Berman Tabacco’s Michael Stocker Dark Part of Panel Discussion at NCPERS’ Annual Conference

Please join Berman Tabacco at the National Conference on Public Employee Retirement Systems’ Annual Conference & Exhibition from May 19-22 in Seattle, Washington.  Berman Tabacco attorney Michael Stocker Dark will participate in a panel discussion entitled The Secret Language of Share Price Movements on Tuesday, May 21st, starting at 10:25 a.m.

The discussion will focus on identifying the fingerprints of securities fraud in unusual share price movements, the role that confidential-witness investigations can play in understanding sudden stock downturns, and the role that public pension funds can play in policing the informational integrity of the markets.

For more information click here.

Berman Tabacco Appointed Lead Counsel in Veradigm Inc. Securities Class Action

On March 1, 2024, the Honorable Lindsay C. Jenkins of the U.S. District Court for the Northern District of Illinois appointed Berman Tabacco as sole Lead Counsel in the securities class action lawsuit against Veradigm Inc. (the “Company”) and certain of its executive officers.  Judge Jenkins appointed the firm’s client, Alameda County Employees’ Retirement Association (“ACERA”), as sole Lead Plaintiff.  The initial complaint alleges causes of action on behalf of all persons who acquired the common stock of Veradigm during the period from February 26, 2021 through December 7, 2023 (the “Class Period”).

Veradigm is a healthcare technology company that offers electronic health records, financial management, population health management, and consumer solutions to hundreds of thousands of healthcare providers.

The current operative complaint alleges materially false and misleading statements during the Class Period regarding Veradigm’s financial results and internal controls, which were claimed to have been prepared in compliance with Generally Accepted Accounting Principles (“GAAP”).  Specifically, that complaint alleges:

  • On February 28, 2023, Veradigm announced that, in conjunction with its year-end audit procedures, the Company had “detected certain internal control failures related to revenue recognition that had occurred over the prior six quarters, resulting in a misstatement of reported revenues during those periods.” As a result, the Company estimated that its revenue had been overstated by approximately $20 million from the third quarter of 2021 until the fourth quarter of 2022.
  • In a March 22, 2023 press release, Veradigm announced that it had determined that the size and scope of the revenue misstatements were significantly greater than initially estimated and that each of its quarterly filings from fiscal 2021 and fiscal 2022 could no longer be relied upon and would need to be restated.
  • In the months that followed, Veradigm further announced that it had identified additional misstatements dating back to fiscal year 2020, that it was no longer in compliance with the NASDAQ’s listing requirements, and that it expected to receive a delisting notice from the NASDAQ due to its inability to file its belated periodic SEC filings.
  • On December 8, 2023, the Company announced that its Chief Executive Officer and Chief Financial Officer had been forced to resign as a result of the investigation by the Audit Committee of the Company’s Board of Directors into the accounting proprieties that form the subject of this case.

On February 29, 2024, Veradigm was delisted by NASDAQ after failing to cure identified issues by that NASDAQ-imposed deadline.

The Company has neither restated the identified financial statements nor filed any other financial statements since its initial announcement in early 2023.

The case is Erwin v. Veradigm Inc., Case No. 1:23-cv-16205 (N.D. Ill.).  The litigation team includes Nicole Lavallee, Daniel Barenbaum, and Jeffrey V. Rocha from the firm’s San Francisco office.

Berman Tabacco Defeats Motion To Dismiss in Inotiv, Inc. Securities Litigation

Berman Tabacco successfully defeated Defendants’ motion to dismiss federal securities fraud claims against Inotiv, Inc. (“Inotiv”) and several of its executive officers in a case that alleges Defendants’ concealment of, among other things, pervasive mistreatment of animals that the Court described as “appalling violations of the Animal Welfare Act.”

Berman Tabacco is Lead Counsel representing the Oklahoma Police Pension and Retirement System in this securities class action lawsuit brought on behalf of (1) all persons who acquired Inotiv common stock during the period between September 21, 2021 and May 26, 2022; and/or (2) all persons who held Inotiv common stock as of November 4, 2021 and were entitled to vote at a special meeting of shareholders on matters necessary to approve Inotiv’s acquisition of a leading research animal supply company, Envigo RMS, LLC (“Envigo”).

Inotiv is a contract research organization that provides various drug discovery and development services to customers in the pharmaceutical, chemical, and medical device industries, as well as to academic and governmental research institutions.  The action alleges that Defendants issued materially false and misleading statements and failed to disclose the alleged existence of flagrant violations of federal animal welfare regulations at an Envigo dog breeding facility located in Cumberland, Virginia that led the U.S. Department of Justice, with federal and state law enforcement agents, to conduct a search and seizure, which eventually led to the rescue of more than 4,000 animals and shuttering of the Cumberland Facility in June 2022.  The action also alleges that Defendants made material misrepresentations and omissions in Proxy Materials provided to Inotiv investors in advance of the November 4, 2021 shareholder vote concerning the Cumberland Facility, as well as concerning risks to Envigo’s ability to continue importing research primates from Asia.

On March 29, 2024, the Honorable Philip P. Simon of the U.S. District Court for the Northern District of Indiana issued an Opinion and Order denying Defendants’ Motion to Dismiss.  The Court found that Lead Plaintiff’s First Amended Complaint (“FAC”) sufficiently pled claims under Section 10(b) of the Securities Exchange Act of 1934 in connection with Defendants’ concealment of “what can only be described as appalling violations of the Animal Welfare Act dating back to at least July 2021, when USDA conducted an inspection at [Envigo’s] dog-breeding facility in Cumberland Virginia.”  The Court further found that the FAC sufficiently alleged claims under Section 14(a) of the Exchange Act based on Defendants’ alleged material misrepresentations and omissions concerning the Cumberland Facility and Envigo’s primate importing business.

Boston Partner Steven Buttacavoli stated: “The Court’s ruling is a major step forward for Inotiv investors who were harmed by Defendants’ concealment of material problems with the Envigo businesses acquired in November 2021, including mistreatment of beagles that the court rightly found to be ‘appalling.’  We are looking forward to the discovery stage and litigating this case on behalf of our client and the class.”

The case is In re Inotiv, Inc. Sec. Litig., No. 4:22-cv-045-PPS-JEM (N.D. Ind.).  The litigation team includes Patrick T. Egan, Steven J. Buttacavoli, Justin N. Saif, and Christina L. Gregg of Berman Tabacco’s Boston Office.

Berman Tabacco’s Todd A. Seaver to Speak on Class Action Law Forum Panel on Class Certification and Settlement

Please join Berman Tabacco at Western Alliance Bank’s 6th annual Class Action Law Forum (CALF) held in collaboration with the University of San Diego School of Law.  The event is taking place in person in San Diego (at the University of San Diego School of Law’s Joan B. Kroc Institute for Peace and Justice, 5998 Alcala Park) and virtually from March 12-14, 2024.  Berman Tabacco partner Todd A. Seaver will participate in a panel discussion entitled Class Certification and Settlement Issues on Wednesday, March 13th starting at 4:00 p.m. PT.

Proceeds from the CALF event benefit the Western Alliance Bank Scholarship Fund, which supports a law student at University of San Diego School of Law who is in financial need and also participates in CALF.

For more information click here.

SEC Adopts New Beneficial Ownership Reporting Requirements

Securities and Exchange Commission (“SEC”) Chair Gary Gensler recently said, “In our fast-paced markets, it shouldn’t take ten days for the public to learn about an attempt to change or influence control of a public company.”

It came as little surprise then on October 10, 2023, when in a 4-1 vote, SEC commissioners adopted a rule to shorten the amount of time an investor has to disclose an ownership stake of more than five percent in a company from ten business days to five business days.

The SEC’s New Beneficial Ownership Rules

In the recent vote, the SEC adopted rule amendments governing beneficial ownership reporting requirements under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. Specifically, the amendments cut in half the time that activist investors and hedge funds will have to divulge large stakes in publicly traded companies. In addition, the new rules require market participants to provide more timely information on their positions, a move the SEC says will better meet the needs of investors in today’s financial markets.

In addition to shortening the deadline for initial Schedule 13D filings, the new rules clarify the meaning of “groups” subject to beneficial ownership reporting obligations, and perhaps most significantly, the rules clarify Schedule 13D disclosure requirements with respect to derivative securities to include the requirement that all interests in derivative securities must be fully disclosed. Finally, in a nod toward disclosure modernization, the new rules require that Schedule 13D and 13G filings be made using a structured, machine-readable data format.

Chair Gensler heralded the moves, saying in a statement, that the updated disclosure process was aimed at informing investors and the market more quickly in the wake of technological changes that have swept Wall Street in recent decades. “Frankly, these deadlines from half a century ago feel antiquated,” Gensler said. Indeed, the SEC’s reporting timelines for investors with and without the intent of influencing control of a business had not previously been amended since 1968 and 1977, respectively.

