ATTORNEYS AT LAW FREQUENTLY ASKED QUESTIONS

Transcription

1 ATTORNEYS AT LAW FREQUENTLY ASKED QUESTIONS

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3 [FREQUENTLY ASKED QUESTIONS]

4 The fo llo w ing q ue stio ns and answ e rs p ro v id e ge ne ral info rmatio n ab o ut se c uritie s c lass ac tio ns, share ho ld e r d e riv ativ e litigatio n, ER ISA c lass ac tio ns and antitrust litigatio n. The y are no t le gal ad v ic e. SECURITIES CLASS ACTIONS What is a class action? A class action is a representative lawsuit that allows representatives or named plaintiffs to sue one or more defendants on behalf of others who have suffered the same type of harm. Class actions are typically filed when the issues in a case apply to so many people that it is not practical for them all to litigate their own separate individual lawsuits. What is a securities class action? A securities class action is filed by investors who purchased a company's debt or equity within a specific period of time known as a "class period" and suffered economic injury, typically as a result 1

5 of alleged fraudulent price manipulation. Securities class actions generally arise from a company or insiders making false or misleading statements to the market or failing to disclose material adverse facts about their company's business or prospects and are brought under the anti-fraud provisions of the federal securities laws including the Securities and Exchange Act of 1934 and the Securities Act of Of what benefit is a securities class action? Securities class actions provide investors with the ability to be represented in lawsuits against large, well-funded corporations who are alleged to have violated the securities laws and have a lot of money to spend on defending lawsuits directed at those violations. Class actions allow investors who would never have brought an individual action against a company to seek recovery from the company without having to individually retain lawyers and incur legal fees. Why are securities class actions filed? Securities class actions are typically brought when: (a) a publicly held company and its officers, directors, other employees, accountants or underwriters publicly make any untrue or misleading statement of or fail to disclose material facts; and (b) as a result of the ultimate disclosure of the untrue statement or omission, the company's stock price drops, injuring investors who purchased the stock at artificially high prices during the class period. What is a class period? A class period is a specific time period that starts when a company makes an untrue statement of a material fact about the company or the company has a duty to disclose such material fact and fails to do so. A class period generally ends when accurate information about the company is publicly disclosed. 2

6 How do I know if I have a securities-fraud claim? If you purchased publicly traded securities that declined in value following a significant negative disclosure about the company, you may have a claim. Scott+Scott will quickly investigate the matter and advise as to whether any securities fraud may have occurred. If you wish to discuss your claim or have any questions concerning your rights in a securities-fraud action, please contact the Firm. Do I have a claim if I sold my stock before the filing of a securities class action? A valid claim in a securities class action depends on when the stock was purchased. If you purchased your stock during the class period and suffered losses as a result of the alleged fraud, you may have a claim even if you sold your stock before the filing of a securities class action. Do I have to hold my stock once a securities class action is filed? You do not need to hold the stock in order to participate in a securities class action or securities class action recovery. If I continue to hold stock in a company after a significant negative disclosure, will I be precluded from participating in a settlement? No. You can still participate in a settlement.

7 Should I file a securities class action if a similar action has already been filed? Having suffered meaningful losses, you are entitled to be represented by the best available lawyers of your choosing to pursue your claims. Experienced counsel will pursue your claims diligently. Scott+Scott is a national law firm with extensive experience in securities class actions and a record of obtaining exceptional results for class members. What is a lead plaintiff in a securities class action? A lead plaintiff is a class member, or class members, appointed by the court to represent the interests of the class. The lead plaintiff must seek appointment as such and, of those seeking lead plaintiff appointment, usually has the largest financial interest in the relief sought by the class. Lead plaintiff designation can be granted to individuals, groups of individuals, institutional investors, or combinations thereof. How do I become a lead plaintiff? Courts appoint a lead plaintiff or lead plaintiffs to represent a class from the member or members of that class who: (i) request to be a lead plaintiff within 60 days of the publication of a notice of the pendency of a class action; and (ii) are most capable of adequately representing the interests of the class. What are the lead plaintiff responsibilities in a securities class action? Lead plaintiffs select and retain counsel to represent the class. Lead plaintiffs thereafter represent all class member interests in the litigation. How are damages calculated in a securities class action? Damage experts estimate the price that the subject stock would have been during the class period had all material facts been known 4

