburg in the opinion of the Supreme Court in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007), which was litigated by Milberg LLP
© Milberg 2010 5 Traditional Securities Class Action Litigation Historically, as fiduciaries, institutional investors have actively sought to recover fund losses due to fraud
© Milberg 2010 6 Institutional Investors Role Private and public funds dominate the market and have vested interest in: Maintaining integrity of financial markets Assuring corporate accountability Maximizing returns Increasingly stepping forward to seek recoveries for losses due to securities fraud Fulfill fiduciary duties to take action when necessary Serve as Lead Plaintiff and/or Class Representative
© Milberg 2010 7 U.S. Securities Class Actions with Union/Public Pension Fund As Lead Plaintiff Sources: PricewaterhouseCoopers 2008 Securities Litigation Study (April 2009) and PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010) Final 2009 data was not available; the full-year projections were based upon filings through June 30, 2009.
© Milberg 2010 8 U.S. Securities Class Actions with Any Institutional Investor As Lead Plaintiff Sources: PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010) Final 2009 data was not available; the full-year projections were based upon filings through June 30, 2009.
© Milberg 2010 9 Institutional Investors Account for Vast Majority of Settlements 91 total settlements valued at $3.1 billion in 2009 57% of cases settled in 2009 had an institutional investor as lead plaintiff However, the value of the cases led by an institutional investor that settled in 2009 accounted for 85% of the value of total 2009 settlements Nine of the top ten settlements in 2009 had institutional investors as the lead plaintiff Sources: PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010)
© Milberg 2010 10 Recent Jury Verdict: In re Vivendi Universal, S.A. Recent trial ended with a jury verdict finding Vivendi liable on all counts Retirement System for the General Employees of the City of Miami was a lead plaintiff Class includes foreign institutional and individual investors Investors estimated to recover up to $9.3 billion
© Milberg 2010 11 Transactional and Derivative Litigation – Protecting Assets From Future Losses Comverse Derivative Litigation $62 million in cash + significant corporate governance reforms (subject to court approval at June 21, 2010 hearing) Southwest Airlines Improved reporting procedures Anheuser Busch Litigation Settled for additional disclosures in proxy statement concerning merger with InBev, protections for certain AB employees and an increase in the merger consideration Madoff Litigation Brought on behalf of feeder funds that invested with Madoff Alleges that the funds managers failed to conduct adequate due diligence Alleges that the funds auditors failed to conduct proper audits
© Milberg 2010 12 Foreign Fund Trends and Statistics
© Milberg 2010 13 A Foothold in 2000-2010 Two of Top 10 securities class action settlements of all time have been against foreign corporations Nortel (two cases brought in 2001 and 2004): $2.2 billion Royal Ahold N.V. (2003): $1.1 billion Cross-border transactions Globalization of the securities marketplace Outreach by U.S.-based securities class action firms Education and marketing efforts of U.S.-based securities litigators Growing relationships between U.S. class actions firms and international institutional investors
© Milberg 2010 14 Non-U.S. Institutional Investor Lead- Plaintiff Applicants Trend Source: ISS Research (Dec 2008)
© Milberg 2010 15 Growing Geographic Distribution 234 instances of international institutional investors moving for lead plaintiff status (1996 through 2007) 134 different cases 25 different countries 31 different law firms represented the international institutional investors Top 5 Countries: Germany, Canada, Israel, Italy and United Kingdom Included public pension funds, asset managers, mutual funds, union pension plans, and hedge funds
© Milberg 2010 16 Non-U.S. Institutional Investor Lead Plaintiff Applicants by Country: 1996 - 2007 Source: ISS Research (Dec 2008)
© Milberg 2010 17 Foreign Participation Contributions in U.S. Securities Class Actions Maximize shareholders returns Nortel Networks cases Help achieve important corporate governance changes Increase credibility of cases Steer class definition to include Eurobond purchasers and/or shares purchased on foreign exchanges Increased participation by non-U.S. investors in U.S.- based securities class actions may drive legal reforms in their own countries Structure settlements to include international institutional investors