What the SEC’s New Rules Mean for Investors

While the rules certainly impact timelines for investors with “control intent,” the new rules have also shortened deadlines for investors with no “control intent,” such as qualified institutional investors. Institutional investors must now report significant stakes within forty-five days after the end of a calendar quarter rather than on a calendar year basis. Under the new requirements, passive investors, similarly, must make disclosures within five days, down from ten.

The rules also come as the SEC heightens scrutiny of the private funds industry, and analysts predict that the new rules will most heavily affect activist investors, since shorter deadlines could hamper such investors’ ability to build stakes above the five percent mark in secret and diminish the profits they gain once their positions become public. Since amendments to the disclosures will need to be filed within two business days, under the new rules, investors crossing the five percent threshold will now have to disclose all their interests in a company, including security-based swaps, which is how activist investors tend to build stakes secretly.

Hedge funds warned that the rule would make activist investing less attractive because other investors would jump in and drive up the price of companies while funds were building their positions. In addition, hedge funds have publicly criticized the rule, claiming that shortened deadlines will reduce market efficiency because investors will have less incentive to identify and fix mismanaged companies. But in its roll-out of the rules, the SEC stressed that efficiency and transparency are precisely the point of the new regulations.

The new reporting requirements are intended to alert the market about potential changes in corporate control and are intended to address information asymmetries in the market precisely to prevent investors from quietly building their positions without others knowing. Financial reform advocacy groups mostly welcomed these changes, lauding the new rules as a welcome step to increasing efficiency, transparency, and fairness for all market participants.

In all, the adoption of the new Schedule 13D and 13G rules reflects the culmination of a decades-long process of advocacy for the modernization of beneficial ownership reporting, and such action demonstrates the importance that the SEC will place on Section 13 beneficial ownership filing requirements going forward. All said, the new rules signal that this area of law will continue to be a singular focus for the agency for years to come.

Follow The Money: SEC, FASB Signal Heightened Scrutiny of Cash-Flow Statements

U.S. regulators and standard setters are pressuring U.S. companies regarding the filing of cash-flow statements meant to help investors assess the financial well-being of an entity.

A cash-flow statement is one of three statements that public companies are required to file with the Securities and Exchange Commission (“SEC”). They serve as a snapshot of a company’s cash during a specific reporting period. Armed with these disclosures, investors learn where a company is getting its money, how (and how fast) it is using that money, and whether it has enough cash to fund operations and sustain business.  Despite their importance, some companies and auditors do not give as much attention to the cash flow statement as they do, for example, the balance sheet or income statement.  When companies fail to dedicate rigor and attention to preparing cash flow statement, investors are left in the dark—an issue the SEC plans to address.

News of this heightened scrutiny first appeared when SEC Chief Accountant Paul Munter published a statement on “Improving the Quality of Cash Flow Information Provided to Investors,” noting:

Unfortunately, we have observed that preparers and auditors may not always apply the same rigor and attention to the statement of cash flows as they do to other financial statements, which may impede high quality financial reporting for the benefit of investors.  This is evidenced by the statement of cash flows consistently being a leading area of financial statement restatements, and by our observations of material weaknesses in internal control over financial reporting (“ICFR”) around the preparation and presentation of the statement of cash flows.

SEC senior associate chief accountant, Anita Doutt, has described a main problem with the cash-flow statements by pointing to the two types of restatements companies can make to correct errors.  While a “big R” correction involves a company reissuing financials where an error materially affects those statements, a “little r” revision allows a company to address minor errors in a filing through future financial statements.  According to Doutt, companies have been routinely deeming their cash-flow statement errors immaterial, therefore consistently making “little r” revisions instead of reissuing past financials.

Munter also focused on presentation and disclosure, internal controls, and independent auditors. As a word of warning to issuers and auditors, Munter emphasized that “a materiality level is established for the financial statements as a whole and it would not be appropriate for auditors to establish a materiality level for the statement of cash flows that exceeds the materiality level for the financial statements as a whole.”

Separate from the SEC update, the Financial Accounting Standards Board (“FASB”)—which sets accounting rules for U.S. companies—recently voted to add a rulemaking project to its agenda regarding the reorganization of cash-flow statements to address items core to the operations of banks and other financial institutions.

“When you think about it, we don’t require a single format for balance sheets, we don’t make financial institutions do classified balance sheets, we don’t have a single format for income statements, but we’ve stuck with this over 30 years—a single format to the statement of cash flows as if ‘that one there’s no variance by industry,’ and I think at the end of the day there is,” FASB Chair Richard Jones said about the cash-flow statement filing process. “And I think we’ve heard that pretty loudly from our customers who say they don’t use our product in certain industries and so I think it’s incumbent upon us to see if there’s improvements we can make to the statement of cash flows.”

FASB’s actions could result in an amendment of the standard governing cash-flow statements, ASC 230. Where a cash-flow statement has three sections for operating activities, investing activities, and financing activities, FASB is looking into revising how financial institutions report under those categories. Specifically, as part of the project, FASB is looking to require financial institutions to expand cash-flow statements to include additional line items about operations and to reclassify certain activities into the “operating” section, rather the “investing” or “financing” section. FASB is also looking into whether financial firms should disclose the amount of cash interest income received in a given period.

“The statement of cash flows represents a critical piece of a complete picture of an issuer’s financial health and operations. Issuers and auditors have a responsibility, under securities laws and professional standards, to apply the same high level of care and professionalism to the preparation, review, and audit of the statement of cash flows as is required for the other financial statements. Investors should be provided with transparent, meaningful, and high-quality cash flow information that is subject to rigor in both preparation and auditing, consistent with the other components of the financial statements.

These steps from the SEC and FASB mark positive shifts in the regulatory and standard framework governing cash-flow statements, as increased quality in these filings allows for a more robust disclosure of a company’s financial position and is beneficial to all investors.

Berman Tabacco Shortlisted as a Finalist for Plaintiff Firm of the Year for 2024 by Benchmark Litigation

Berman Tabacco is honored to have been selected by Benchmark Litigation as one of the finalists for Plaintiff Firm of the Year for its Benchmark Litigation US Awards 2024.  Benchmark Litigation is hosting its annual Benchmark Litigation Awards on March 13, 2024 in New York City.

In 2024, the firm was recognized as a Top 10 Plaintiffs firm (for the 8th time) and in the top category of Highly Recommended (for the 13th time).  The firm was also selected by Benchmark California as a Tier 1 firm—the highest rank awarded—in its Plaintiff category, with partners Joseph J. Tabacco, Jr., Nicole Lavallee, Todd A. Seaver, and Daniel E. Barenbaum designated as Litigation Stars, and Matthew D. Pearson designated as a Future Star.  Similarly, Boston partners Norman Berman, Kathleen Donovan-Maher, Leslie Stern, and Patrick T. Egan were designated as Massachusetts Litigation Stars, and Nathaniel Orenstein was designated as a Massachusetts Future Litigation Star.

These are illustrative of similar rankings within Benchmark Litigation’s National and State rankings, both for the firm and its attorneys.

Shareholder Litigation and Securities Enforcement—A Year in Review on January 30, 2024

Please join Berman Tabacco at the Bar Association of San Francisco’s (BASF) Shareholder Litigation and Securities Enforcement—A Year in Review program on Tuesday, January 30, 2024. The program, presented by the BASF’S Securities Litigation Section, from 9:00 a.m. – 1:00 p.m. at BASF’s offices at 201 Mission Street, Ste. 400 in San Francisco.

Berman Tabacco attorney Michael Stocker Dark will participate in a panel discussion entitled Major SEC/DOJ Enforcement Actions and Crypto Litigation, starting at 11:45 a.m. There will be two earlier panel discussions on the following topics: Developments in Federal Securities Litigation and M&A & Delaware Litigation. For more information click here.

U.S. Supreme Court to Hear Oral Argument on “Actionable Omissions” Under Item 303 of Regulation S-K

On January 16, 2024, the U.S. Supreme Court will hear oral argument in the matter Macquarie Infrastructure Corporation, et al. v. Moab Partners, L.P., et al. (“Macquarie”) to resolve a circuit split over the types of corporate “non-disclosures” that may be considered actionable in class action suits brought by private plaintiffs under the federal securities laws.

At the heart of the matter is Item 303 of Regulation S-K (“Item 303”), a regulation overseen by the Securities and Exchange Commission (“SEC”).  Item 303 requires public companies to include in their financial statements a discussion and analysis (known as management’s discussion and analysis, or “MD&A”) of all “material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating results or of future financial condition.”  The SEC designed Item 303 to encourage a more comprehensive and robust analysis by public companies, promoting transparency and aiding investors in making informed decisions.