8 during the class period. This figure may or may not equal the total amount that investors feel they lost on their investment. This is because stock prices reflect many factors in any given case and not always solely the allegedly undisclosed or misrepresented truth. How long before securities class actions are resolved? Some actions settle quickly. Some eventually go to trial. Because of the complexity of securities class actions, many take years to litigate. Scott+Scott aggressively prosecutes all its cases. Does it cost me anything to file or participate in a securities class action? Scott+Scott represents investors in securities class actions on a contingent fee basis. We seek fees from the court if, and only if, we are successful in obtaining a recovery for the class and then, any fees awarded are paid out of the class wide funds recovered, not by a single plaintiff or class member directly. All costs and expenses of the litigation are advanced by Scott + Scott. How are attorney fees paid? Attorney's fees are generally awarded as a percentage of the benefit achieved by the attorneys for the class or by order of a court. These percentages vary depending upon, among other factors, the size of the recovery for the class and the length and complexity of the litigation. It is the court, after full notice to all class members, that ultimately determines what is a fair and reasonable fee. SECURITIES CLASS ACTIONS AND THE NON-U.S. INVESTOR [THE SUPREME COURTS MORRISION DISCUSSION] In Morriso n v. Natio nal Australia Bank, 130 S. Ct (2010), the U.S. Supreme Court dramatically altered the landscape for foreign investments and changed nearly a half century of precedent by 5

9 precluding certain purchasers of foreign securities from seeking relief under the federal securities fraud laws in U.S. courts. Specifically, the Court held that U.S. courts do not have jurisdiction to hear cases involving a foreign plaintiff suing a foreign corporation for violations of U.S. securities laws based on purchases that occurred on a foreign exchange. The fact that a foreign corporation s American Depository Receipts (ADRs) are listed on the New York Stock Exchange (NYSE) and the alleged conduct contributing to the fraud occurred in the United States are deemed irrelevant. M o rriso n set forth a new bright-line transactional test to determine whether the U.S. courts may exercise jurisdiction over transnational securities fraud. Instead of looking at whether the wrongful conduct had a sub stantial e ffe c t on U.S. citizens or whether the wrongful cond uct o ccurred in the United States to determine jurisdiction, as it did since the 1960 s, courts now look to where the transaction took place, i.e., the purchase of the securities. Id. at The Court held that the reach of 10(b) of the 1934 Act is limited to securities listed on American stock exchanges and the purchase or sale of any other security in the United States (i.e. a domestic security ). Id. at In the wake of the Morriso n decision and the sometimes confusing interpretations of this decision, it is more important than ever for institutional investors, including public pension as well as Taft- Hartley funds, to be aware of these new risks when investing abroad and to review their legal options with qualified counsel, such as Scott+Scott, when fraud does occur. 6

10 May non-u.s. investors participate in U.S. securities fraud litigation? With few exceptions, if a non-u.s. investor acquires the publicly traded securities of a U.S.-based corporation, or any securities on a U.S. exchange, they may participate in U.S. securities-fraud litigation concerning those securities, whether that is in the form of an individual action, as an active participant in a class action or as an absent class member. May a non-u.s. investor serve as a lead plaintiff in U.S. securities fraud class actions? Yes. If a securities-fraud class action is pending or settled, must non-u.s. investors initiate litigation in order to share in settlement or recovery proceeds? No. All class members, regardless of citizenship, may submit claim forms in the same fashion as all other class members. Are non-u.s. investors limited solely to participation as class members in securities-fraud class actions? No. Just like all injured investors in any given case, non-u.s. investors may choose to seek active participation in a class action as a lead or representative plaintiff, choose to remain an absent class member or pursue individual litigation on their own behalf. SHAREHOLDER DERIVATIVE ACTIONS What is a derivative action? Derivative actions are lawsuits filed by shareholders on behalf of the corporation to enforce a cause of action against a third party, such as an officer or director of that corporation or any other person or entity against whom that corporation had a claim. 7