© Milberg 2010 18 Attractiveness of U.S. Lawsuits Ability to sue on behalf of other similarly situated persons is largely unique to the United States Availability of contingency fee arrangements Absence of loser pays fee-shifting rules Confidentiality Order Scheduling Orders, which move the litigation Right to expansive discovery after Motion to Dismiss phase Well-developed system for certifying class actions Potential for a large jury verdict
© Milberg 2010 19 Lead Plaintiff Incentives Submit claim forms in a timely fashion 30-70% of institutional investors fail to file claim forms in cases where they have losses Extraordinary percentage in light of $6.9 billion in securities class action settlements finalized in 2007 Unaware of lawsuits until after the LP deadline Increased attention to the filing process may lead to more active involvement by international institutional investors
© Milberg 2010 20 Opting-Out of Class Actions Depends on the particulars of a plaintiffs claims and the strengths of those claims connected to the plaintiffs purchases Typically reserved for plaintiffs with substantial losses and financial and structural wherewithal to pursue its own claims The ability of defendants to pay damages Advantages of opting-out The ability to select the venue in which to file The power to select counsel The ability to direct settlement unimpeded by the court or class issues Possibility of obtaining a recovery many times larger than what would have been obtained in a class recovery No need to seek class certification Risks Opt-out plaintiff runs the risk of non-recovery- opting out forever bars that plaintiff in participating in the class settlement or judgment
© Milberg 2010 21 The Milberg Difference
© Milberg 2010 22 Milberg LLP: Setting the Standard Expertise Lead Counsel in 29 of the Top 100 Settlements Co-lead counsel in more of the 100 largest settlements than any other plaintiff law firm Top 10 plaintiffs law firm based on total settlements in 2008 Leadership in landmark cases (e.g., Tellabs, Inc. v. Makor) Resources Financial and human resources to oppose defense firms Top-tier attorneys supported by in-house experts Forensic accountants and investigators Litigation technical support Results 40 years of unparalleled recoveries on behalf of investors Sources: RiskMetrics SCAS 100 for 2009 and SCAS 50 for 2008
© Milberg 2010 23 Recent and Notable Milberg LLP Securities Class Action Results DateCaseRecovery ($) January 29, 2010In re Vivendi Universal, S.A. Securities Litig., No. 1:02-cv-05571-RJH-HBP $9,300,000,000 (est) August 9, 2009In re Initial Public Offerings Sec. Litig., No. 21 MC 92 (SAS) (S.D.N.Y.)$586,000,000 January 14, 2009Carlson v. Xerox Corp. et. al., No. 3:00-CV-1621 (D. Conn.)$750,000,000 January 6, 2009In re Chiron Corp. Sec. Litig., No. C 04-4293 (N.D. Cal.)$30,000,000 August 8, 2008In re Biovail Sec. Litig., No. 03-CV-8917 (S.D.N.Y.)$138,000,000 December 19, 2007 In re Tyco Intl, Ltd. Multidistrict Litigation, No. 02-1335 (D.N.H.)$3,200,000,000 September 6, 2007 In re CMS Energy Sec. Litig., No. 02-72004 (E.D. Mich.)$200,000,000 July 18, 2007In re American Express Fin. Advisors Sec. Litig., No. 04-1773 (D.N.J.)$100,000,000 June 8, 2007In re Martha Stewart Living Omnimedia, Inc., Sec. Litig., No. 02-6273 (S.D.N.Y.)$30,000,000 January 29, 2007In re Nortel Networks Corp. Sec. Litig. (Nortel I), No. 01-CV-1855 (S.D.N.Y.)$1,142,000,000 January 8, 2007In re Sears, Roebuck & Co. Sec. Litig., No. 02-7527 (N.D. Ill.)$215,000,000 September 7, 2005 In re CVS Corp. Securities Litigation, No. 01-11464 (D. Mass.)$110,000,000 June 14, 2005In re Deutsche Telekom AG Securities Litigation, No. 00-9475 (S.D.N.Y.)$120,000,000
© Milberg 2010 24 Milberg LLP Practice Areas Institutional Investor Services Portfolio Monitoring Quarterly Reporting Case Evaluation Corporate Governance and Shareholder Rights Advice Litigation Bankruptcy Pro Bono Litigation False Claims – Qui Tam Mass Torts Class Action Litigation Securities Fraud Consumer Fraud ERISA Insurance Antitrust Human Rights and Labor Practices Derivative Madoff Transactional Governance and Fees
© Milberg 2010 25 Thank You
© Milberg 2010 26 Benjamin Y. Kaufman, Esq. E email@example.comAdmitted: States of New York and New Jersey T 212.631.8641Education: B.A., Yeshiva University, 1985 F 212.273.4378J.D., Benjamin N. Cardozo School of Law of Yeshiva University, 1988 Beklin Fellow, Belkin Scholar M.B.A., Stern School of Business of New York University, 1999 Mr. Kaufman focuses on class actions on behalf of defrauded investors and consumers. Mr. Kaufmans successful securities litigations include In re Deutsche Telekom AG Securities Litig., No. 00-9475 (S.D.N.Y.), a complex international securities litigation requiring evidentiary discovery in both the United States and Europe, which settled for $120 million. Mr. Kaufman was also part of the team that recovered $46 million for investors in In re Asia Pulp & Paper Securities Litigation, No. 01- CV-7351 (S.D.N.Y.) and $43.1 million, with contributions of $20 million, $14.85 million and $8.25 million from Motorola, the individual defendants, and defendant underwriters respectively, in Freeland v. Iridium World Commcns, Ltd. Mr. Kaufmans outstanding representative results in derivative and transactional litigations include: In re Trump Hotels Shareholder Derivative Litigation (Trump personally contributed some of his holdings; the company increased the number of directors on its board, and certain future transactions had to be reviewed by a special committee.) He recently argued the appeal in In re Comverse Technology, Inc. Derivative Litig., 56 AD3d 49 (2008) which led to the seminal New York Appellate Division opinion which clarified the standards of demand futility, and held that a board of directors loses the protection of the business judgment rule where there is evidence of self-dealing and poor judgment by the directors; and In re Topps Company, Inc. Shareholder Litig. which resulted in a 2007 decision which vindicated the rights of shareholders under the rules of comity and doctrine of forum non conveniens and to pursue claims in the most relevant forum notwithstanding the fact that jurisdiction might exist as well in the state of incorporation. Mr. Kaufman is also at the forefront of consumer litigations with a recently-filed litigation brought on behalf of paid e-mail subscribers against web hosting and e-mail service providers in Golf Clubs Away LLC v. Hostway Corporation, et al., Case No. 09-29596 (Fl. Cir. Ct., Broward County). In addition, Mr. Kaufman represents many of the firm's corporate clients in complex commercial litigation matters and arbitrations, including Puckett v. Sony Music Entertainment, No. 108802/98 (New York Cty. 2002) (a complex copyright royalty class action) and in arbitrations on behalf of oppressed minority shareholders in both public and privately held corporations. Prior to joining Milberg in August of 1998, Mr. Kaufman was a Court Attorney for the New York State Supreme Court, New York County (1988-1990) and Principal Law Clerk to Justice Herman Cahn of the Commercial Division of the New York State Supreme Court, New York County (1990-1998).
© Milberg 2010 27 Todd Kammerman, Esq. E firstname.lastname@example.orgAdmitted: States of New York and New Jersey T 646.733.5692Education: B.A., Brandeis University, 1999 cum laude with honors F 212.273.4339J.D., Benjamin N. Cardozo School of Law of Yeshiva University, 2002 Alexander Fellow Mr. Kammerman focuses his practice on litigation involving defrauded investors and consumers. Mr. Kammermans successful litigations include In re CMS Energy Securities Litigation, No. 02-72004 (E.D. Mich.) ($200 million recovery); In re Royal Dutch/Shell Transport ERISA Litigation, No. 04-1398 (D.N.J.) ($90 million recovery); Scheiner v. i2 Technologies, et al., No. 01-418 (N.D. Tex.) ($87.8 million recovery); and In re Collins & Aikman Corporation Securities Litigation, No. 03-71173 (E.D. Mich.) ($10.8 million recovery). Mr. Kammerman played a pivotal role in the In re Comverse Technology, Inc. Derivative Litigation ($62 million recovery), particularly in drafting the appellate briefs which led to the seminal New York Appellate Division opinion, reported at 56 A.D.3d 49 (2008), clarifying the standards of demand futility, and holding that a board of directors loses the protection of the business judgment rule where there is evidence of self-dealing and poor judgment by the directors. He was also a member of the team that litigated the appeal in Tellabs, Inc. v. Makor Issues & Rights, Ltd. before the United States Supreme Court, in which the Supreme Court issued an opinion defining the pleading standard for scienter in all federal securities fraud cases, and is reported at 551 U.S. 308 (2007). While at Cardozo, he was named an Alexander Fellow, through which he worked as a judicial intern in the chambers of the Honorable Joseph A. Greenaway, Jr., U.S.D.J. in Newark, New Jersey. Mr. Kammerman is a member of the bars of the States of New York and New Jersey and is admitted to practice before the United States District Courts for the District of New Jersey, Southern District of New York, Eastern District of Michigan and the Eastern District of New York and the United States Courts of Appeals for the Third and Eleventh Circuits.
© Milberg 2010 28 Milberg LLP www.milberg.com New York One Pennsylvania Plaza 49 th Floor New York, New York 10119 T 212.594.5300 or 800.320.5081 F 212.868.1229 Los Angeles One California Plaza 300 South Grand Avenue Suite 3900 Los Angeles, California 90071 T213.617.1200 F213.617.1975 Tampa Corporate Center One 2202 N. Westshore Blvd. Suite 200 Tampa, Florida 33607 T813.639.4248 F813.639.7501 Detroit One Kennedy Square 777 Woodward Avenue Suite 890 Detroit, MI 48226 T313.309.1760 F313.447.2080
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