Because Item 303 imposes an “affirmative duty to disclose” material events and uncertainties related to a company’s financial condition and results of operations, purported violations of Item 303 are oft-alleged as independently actionable omissions by private plaintiffs in federal securities class actions.

As it stands, circuits are split on whether a violation of Item 303 may, standing alone, give rise to liability as an actionable omission under the federal securities laws.  In the 2015 case In re NVIDIA Corporate Securities Litigation, the Ninth Circuit, relying on the Third Circuit decision in Oran v. Stafford, held that a company’s failure to disclose a known trend or uncertainty in its financial statements, as required by Item 303, did not in and of itself give rise to liability under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) or Rule 10b-5 promulgated thereunder.  Months later, the Second Circuit in Stratte-McClure v. Morgan Stanley, ruled that a failure to disclose under Item 303 can serve as the basis for a securities fraud claim under Section 10(b) and Rule 10b-5 so long as the omission satisfies the materiality requirements outlined in the seminal U.S. Supreme Court case Basic Inc. v. Levinson.

The Macquarie matter centers on Macquarie Infrastructure Corporation’s (“MIC”) alleged failure to disclose the impact that a new international fuel standard would have on the revenue of one of its subsidiaries before the standard went into effect.  As alleged by lead plaintiff Moab Partners, L.P. (“Moab”), the impact the standard would have on MIC’s bottom-line created a duty to disclose under Item 303, and defendants’ failure to disclose this material event and/or uncertainty in violation of Item 303 therefore amounted to an actionable omission under Section 10(b) of the Exchange Act and Rule 10b-5.  The district court dismissed the case in 2021, holding in part that Moab failed to adequately plead an actionable omission based on allegations that the defendants violated their disclosure obligations under Item 303.  The Second Circuit reversed, holding that Moab had adequately alleged a “known trend or uncertainty” that gave rise to a duty to disclose under Item 303, and that a failure to make such a material disclosure as required by Item 303 “can serve as the basis for claims under Sections 11 and 12(a)(2), and for a claim under Section 10(b) if the other elements have been sufficiently pleaded.”

Opponents of the Second Circuit’s standard as set forth in Macquarie argue that expanding the scope of Item 303 to private securities actions creates problems for companies in determining whether a trend or uncertainty is material enough to be included in their MD&A disclosures and that enforcement of the rule is better suited for the SEC.  Proponents, on the other hand, argue that private investors often have more resources to hold public companies accountable for failing to disclose information that would be material to a reasonable investor, and that allowing private lawsuits based on Item 303 violations enhances accountability and encourages companies to provide more robust disclosures.

Thus, the Supreme Court’s upcoming decision in Macquarie is likely to draw interest from both the financial and legal communities, as it has the potential to shape the level of transparency and accountability required of public companies in their public disclosures.

Todd Seaver Selected as one of Who’s Who Legal’s 2024 Thought Leaders

Who’s Who Legal (WWL) has recognized San Francisco partner Todd A. Seaver in two of its Thought Leader publications for 2024.  He was selected a Thought Leader in the USA – Competition – Plaintiff category, issued on October 26, 2023, as well as in the Competition – Plaintiff category, issued November 29, 2023.  Todd was previously selected as a Thought Leader in Competition – Plaintiff in 2019-2020 and 2022-2023, as well as in USA – Competition – Plaintiff in 2023.  He has also been recognized by Global Competition Review in its Who’s Who Legal: Competition guide every year since 2017.

Who’s Who Legal is a co-publication of U.K.-based Global Competition Review and Lexology, a “global legal intelligence platform for mitigating risk, staying abreast of change, and finding expert counsel, built on insights, forward-looking analysis, and expert guidance from the world’s leading law firms.”  According to WWL, its “research process is conducted using proprietary digital and in-person qualitative techniques, with 5,000 interviews with leading practitioners occurring annually, and [m]ore than 250,000 third-party recommendations are gathered each year.” Thought Leaders are those attorneys “who have performed especially well, around 25-30% of listed practitioners.”

Berman Tabacco Welcomes Two New Associates

Berman Tabacco is pleased to welcome two new associates to the firm, one in the Boston office and the other in San Francisco.

Brooke Lowell

Brooke joined the firm in November and works out of the Boston office.  Brooke focuses her practice on antitrust litigation.

Brooke is a 2020 graduate of William & Mary Law School. While in law school, Brooke was the executive editor of the William & Mary Bill of Rights Journal, where her note on birth certificate gender change laws was selected for publication.  She also externed for the Legal Aid Society of Eastern Virginia and William & Mary’s Office of Diversity and Inclusion.

During law school, Brooke served as Vice President of the Equality Alliance, where she volunteered at the Gender Marker and Name Change Clinic.

Pierce Stanley

Pierce joined the firm in September and works out of the San Francisco office.  Pierce focuses his practice on privacy and antitrust matters.

Pierce is a 2023 graduate of the University of San Francisco School of Law. While in law school, Pierce served as Editor-in-Chief of the USF Intellectual Property and Technology Law Journal. He was a privacy extern at Verily Life Sciences and previously served as a judicial extern for the Honorable Andrew Y.S. Cheng of the Complex Litigation Department of the California Superior Court, County of San Francisco.

In law school, among other things, Pierce worked for the Federal Trade Commission and interned for the American Civil Liberties Union (ACLU) of Northern California’s technology and civil liberties program.  Prior to that, Pierce was a data analyst and researcher at the Council on Foreign Relations and the Brookings Institution, and he further served as an editor of The New Republic magazine.

The SEC’s Increased Focus on Cybersecurity Risk

Computer Security Expert Dan Farmer once wrote: “As we’ve seen over and over again, the digital realm can be as dangerous and fraught with peril as the physical world, and it’s high time we started taking it just as seriously.” The U.S. Securities and Exchange Commission (SEC) agrees.

The SEC is taking important steps to ensure that businesses remain vigilant and proactive in safeguarding their valuable assets, sensitive data, and customer information from the looming threat of cyberattacks. Further, the SEC is underscoring the importance of quick and robust disclosures when a material cybersecurity incident occurs.

New Cybersecurity Risk Management Rules

In late July, the SEC adopted rules requiring companies that register with the SEC to disclose both cybersecurity incidents and, on an annual basis, material information regarding their cybersecurity risk management, strategy, and governance. The Commission also adopted rules requiring foreign private issuers to make comparable disclosures.

In announcing the new rules, SEC Chair Gary Gensler stated: “Whether a company loses a factory in a fire—or millions of files in a cybersecurity incident—it may be material to investors. Currently, many public companies provide cybersecurity disclosure to investors. I think companies and investors alike, however, would benefit if this disclosure were made in a more consistent, comparable, and decision-useful way. Through helping to ensure that companies disclose material cybersecurity information, today’s rules will benefit investors, companies, and the markets connecting them.”

Under the new rules, registrants will be required to disclose any cybersecurity incident they deem material and to describe “the material aspects of the incident’s nature, scope, and timing, as well as its material impact or reasonably likely material impact on the registrant.” Such disclosures must be made within four business days after a registrant determines that a cybersecurity incident is material, with exceptions in circumstances where the U.S. Attorney General determines that immediate disclosure would pose a substantial risk to national security or public safety.

In addition, the new rules will require registrants to describe their processes, if any, for “assessing, identifying, and managing material risks from cybersecurity threats, as well as the material effects or reasonably likely material effects of risks from cybersecurity threats and previous cybersecurity incidents.” It will also require registrants to annually describe the board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from cybersecurity threats.

These rules are set to take effect December 15, 2023, but the SEC is not delaying in flexing its enforcement muscle on this topic.

The SEC’s “Milestone” SolarWinds Complaint

On October 30, 2023, the SEC announced charges against SolarWinds Corp. and its Chief Information Security Officer, Timothy G. Brown, alleging fraud and internal control failures related to allegedly known cybersecurity risks and vulnerabilities.  The Wall Street Journal has dubbed the action “a milestone in its evolving attempt to regulate how public companies deal with cybersecurity.”

The facts underlying the SolarWinds action date back to between January 2019 and December 2020. During that time, SolarWinds experienced a “massive, nearly two-year long cyberattack.”

The SEC’s complaint alleges that from at least October 2018 through at least January 12, 2021, SolarWinds and Brown “defrauded SolarWinds’ investors and customers through misstatements, omissions, and schemes that concealed both the Company’s poor cybersecurity practices and its heightened—and increasing—cybersecurity risks. SolarWinds’ public statements about its cybersecurity practices and risks painted a starkly different picture from internal discussions and assessments about the Company’s cybersecurity policy violations, vulnerabilities, and cyberattacks.”

Specifically, the SEC claims that SolarWinds poor cybersecurity practices included “(a) failure to consistently maintain a secure development lifecycle for software it developed and provided to thousands of customers, (b) failure to enforce the use of strong passwords on all systems, and (c) failure to remedy access control problems that persisted for years.”