11 Derivative actions are brought when a corporation possesses, but does not enforce, its rights against third parties, which may include insiders. It is often necessary for shareholders to institute a derivative action because the corporation, which is run by officers and directors, will not bring a lawsuit against one of its own, even where there is serious wrongdoing. What types of claims are filed in a derivative lawsuit? Derivative actions most often involve claims that officers and directors are wasting corporate assets or that a corporation's management or board of directors breached fiduciary duties owed to shareholders by negligence, mismanagement or self-dealing. How do shareholders benefit from derivative actions? Any relief granted pursuant to a derivative action is a judgment against a third person requiring them to pay money to or make changes for the benefit of the corporation. If money is recovered as a result of a derivative action, it is paid back to the corporation. May non-u.s. investors participate in U.S. shareholder derivative litigation? Yes. With very limited exception, all shareholders of every U.S. corporation have standing to pursue derivative litigation on that corporation's behalf. Will I have to pay anything if I bring a derivative action? No. All expenses are advanced by Scott+Scott. Attorney's fees are paid only if a benefit is obtained for the corporation and the court approves a fee and then, any fee is paid either by the defendants or out of any funds recovered, as ordered by the Court. 8

12 ERISA 401(k)/PENSION RETIREMENT BENEFIT class actions What is an ERISA 401(k)/pension retirement benefit class action? An ERISA 401(k)/pension retirement benefit class action is a class action filed by participants or beneficiaries of a company's 401(k) or other retirement plan who acquired company stock in the plan within a specific period of time known as a "class period" and suffered economic injury as a result of the company's stock being artificially inflated when it was acquired. ERISA 401(k)/pension retirement benefit class actions generally are brought under ERISA and allege that the plan's trustees, including the company itself, breached fiduciary duties to plan participants and beneficiaries during the class period surrounding such stock acquisition. Of what benefit is an ERISA 401(k)/pension retirement benefit class action? ERISA 401(k)/pension retirement benefit class actions provide retirement plan participants and beneficiaries with the ability to be represented in lawsuits against large, well-funded corporations and other persons who are alleged to have violated fiduciary duties owed to retirement plans and their participants under ERISA and have a lot of money to spend defending lawsuits directed at those violations. Class actions allow injured persons who would never have brought an individual action to seek recovery without having to individually retain lawyers and incur legal fees. What is a class period? In ERISA 401(k)/pension retirement benefit class actions, a class period is the specific timeframe in which the alleged breaches of fiduciary duty caused injury to retirement plan participants and beneficiaries. How do I know if I have an ERISA 401(k)/pension retirement benefit claim? If you acquired your employer's stock or other securities in your 9

13 401(k) or other retirement plan account and the value of that stock or other security subsequently declined in value following a significant negative disclosure about the company, you may have a claim. Scott+Scott will quickly investigate the matter and advise as to whether the Firm believes there may have been fiduciary duty breaches by your retirement plan trustees. If you wish to discuss your claim or have any questions concerning your rights in an ERISA 401(k)/pension retirement benefit class action, please contact us. Should I file an ERISA 401(k)/pension retirement benefit class action if a similar action has already been filed? Having suffered meaningful losses, you are entitled to be represented by the best available lawyers of your choosing to pursue your claims. Experienced counsel will pursue your claims diligently. Scott+Scott is a national law firm with extensive experience in ERISA 401(k)/pension retirement benefit class actions and a record of obtaining exceptional results for class members. How long before ERISA 401(k)/pension retirement benefit class actions are resolved? Some actions settle quickly. Some eventually go to trial. Because of the complexity of ERISA 401(k)/pension retirement benefit class actions, many take years to litigate. Scott+Scott aggressively prosecutes all its cases. Does it cost me anything to file or participate in an ERISA 401(k)/pension retirement benefit class action? Scott+Scott represents 401(k) and other retirement plan participants and beneficiaries in ERISA 401(k)/pension retirement benefit class actions on a contingent-fee basis. We seek fees from the court if, and only if, we are successful in obtaining a recovery for the class and then, any fees awarded are paid out of the class wide funds recovered, not by a single plaintiff or class member directly. All costs and expenses of the litigation are advanced by Scott + Scott. 10