In support of its allegations, the SEC cites to internal memoranda in claiming that SolarWinds’ security posture was extremely poor, in contrast with the company’s public disclosures. According to the complaint, Brown wrote in internal presentations in 2018 that SolarWinds’ remote access set-up was “not very secure” and that someone exploiting the vulnerability “can basically do whatever without us detecting it until it’s too late,” which could lead to “major reputation and financial loss” for SolarWinds. The SEC also cites to 2018 and 2019 presentations by Brown that the “current state of security leaves us in a very vulnerable state for our critical assets” and that “[a]ccess and privilege to critical systems/data is inappropriate.”

In announcing the complaint, the SEC’s Director of Enforcement Gurbir S. Grewal stated: “We allege that, for years, SolarWinds and Brown ignored repeated red flags about SolarWinds’ cyber risks, which were well known throughout the company…. SolarWinds and Brown engaged in a campaign to paint a false picture of the company’s cyber controls environment, thereby depriving investors of accurate material information.”

The action has been controversial among some business that believe the SEC is placing excessive burdens on the purported victims of cyber attacks. An attorney for SolarWinds commented, “The SEC is improperly trying to appoint itself the cybersecurity police for public companies. The agency’s overreach into this complex area should alarm all public companies and cybersecurity professionals across the country.”

* * *

Given the rapid expansion of our digital landscape, coupled with the global shift in remote work and the integration of smart devices, there is fertile ground for malicious actors seeking to exploit vulnerabilities within corporate systems. As the threats become more widespread and sophisticated it is critical that companies remain vigilant and proactive in protecting against cyberattacks. Further, once a material breach occurs, companies must be transparent and swiftly disclose material facts about the incident to better inform investors and protect clients and customers.

With its new rules and SolarWinds action, the SEC demonstrating the importance of implementing robust cybersecurity controls and ensuring accurate public disclosures following cybersecurity incidents.

In addition to its commitment to prosecute securities and antitrust frauds, Berman Tabacco has launched its data privacy team to work to protect consumers. From data breaches, to concealed tracking software, to compromised health records, Berman Tabacco’s privacy attorneys represent consumers harmed by businesses that fail to safeguard private information and covertly monetize client data for profit. For more information, please visit our Privacy practice area page

Eight Berman Tabacco Attorneys Recognized by Massachusetts Super Lawyers Magazine

Berman Tabacco is pleased to announce that eight attorneys from Berman Tabacco’s Boston office have been recognized by the Massachusetts Super Lawyers magazine, published by Thomson Reuters.  Partners Norman Berman, Kathleen Donovan-Maher, Leslie R. Stern, Patrick T. Egan, Nathaniel L. Orenstein, Steven J. Buttacavoli, and Steven L. Groopman, and attorney Jay Eng were selected as 2023 Super Lawyers.

Super Lawyers, a part of Thomson Reuters company, states that it is “a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement.”  Super Lawyers states that it recognizes the top 5% of attorneys in each state, as well as the top 2.5% for Rising Star attorneys, chosen by their peers and through independent research, peer nominations, and peer evaluations.

Interview with Associate Christina Gregg on Her Volunteer Work with the ABA Young Lawyers Division

Interview with Associate Christina Gregg on Her Volunteer Work with the ABA Young Lawyers Division

Christina Gregg, an associate in our Boston office, focuses her practice on securities and complex civil litigation. Since starting at Berman Tabacco, Christina has been a core member of several litigation teams, including becoming an early member of Berman Tabacco’s Data Privacy Litigation team.

Outside of work, among several pursuits, Christina works closely with the American Bar Association’s Young Lawyers Division. Recently, she added two new roles to her resume: Associate Editor and Podcast Associate Producer.

Starting in August 2023, Christina joined the ABA’s Young Lawyers Division as an Associate Editor and Podcast Associate Producer. With the first episode of Young Lawyer Rising produced by Christina dropping last month [https://legaltalknetwork.com/podcasts/aba-young-lawyer-rising-podcast/2023/10/be-part-of-legal-history-attorneys-creating-precedents-in-cannabis-law/], we sat down with Christina to learn more about her recent project.

BT: You have commented that this project is a bit of a return to your “media and journalism” days. Can you tell us a little about your pre-law journalism background?

Prior to attending law school, I spent four years working in media and communications, with a focus on political news and communications. That chapter of my career offered me incredible experiences, ranging from managing regional editorial teams with a content startup company to producing national news coverage with a Fortune 500 media brand. Overall, I loved the way that informative, captivating storytelling could break down barriers between everyday people and the institutions that shape their lives. My years working in media and communications taught me to pay attention to what a listener or reader is looking for in a story and left me with writing and oral advocacy skills that I now utilize in my role as an attorney.

BT: What sparked your interest in the ABA Young Lawyers Division?

I think an essential part of learning in the early stages of a career is finding a community that helps you grow. I found myself continually going back to ABA Young Lawyers Division articles for helpful tips and tricks on everything from brief writing to growing your brand as a new attorney. I am a huge proponent of newer attorneys utilizing the vast and varied resources at our disposal for self-directed learning about practice areas and broader career development. Eventually, I realized I would love to apply my passion for building knowledge feedback loops for my fellow junior attorneys with the ABA Young Lawyers Division. I applied and was thrilled to be appointed to these editorial roles.

BT: So, what exactly does an Associate Producer for a podcast do?

As associate producer, I have a number of responsibilities. First, our team plans out the “theme” for each episode. My most recent episode’s theme was partially centered around Hispanic Heritage Month, so we knew we wanted someone who could speak to the importance of their background as a latino/a lawyer. Next, I reach out to potential guests and conduct “pre-interviews.” A pre-interview conversation is essential to podcast production because it provides an episode roadmap for the podcast host, editor, and co-producers. Finally, our team records, edits, and publishes the podcast for listeners across the country.

BT: What stories are you hoping to bring to light through this work?

As we all know, every great story has an element of adversity. That’s why it’s often the stories of those who overcame an obstacle or took a non-linear path to achieve success that leave a lasting imprint. Where the legal industry can at times feel overwhelming and discouraging for newer attorneys just starting out, sometimes the most valuable advice comes from someone sharing the mistakes they made and how they learned from them. As a producer and associate editor, I am always on the lookout for folks who are willing to not only highlight and share their accolades and achievements, but also the human details that tell the story of how they got there. My hope is that listeners, no matter their background, will leave having heard at least one nugget that they can apply to their own practice and career.

BT: So, what are some of your favorite podcasts (legal or otherwise)?

I am a bit of a podcast fanatic. I listen to them while cooking, running, grocery shopping—really whenever I can! My favorite legal podcasts are Amicus with Dahlia Lithwick for all things SCOTUS, Law360’s Pro Say for my weekly updates, and LawNext for great insights on emerging trends in legal technology. When I’m looking to turn my brain off from lawyering, I wind down (and laugh) with episodes of We Can Do Hard Things, the Big Picture, and Hidden Brain.

BT: How can people follow/subscribe to your podcast?

You can find Young Lawyer Rising wherever you get your podcasts (such as through Apple Podcasts, Spotify, and Google Podcasts).

Best Lawyers® Again Ranks Berman Tabacco as a Top Tier firm in Securities and Antitrust in its Fourteenth Edition of “Best Law Firms

Best Lawyers® has released their Best Law Firm rankings for 2024—their first independently published rankings.  They have ranked Berman Tabacco both nationally and in the San Francisco metropolitan area as leaders in the areas of Litigation-Antitrust (for the fifth time) and Litigation-Securities (for the fifth time) in the 14th edition.   The Best Law Firms rankings are based on a combination of client feedback, information provided on law firm surveys, and Best Lawyers® peer review.  According to Best Lawyers, of the more than 23,000 firms and 97,000 client submissions—the largest participation pool to date–only 2,202 firms received a national law firm ranking in this edition. They state that these “rankings highlight a unique combination of high-quality law practices and the full breadth of legal expertise that has always been differentiated by the credibility and transparent rankings process developed by Best Lawyers.”

To be eligible for consideration as a Best Law Firm, a firm must have at least one attorney ranked in the current edition of The Best Lawyers in America®.  Berman Tabacco has three ranked attorneys:  Joseph J. Tabacco, Jr. has been recognized in the areas of Litigation (Securities) and Litigation (Antitrust), Nicole Lavallee has been recognized in the area of Litigation (Securities), and Christopher T. Heffelfinger has been recognized in the area Litigation (Antitrust).  Best Lawyers® holds itself out as one of the oldest and most respected peer-review publications, with the 2024 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 13.7 million peer evaluations, and recognizing attorneys in 75 national practice areas.  Best Lawyer’s states that these “rankings highlight a unique combination of high-quality law practices and the full breadth of legal expertise that has always been differentiated by the credibility and transparent rankings process developed by Best Lawyers.”

Metropolitan San Francisco

  • Tier 1 in Litigation – Antitrust
  • Tier 1 in Litigation – Securities

National Rankings

  • Tier 2 in Litigation – Antitrust
  • Tier 2 in Litigation – Securities

Fall Road Trips

The leaves are changing color in New England, and the Berman Tabacco team is geared up for another busy fall on the road, but with some local events mixed in for good measure. We always love the opportunity to host clients and friends when they come to town.

So far this year, our team covered many miles, attending events, conferences, and client meetings across several states and Washington, D.C., including Florida, Louisiana, Arizona, Oklahoma, Texas, Illinois, California, and Colorado.

As we close out 2023, our dance card remains full.

A few weeks ago, Nicole Lavallee and Matthew Pearson attended the Counsel of Institutional Investors’  Fall Conference in Long Beach, California.

Just last week, Leslie Stern attended the Annual International Foundation of Employee Benefit Plans (IFEBP) conference in Boston, where Berman Tabacco was proud to co-sponsor a waterfront event for well over 1,000 guests who enjoyed a spectacular view of Boston harbor.  Meanwhile, Nathaniel Orenstein set off to historic Springfield, Mass. for the Massachusetts Association of Contributory Retirement Systems’  fall summer conference.

Later this month, Leslie and Nicole will try their luck in Las Vegas while attending National Conference on Public Employee Retirement Systems’ (NCPERS) fall conference. And soon after that, Nicole and Matt will start November attending the State Association of County Retirement Systems (SACRS) conference in Rancho Mirage, California.

“As always, we look forward to seeing our clients and friends on the road,” commented Boston Partner Leslie Stern. “These conferences provide outstanding education on many core issues impacting our clients, but also serve as wonderful face-to-face opportunities to connect and catch up.”

Keep an eye out for us down the road!

Christina Sarraf Named Co-Chair of Younger Lawyers Division of the Northern California Federal Bar Association

San Francisco associate Christina Sarraf has been named the Co-Chair of the Younger Lawyers Division of the Northern District of California Chapter of the Federal Bar Association (FBA). The Younger Lawyers Division is the largest division of the FBA, “with over 4,000 members, and it serves approximately one-fourth of the FBA’s total membership” and “represents the newest additions to the federal bar, composed of members who are 40 years old or younger or have been admitted to practice for less than 10 years.” Christina was elected to the FBA’s Executive Committee earlier this year.

The FBA, founded in 1920, holds itself out as being dedicated to the advancement of the science of jurisprudence and to promoting the welfare, interests, education, and professional development of all attorneys involved in federal law.  Among other things, the organization advocates making changes to and improving the federal legal system via a network of close to 100 chapters.  The Northern District of California Chapter claims itself to be one of the most active chapters in the country, committed to “serving the needs of federal practitioners, Judges, and courts, as well as the Northern District of California community as a whole.”

Fifth Annual Women in Leadership (WIN) Conference on October 26, 2023

Please join Berman Tabacco at the Bar Association of San Francisco’s (BASF) fifth annual WIN Conference 2023 on Thursday, October 26, 2023 at 12:30 pm at BASF’s offices at 201 Mission Street, Ste. 400, San Francisco, presented by the Women’s Impact Network No Glass Ceiling 2.0.  Berman Tabacco is pleased to be a sponsor of this event.  There will be panel discussions on the following topics:

  • Dismantling Bias in the Legal Profession
  • Path to Solo Practice
  • Equality in the Legal Profession
  • Authentic Mentorship – Challenges and Rewards
  • AI in the Legal Profession

For 8th Consecutive Year, Benchmark Litigation Ranks Berman Tabacco as a “Top Plaintiffs” Firm

The 2024 edition of Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, has issued its rankings profiling U.S. law firms.  For the 8th consecutive year, Berman Tabacco was ranked as a Top Plaintiffs firm (in a select group of 12 firms) for its work representing individuals and institutions injured by violations of the securities and antitrust laws.  The firm was also ranked in the top category of Highly Recommended—the 13th consecutive year that the firm has received that ranking from BenchmarkBenchmark Litigation notes that Berman Tabacco has been referred to by peers as “one of the premier plaintiff shops.”

In addition to the firm’s rankings, ten partners have been recognized by Benchmark Litigation:

“We thank Benchmark Litigation for recognizing Berman Tabacco for its 2024 edition,” said Kathleen Donovan-Maher, managing partner of the firm’s Boston office.  “It is a true team effort, and we are honored to have our dedication and hard work, together with the results we achieve for our clients, recognized.”

Partner Steven L. Groopman Recognized in Benchmark Litigation’s 40 & Under List for 2023

For the second consecutive year, Benchmark Litigation has selected Boston-based partner Steven L. Groopman to appear in its Benchmark Litigation—40 & Under List for 2023 (8th ed.) in the Plaintiff Class Action practice area.

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, notes that the 40 & Under List is a “Guide to the nation’s most notable up and coming litigation attorneys in the US” and that they set “out to identify the best and brightest litigators.”

Steve’s diverse practice sees him representing the firm’s clients in multiple practice areas. “Berman Tabacco congratulates Steve on this well-deserved recognition by Benchmark Litigation,” said Kathleen M. Donovan-Maher, Boston’s Managing Partner, “which reflects his tenacity and dedication to representing the firm’s clients.”

Three San Francisco Partners Recognized By Who’s Who Legal: Competition 2023 (Plaintiff)

Berman Tabacco is pleased to announce that Who’s Who Legal (WWL), a publication of U.K.-based Global Competition Review, has once again recognized San Francisco Partners Joseph J. Tabacco, Jr., Todd A. Seaver, and Christopher T. Heffelfinger as leaders in the antitrust field in the Plaintiff category in the 2023 edition of Who’s Who Legal: Competition. Mr. Tabacco has been included in this publication for the past 10 years, since the creation of the Plaintiff category. This is the seventh consecutive year that Mr. Seaver has been selected and the third for Mr. Heffelfinger. Mr. Seaver has also been recognized by WWL as a Thought Leader in Competition (2019-2020, 2022-2023) and a Thought Leader: USA (2023).

“We congratulate Joe, Todd, and Chris on being selected by Who’s Who Legal: Competition as leaders in the plaintiff antitrust practice,” said San Francisco Managing Partner Nicole Lavallee. “It serves as validation for their hard work and recognition of the esteem in which they are held on both sides of the aisle.”

Best Lawyers® Recognizes Berman Tabacco Attorneys for the Seventh Consecutive Year

Berman Tabacco is pleased to announce that four Berman Tabacco attorneys have been recognized by The Best Lawyers in America® in their 30th edition (2024), which was released on August 17, 2023.

Three partners have been recognized by the The Best Lawyers in America publication. Joseph J. Tabacco, Jr. and Christopher T. Heffelfinger were selected in the areas of both Antitrust and Securities Litigation, and Mr. Tabacco was further designated in the area of Mass Tort Litigation / Class Actions – Plaintiffs. Nicole Lavallee was selected in the areas of Securities Litigation and Mass Tort Litigation / Class Actions – Plaintiffs.

Additionally, of counsel attorney Kristie LaSalle was recognized in The Best Lawyers in America: Ones to Watch in the areas of Antitrust Law, Antitrust Litigation, and Mass Tort Litigation / Class Actions – Plaintiffs.

“We congratulate our colleagues for this well-deserved honor,” commented Daniel Barenbaum, a partner in the firm’s San Francisco office. “We are grateful to Best Lawyers for continuing to recognize the work we do on behalf of our clients and the classes they represent.”

Best Lawyers states that it is one of the oldest and most respected peer-review publications and “has become universally regarded as the definitive guide to legal excellence.” For the 2024 edition, Best Lawyers reviewed over 16 million peer evaluations, which resulted in more than 76,270 leading lawyers being included in 149 practice areas.

Partner Kathleen Donovan-Maher Selected as 2023 Top Rated New England Lawyer

Boston Managing Partner Kathleen Donovan-Maher has been selected as a 2023 Top Rated Lawyer in New England and was featured in a special section of The National Law Journal highlighting New England’s Top-Rated Lawyers. This is the sixth consecutive year Kathleen has been selected.

“We are grateful to The National Law Journal for recognizing Kathleen and thrilled for her that she is repeatedly recognized for her value as a leader, partner, and colleague,” said Boston partner Leslie R. Stern.

The 2023 Top Rated Lawyer in New England special section features attorneys who have achieved the AV® Preeminent™ rating from Martindale-Hubbell®. Martindale-Hubbell describes its Peer Review Ratings as having recognized lawyers for their professional excellence and high ethical standards for more than a century, long setting the standard for lawyer ratings.