14 How are attorney fees paid? Attorney's fees are generally awarded as a percentage of the benefit achieved by the attorneys for the class or by order of a court. These percentages vary depending upon, among other factors, the size of the recovery for the class and the length and complexity of the litigation. It is the court, after full notice to all class members, that ultimately determines what is a fair and reasonable fee. ANTITRUST ACTIONS What are the antitrust laws? The goal of the antitrust laws is to protect and promote competition for goods and services of all kinds. There are two main federal antitrust statutes. First, the Clayton Act prohibits mergers that are likely to substantially lessen competition. Second, the Sherman Act prohibits contracts, combinations and conspiracies that unreasonably restrain trade and also forbids monopolization by a dominant firm in a market. There are also laws in many states that are directed at promoting fair competition. What conduct is illegal under the antitrust laws? Some examples of conduct forbidden by the antitrust laws include price-fixing, market allocation, boycotts, tying arrangements, price discrimination, monopolization and attempted monopolization. Who enforces the antitrust laws? Private citizens and businesses, the U.S. Department of Justice and the Federal Trade Commission enforce the federal antitrust laws. Violations of the Sherman Act give rise to both civil damages and criminal punishment of up to 10 years imprisonment and $100 million in fines. Criminal penalties for violations of the Sherman Act, though, may only be sought by the U.S. Department of Justice. In states that have enacted antitrust laws, the executive 11

15 branches of those states enforce them. In general, however, private citizens and businesses may also enforce state antitrust laws. Of what benefit are antitrust lawsuits? The antitrust laws benefit consumers through lower prices, better quality and greater choice. The U.S. Supreme Court called the antitrust laws the "Magna Carta of free enterprise." Verizo n Co mmu'ns Inc. v. Law O ffices o f Curtis V. Trinko, LLP, 540 U.S. 398, 415 (2004). When the antitrust laws are effectively enforced, they not only can save consumers billions of dollars a year in illegal overcharges and other anticompetitive injuries, but also serve to remedy losses suffered by businesses that are the victims of unfair competition and protect them from such abuses in the future. Are antitrust lawsuits the same as class actions? Antitrust actions may be brought as individual or class actions, depending on the facts of any given case and the desires of the injured plaintiffs. The decision to proceed on a class or individual basis, or to "opt out" of an existing action is one that involves balancing a number of factors, including economics, the probabilities of success, damages and relative bargaining power, among other factors. Scott+Scott works closely with its clients to ensure such decisions are made prudently, on an informed basis and in the client's best interests. 12

16 This publication describes many successful client representations, strategies or outcomes in matters including class action and other adversarial proceedings. The results portrayed were dependent on the facts of the particular matters described, among many other variables. Results differ based on different facts and circumstances. Scott+Scott LLP intends no assurance, guarantee or prediction as to results in other matters, even if they involve similar facts and circumstances. Except where otherwise indicated, the depiction of newsworthy items in this publication does not represent and is not intended to suggest any actual article, newspaper or other publication. Similarly, the photos and artwork used in this publication are not intended to represent actual companies, places or specific events. Generally speaking, the attorneys mentioned are not certified as specialists or experts by any professional or governmental agency or authority. References to practice areas, expertise, concentrations or specializations of Scott+Scott LLP attorneys are not intended to suggest anything to the contrary or to suggest any professional or governmental standard by which such experience is measured. Although Scott+Scott LLP has offices in several jurisdictions, our attorneys are licensed to practice only in those of such jurisdictions designated in their respective biographies. This publication is not intended as advertising or solicitation in any jurisdiction where, if so characterized, it would fail to comply with applicable laws and rules. Scott+Scott LLP is organized and registered under the laws of the State of Connecticut. To the extent that any jurisdiction requires such a designation, Scott+Scott LLP designates its Connecticut office as its principal office and the following persons responsible attorney contacts with respect to our operations in and from the jurisdictions noted opposite their names: David R. Scott Connecticut; Christopher Burke California; Beth Kaswan New York. Each office s respective address is included on the back cover of this publication. Scott+Scott LLP, Scott+Scott and the Scott+Scott LLP logo are service marks of Scott+Scott LLP. Copyright 2012 Scott+Scott Attorneys at Law LLP

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