Lawdragon Recognizes Eight Berman Tabacco partners in its 2023 500 Leading Plaintiff Financial Lawyers

For the fifth consecutive year, industry observer Lawdragon has named eight Berman Tabacco partners to its 2023 list of the 500 Leading Plaintiff Financial Lawyers.  Selected are: Norman Berman, Joseph J. Tabacco, Jr., Kathleen M. Donovan-Maher, Nicole Lavallee, Leslie R. Stern, Christopher T. Heffelfinger, Todd A. Seaver, and Kristin Moody.  Additionally, Norman Berman and Joseph J. Tabacco, Jr. were included in their Hall of Fame.

“We are honored by the ongoing recognition by Lawdragon and its validation of the work we do on behalf of our clients and injured shareholders,” said San Francisco Office Managing Partner Nicole Lavallee.

According to Lawdragon, the 500 Leading Plaintiff Financial Lawyers were selected “through Lawdragon’s well-honed methodology combining journalistic research, robust nominations and vetting with experts.”  Lawdragon further states that, “this remarkable group of lawyers puts it all on the line with courage and clout that matches their defense counterparts in securities and other financial litigation; the booming antitrust field; whistleblowing claims; data privacy and so much more.”

Benchmark Litigation Names Partner Nicole Lavallee as one of its “Top Women Lawyers” in Litigation

Nicole Lavallee, the Managing Partner of Berman Tabacco’s San Francisco office and a member of the firm’s Executive Committee, has been selected by Benchmark Litigation to appear in the 12th edition of Benchmark Top 250 Women in Litigation.  According to Benchmark, this publication focuses on the leading Top 250 female litigators from across the United States who have “earned their place by participating in some of the most impactful litigation matters in recent history, as well as by earning the hard-won respect of their peers and clients as top players in their respective fields.”

“We are delighted with Benchmark’s recognition of Nicole’s longtime achievements as an extraordinary lawyer,” said San Francisco Name Partner Joseph J. Tabacco, Jr.

A lead partner of the Securities Practice Group, Nicole is a trusted advisor on securities litigation and related matters to many of the nation’s largest pension funds and institutional investors.  Nicole has vast, exceptional experience and has prosecuted dozens of high-profile complex securities cases for the firm, earning judicial praise for her work.

Regulators Pursue Pervasive Use of Off-Channel Messaging on Wall Street

In the rapidly evolving world of technology, new developments have often attempted to test the boundaries of our laws.  In recent years, modern communication platforms such as WhatsApp, Signal, and Telegram have gained popularity.  Major players in the financial sector, including broker-dealers and hedge funds, are alleged to have been using these apps for backroom and offline communications, eluding federal rules mandating the preservation of business communications. Some institutions are even alleged to have utilized these apps as a means to engage in unlawful conduct. While use of these apps in the financial sector have been flying under the regulatory radar, they have arguably not been flying outside of regulatory reach. U.S. regulators—including the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), and the Department of Justice (“DOJ”), among others—have taken action to curtail these types of off-channel communications. While regulators teed off with enforcement over broker-dealers under their robust preservation regulations, they have now shifted toward investment advisers who seemingly operate under less stringent rules.

Phase 1: Broker-Dealers
The SEC’s efforts to enforce compliance with record-keeping requirements in this new modern age turned a significant corner in December 2021 when JP Morgan admitted wrongdoing in a settlement, a rare occurrence in such matters. The firm agreed to pay a staggering $125 million penalty—nearly ten times what the SEC has previously imposed in similar matters. The penalty was warranted, as cheekily explained by SEC Chair Gary Gensler, because “[s]ome market participants did not act as if they got the message.”

Since the JP Morgan settlement, over a dozen broker-dealers have faced enforcement actions that have led to penalties that exceeded $2 billion. These institutions have also committed to retaining compliance consultants to enhance compliance practices and conducting comprehensive reviews of the institutions’ communication retention policies and procedures.

The broker-dealer recordkeeping rule at the heart of these SEC actions is Rule 17a-4 of the Securities Exchange Act of 1934. Broker-dealers must preserve originals of all communications related to their “business as such” for at least three years. To meet the electronic record-keeping requirements, firms must maintain records in a non-rewritable, non-erasable format known as “write once, read many” (“WORM”). (Alternatively, as of May 3, 2023, broker-dealers have had the option to use an alternative “audit-trail” method, allowing for the recreation of original records if they are deleted or modified.)

However, the SEC asserted that, in violation of Rule 17a-4, senior and junior brokers, bankers, traders, clients, and other related third-parties were routinely found to be communicating about business matters off-channel, such as debt and equity deals and various trading issues. By not overseeing these unofficial communication platforms (or having the capability to search them, if subpoenaed), broker-dealers were alleged to have created a regulatory blind spot, hindering regulators’ ability to oversee the markets effectively and gather evidence for investigations.

Both the CFTC and the DOJ have also taken aim at these practices.  CFTC Commissioner Christy Goldsmith Romero asserted that financial firms have engaged in “widespread unauthorized communication methods” to “evade [CFTC] regulatory oversight,” including “at the direction of senior executives who knew they were violating bank policies but wanted to obfuscate communications surrounding trading.” For example, one Bank of America trader stated, “[w]e use WhatsApp all the time but we delete convos regularly.” The CFTC also found that “the head of a trading desk also routinely directed traders to delete messages on personal devices and to use Signal, including during the CFTC’s investigation.”

To address evolving messaging technology, the DOJ also recently issued guidance, including about the need for automatic disclosure and production of communications from third-party messaging applications during its investigations.

Phase 2: Investment Advisors
More recently, after settling with the traditional broker-dealers and banks, the SEC has sought to similarly expand the reach of its recordkeeping oversight and enforcement to non-broker-dealer advisers, such as hedge funds and private equity advisers. There has been at least one SEC settlement with investment adviser DWS Investment Management Americas, Inc. which agreed to pay $125 million for violating recordkeeping provisions of the Investment Advisers Act of 1940 and failing to reasonably supervise, prevent, and detect those violations. In addition, investment adviser group Edward Jones is cooperating with an SEC investigation regarding the “retention of electronic communications stored on personal devices or messaging platforms that have not been approved by Edward Jones for business use by its employees.”

But investment advisers arguably have different obligations than broker-dealers.  While broker-dealers operate under the strict and prescriptive rules discussed above, investment advisers, including hedge funds and private equity, operate under relatively more lax controls. Specifically, Rule 204-2(a)(7) of the Investment Advisers Act requires preservation for at least five years of only certain types of communications, such as original communications relating to, among other things, any recommendations or advice to clients and certain client-specific transactional communications.

It comes as no surprise then that investment advisers and their advocates appear to be pushing back more forcefully than the broker-dealers. Ten trade associations joined forces to express concerns to SEC Chair Gary Gensler, alleging that the commission is overreaching its authority and engaging in rulemaking through enforcement actions. While they acknowledge a place for more prescriptive rules to ensure the preservation of instant messages, they simultaneously claim that other detailed requirements are intrusive and costly. Further, many investment advisers claim to have voluntarily adopted broader electronic communications policies, surpassing statutory requirements.

*          *          *

From the perspective of consumer groups that support the SEC’s recent actions, clear and stringent rules are essential for protecting customers’ interests and maintaining industry best practices, including for investment advisers.

While the use of more modern messaging apps offers various advantages—including enhanced privacy, security, and convenience for users—failure to maintain accurate records could severely impact the regulated financial services industry, including by enabling fraudulent or illegal activity that has the potential to harm investors and undermine market integrity.

Regardless, it is clear that U.S. regulators’ vigilance in addressing messaging non-compliance signals a firm commitment by regulators to reinforcing transparency and accountability throughout the entire financial market.

Berman Tabacco Selected as Antitrust Finalist in National Law Journal’s 2023 Elite Trial Lawyers

Berman Tabacco is honored to have been selected by ALM|Law.com and The National Law Journal, an ALM publication, as one of seven finalists in the Antitrust category for its 2023 Elite Trial Lawyer awards.  The 2023 annual awards ceremony will be held on July 13, 2023 at The St. Regis in New York City.

The firm was recognized for its work in the In re Automobile Antitrust Cases I and II, JCCP Nos. 4298 and 4303 (Cal. Super. Ct. San Francisco Cty.), which settled just weeks before trial (and after 20 years of vigorous litigation) with the last remaining defendant Ford Motor Company of Canada, Limited.  The case alleged that several of the world’s largest automakers—including Ford, GM, Chrysler, Toyota, Honda, and Nissan—conspired to keep discounted new cars and trucks from Canada from entering the U.S. market, which allegedly kept car prices higher for consumers in California and across the United States.  Relatedly, named partner Joseph J. Tabacco, Jr. was recognized as a Trailblazer by the The National Law Journal in its 2023 list of Plaintiffs’ Attorneys Trailblazers earlier this year for the same case.

The National Law Journal states that Elite Trial Lawyers recognizes firms that “have performed exemplary and cutting-edge work on behalf of plaintiffs” and that the “2023 awards will maintain the same prestige as they’ve always had, spotlighting industry-leading plaintiffs lawyers and firms.”  They further state that “[o]ut of hundreds of submissions,” that only “a small percentage are selected as finalists.”

Nine Berman Tabacco Attorneys Selected for Recognition by Northern California Super Lawyers 2023 Magazine (20th Anniversary Issue)

Berman Tabacco is pleased to announce that nine attorneys from Berman Tabacco’s San Francisco office—eight partners and one associate—have been selected for recognition by Northern California Super Lawyers 2023 magazine, published by Thomson Reuters. 

The attorneys designated as 2023 Northern California Super Lawyers are partners Joseph J. Tabacco, Jr.; Nicole Lavallee; Todd A. Seaver; Daniel E. Barenbaum; Kristin Moody; Carl N. Hammarskjold; Matthew D. Pearson, and Christopher T. Heffelfinger.  In addition, associate Jeffrey V. Rocha has been designated as a 2023 Northern California Rising Star (a designation for attorneys under 40 or who have been in practice for less than 10 years). 

Super Lawyers notes that it is “a rating service of outstanding lawyers who have attained a high degree of peer recognition and professional achievement.”  The publication states that it recognizes no more than the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

Daily Journal Again Names Partner Nicole Lavallee as one of its “Top Women Lawyers” in California

Nicole Lavallee, the Managing Partner of Berman Tabacco’s San Francisco office and a member of the firm’s Executive Committee, has been named a Top Women Lawyer in California by the Daily Journal in 2023 for the second time, having previously been selected in 2020.  The list, compiled from nominations submitted statewide, honors leading women practitioners highlighting the victories of women lawyers in the courtroom and the advancements of women in law.

Nicole has vast, exceptional experience and has prosecuted dozens of high-profile complex securities cases for the firm, earning judicial praise for her work.  She focuses on financial justice through asset recovery for investors and is a lead partner of the Securities Practice Group.

On the Road Again (and the Party Never Ends)

The pandemic dip in conference travel was short-lived. Much like the spry 90-year-old Willie Nelson, we are all on the road again.

For the past two years, organizations and conferences that provide educational resources to public and union funds have been as robust and packed as ever. And the Berman Tabacco team has been proud to support these organizations and programs. In-person conferences are an excellent opportunity to see clients face-to-face, but also to learn more about the critical issues impacting them: from macro-economic factors, such as lingering inflation and the war in the Ukraine; to political battles over “ESG” laws and regulations; to trends in the markets for equities, real estate, and alternatives.

So far in 2023, the BT team has logged its share of miles.

On the public fund side, our team of Leslie Stern, Nicole Lavallee, Patrick Egan, Matthew Pearson and Jeffrey Rocha have been traveling across the country attending several events and conferences, including: the National Association of State Retirement Administrator’s winter conference in Washington, D.C.; The Council of Institutional Investors’ February meeting; Texas Association of Public Employee Retirement Systems’ (TEXPERS) annual conference in Austin; and the State Association of County Retirement Systems spring conference in San Diego. Just last week, Nicole Lavallee and Patrick Egan returned from the National Conference on Public Employee Retirement Systems’ (NCPERS) annual conference in New Orleans—a week of great friends, food, and music launched by a conference-opening second-line parade through the streets of the French Quarter.

On the multiemployer side, Leslie Stern has been busy attending the NECA/IBEW conference in January; the North American Iron Workers’ conference in New Orleans; the National Labor & Management Conference in Florida; and the Mass Building Trade Council’s Annual Conference in Springfield, Massachusetts.  Most recently, Leslie attended the North America’s Building Trades Union’s Washington, D.C. conference, where the featured speaker was President Biden.

Looking ahead, our summer dance card is just as full.

This week, Leslie Stern and Nathaniel Orenstein are off to Cape Cod for the Massachusetts Association of Contributory Retirement Systems’ summer conference, while Patrick Egan is off to Tahlequah, Oklahoma for an event with the Oklahoma State Firefighters Association. Late June, as always, presents the National Association of Public Pension Attorneys’ annual conference, a yearly highlight on the calendar. This year, Nicole will be a panel member of the Securities Litigation panel titled “Do you have to be in it to Win.” Lastly, Patrick Egan and Jeffrey Rocha will close out the summer at TEXPERS.

“We look forward to seeing our clients and friends on the road,” commented San Francisco Managing Partner Nicole Lavallee. “These conferences provide not only such great insight into the wide-array of issues impacting our clients, but also wonderful face-to-face opportunities to connect and catch up.”

Keep an eye out for us down the road!

High Court Cuts Defendants Slack on Direct Listings

On June 1, 2023, a unanimous U.S. Supreme Court voted to curtail investor protections in connection with a “direct listing” public offering. The decision is a setback for investors and provides a roadmap for companies to orchestrate public offerings in an attempt to avoid private enforcement of the securities laws.

To set the stage: the case involves claims under the Securities Act of 1933, which regulated public offerings of securities, traditionally done via an initial public offering or secondary public offering. Section 11 of the Securities Act is a powerful tool for investors, as it provides a cause of action for investors harmed by purchasing shares in a public offering where the offering materials (prospectus, registration statement) contain materially misleading statements. While Section 11 claims can only target a discrete set of actors (issuer, director, underwriters), it provides for a strict liability standard for issuers and a negligence standard for other actors. Thus, unlike a traditional Rule 10(b) case under the Securities Exchange Act of 1934, there is no scienter (fraudulent intent) requirement.

The case stemmed from Slack Technologies’ 2019 stock offering. Slack’s offering was made via a relatively new type of offering: the direct listing. A direct listing is an alternative method for a company to go public, but without the cost and procedures typical in a traditional offering, namely selling through underwriter banks. Instead, in a direct listing, a company’s previously issued shares (registered or unregistered) are simply listed on an exchange. While companies, like Slack, still file registration statements related to any registered shares, the direct listing route allows other insiders and early investors to immediately list and trade their unregistered shares without filing any additional offering documents with the SEC if they fall under an exception to the registration requirements (Rule 144). Thus, for any unregistered shares sold directly to the public, there is no lock-up period restricting when insiders can sell unregistered shares, which is typical in traditional offerings. Thus, from the date of the direct listing, both registered and unregistered shares may be available to the public.   While there have only been 14 direct listing offerings to date, certain defense firms have advised clients that these offerings present the benefit of accessing the public markets with less cost while limiting liability exposure.

In its direct listing, Slack registered 118 million shares that were offered and sold pursuant to a registration statement, while simultaneously, an additional 165 million unregistered shares were listed for sale as well. Fiyyaz Pirani, the plaintiff, purchased 30,000 Slack shares on the day of the direct listing; and another 220,000 shares over the following months.

After the direct listing, Pirani brought an action alleging that the registration statement filed in connection with the sale of directly listed registered shares contained materially misleading statements about the Company’s financial conditions and liabilities and thus the stock price paid was inflated.

Slack filed a motion to dismiss in the district court overseeing the litigation, challenging Pirani’s standing and arguing that he could not show that he purchased registered shares traceable to the company’s registration statement, as opposed to unregistered shares. Pirani, however, argued that no sales could have been accomplished without the allegedly false registration statement that was filed with the SEC. Further, Pirani argued that any unregistered shares were encompassed under the phrase “such security” in the statute that references shares offered pursuant to a registration statement.

While both the district court and Ninth Circuit ruled in favor of Pirani, the Supreme Court unanimously reversed.

On appeal, Slack argued that Pirani lacked standing because he did not allege that he purchased registered shares traceable to offering documents. Pirani countered by arguing that investors were entitled to rely on the allegedly misleading prospectus in purchasing the shares, particularly where it may be impossible for an investor to determine whether they received registered or unregistered shares. In fact, Pirani argued that individuals selling unregistered shares made no filing with the SEC. Thus, Pirani asserted the registration statement for the registered shares was the only SEC filing available to Pirani and other investors in connection with the offering.  In essence, the dispute came down to the definition of the phrase “such security” in the statute: namely, whether it was limited to registered shares or could encompass any shares offered in connection with a public offering.

The Supreme Court reversed the Ninth Circuit’s decision and remanded. In a unanimous decision authored by Justice Gorsuch, the Court sided with Slack, interpreting the term “such security” contained within Section 11 as limiting the Section’s reach to securities “registered under [a] particular registration statement alleged to contain a falsehood or misleading omission.” Basing its analysis on other textual provisions of the Securities Act, the Court concluded that while the statutory language was not crystal clear, various “contextual clues” persuaded the Court that Slack’s reading of Section 11 was “the better one.” Thus, the Court found that “[t]o bring a claim under §11, the securities held by the plaintiff must be traceable to the particular registration statement alleged to be false or misleading.” The Court remanded the case to the lower court to decide if Pirani’s complaint can satisfy the pleading requirement that he purchased shares traceable to the alleged defective registration statement.

The Court did not, however, reach the merits on Pirani’s claims under Section 12(a)(2) of the Securities Act—a separate provision also related to public offerings. That provision, creating liability for sellers of newly offered shares, was a focus of much debate during oral argument. For example, Justice Gorsuch questioned whether the Court needed to reach the issue at all, while Justices Kagan, Sotomayor, and Brown Jackson suggested that Section 12(a)(2) is broader in scope than Section 11 because it may apply outside the registration context, meaning liability would attach to both registered and unregistered shares sold simultaneously. Ultimately, the Court sidestepped the Section 12 issue, leaving it for the lower court to weigh in on upon remand. The Court did caution, however, that it was not expressing any views about the proper interpretation of Section 12, nor did it endorse the Ninth Circuit’s “apparent belief that §11 and §12 necessarily travel together, but instead caution[s] that the two provisions contain distinct language that warrants careful consideration.”

While Pirani lives to fight another day in the lower court, the Slack decision is likely to adversely impact investors going forward. While some commentators claim that the Court’s opinion merely re-enforces long-settled Section 11 law, the ruling’s language may invite further erosion of investor rights. First, defendants will certainly argue that the decision requires all Section 11 plaintiffs to “trace” their shares to an offering even where a shareholder purchased their shares directly from an underwriter. Increasingly, defendants challenge standing of such investors on the basis that for nearly every offering, the issued shares are immediately commingled and held by the Depository Trust Company. Thus, defendants have argued that no one—not even lead underwriters—can “trace” shares to an offering whenever there are any unregistered and/or previously issued shares in the market. Such a gross reading—which defendants would argue is further supported by this new Supreme Court decisions—would eviscerate Section 11 as a tool for plaintiffs and turn the clear purpose of Section 11 on its head. Second, the Slack decision will encourage more direct listings and alternative offering procedures that would allow companies to access public markets while seeking to evade the threat of Section 11 liability. This is a troubling sign during our increasingly volatile markets and where one need not look far for examples of the next “Enron,” from Theranos, to Nikola, to collapsing SPAC.  Now is not the time to roll-back shareholder protections.

A copy of the case: Slack Technologies, LLC v. Pirani, is available here.

Berman Tabacco And Its Attorneys Again Recognized As Securities Litigation Leaders By Chambers USA

For the third consecutive year, Berman Tabacco has been recognized as a leader in securities litigation in both the California (Litigation) and USA-Nationwide (Securities Litigation) guides published by Chambers USA, the U.S.-based arm of Chambers and PartnersChambers released its 2023 rankings on June 1st.  Chambers quotes a client or counsel who praised Berman Tabacco, noting that it is “a great firm with great trained lawyers. They’re well versed in negotiating as complex a securities case as you can have.”

In addition to the firm, both Joseph J. Tabacco, Jr. and Nicole Lavallee were individually recognized as among the top U.S. litigators in securities litigation.  This is the 17th consecutive year that Joe has been ranked by Chambers in securities litigation, which quoted a client or counsel who noted that Joe “has extremely great contacts in [the] industry. He can cut through nonsense and find resolutions that are economic and practical.”  Nicole, the Managing Partner of Berman Tabacco’s San Francisco office and a member of the firm’s Executive Committee, was recognized for the third time by Chambers in securities litigation, which quoted a client or counsel who stated that Nicole is “great in terms of communication and understanding how to bring a case together, produce a strategy and make a path for a way forward.”

“We are gratified by Chambers’ recognition of our firm,” said Daniel Barenbaum, a partner in Berman Tabacco’s San Francisco office.  “Our success is born out of our client-centric focus, and Chambers’ ongoing recognition is a testament to the diligent counseling and robust advocacy our attorneys and staff put in representing our clients’ interests.”

Chambers and Partners represents that it is a U.K.-based independent research company operating in 200 jurisdictions that has been researching and ranking attorneys worldwide for over 30 years.  Chambers notes that the “independent rankings” it provides are “central” to everything they do and is “why our research is the industry leader.”  Its “rigorous independent processes” make “Chambers the gold standard in legal insight.”   For more information about Chambers, please see https://chambers.com/.

      

The National Law Journal Names Berman Tabacco Partner Joseph J. Tabacco, Jr. as a 2023 Plaintiffs’ Attorney Trailblazer

San Francisco-based Berman Tabacco named partner Joseph J. Tabacco, Jr. was recognized as a Trailblazer in The National Law Journal’s 2023 list of Plaintiffs’ Attorneys Trailblazers.  Joe, lead counsel for plaintiffs, was recognized, after almost 20 years, for bringing to conclusion In re Automobile Antitrust Cases I and II, JCCP Nos. 4298 and 4303 (Cal. Super. Ct. San Francisco Cty.), via settlement just weeks before trial with the last remaining defendant Ford Motor Company of Canada, Limited.  The case alleged that several of the world’s largest automakers—including Ford, GM, Chrysler, Toyota, Honda, and Nissan—conspired to keep discounted new cars and trucks from Canada from entering the U.S. market, which allegedly kept car prices higher for consumers in California and across the United States.

According to The National Law Journal, this is a special supplement that spotlights “professionals who are agents of change in their respective practice areas” and this list showcases those “who continue to make their mark in various aspects of legal work on the Plaintiffs’ side.”  This is the seventh annual list of Plaintiffs’ Attorneys Trailblazers and it is available here:  2023 National Law Journal Plaintiff’s Lawyers Trailblazers.

Equal Rights Advocates 2023 Gala on June 9, 2023

Please join Berman Tabacco at the Equal Rights Advocates’ (ERA) annual luncheon Friday, June 9, 2023 at 12:00 pm at The Westin St. Francis San Francisco on Union Square. Berman Tabacco is proud to be a sponsor of this event.

This year, the event’s theme is State by State: Building Power for Gender Justice, honoring changemakers from across the country who are advancing rights for women, girls, and gender-expansive people. Click here for more about this year’s event.

ERA is comprised of a team of lawyers and advocates fighting for gender justice since 1974 through impact litigation, policy reform, and community outreach. Click here to learn more about ERA.

Berman Tabacco Shortlisted as a Finalist for Plaintiff Firm of the Year for 2023 by Benchmark Litigation

Berman Tabacco is honored to have been selected by Benchmark Litigation as one of eight finalists in the Plaintiff Firm of the Year category for its Benchmark Litigation US Awards 2023.  Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, is hosting its annual Benchmark Litigation Awards on March 15, 2023 in New York City.

In 2023, the firm was recognized as a Top 10 Plaintiffs firm (for the 7th time) and in the top category of Highly Recommended (for the 12th time).  The firm was also selected by Benchmark California as a Tier 1 firm—the highest rank awarded—in its Plaintiff Work category, with partners Joseph J. Tabacco, Jr., Nicole Lavallee, Todd A. Seaver, and Daniel E. Barenbaum designated as Litigation Stars.

These are illustrative of similar rankings within Benchmark Litigation’s National and California rankings, both for the firm and its attorneys. Boston partners Norman Berman, Kathleen Donovan-Maher, Leslie Stern, and Patrick T. Egan were designated as Massachusetts Litigation Stars, and Nathaniel Orenstein was designated as a Massachusetts Future Litigation Star.  In California regional rankings, the firm was recognized as a Tier 1 firm in the San Francisco region, with San Francisco partners Joseph J. Tabacco, Jr., Nicole Lavallee, Daniel E. Barenbaum, and Todd A. Seaver designated as both California State Litigation Stars and Local Litigation Stars.

Berman Tabacco Settlements Again Listed in ISS SCAS’ The Top 100 U.S. Class Action Settlements of All Time (as of Dec. 31, 2022)

Institutional Shareholder Services’ Securities Class Action Services (ISS SCAS) has published its The Top 100 U.S. Class Action Settlements of All-Time (as of December 31, 2022), which, as reported by ISS SCAS, is an annual report that identifies the largest U.S. securities class action settlements filed after the passage of the Private Securities Litigation Reform Act of 1995.  The cases reported are ranked by the total value of the settlement fund.  According to the report, ISS SCAS verified 141 approved monetary class action settlements in the United States in 2022, with a combined total value of $4.77 billion.  This was the largest dollar value of settlements since 2018 and the highest number of settlements since 2017.

For the sixth consecutive year, Berman Tabacco was listed among the firms with the most settlements on the Top 100 list, with five settlements totaling $1,975,900,000.

Berman Tabacco Settles Portola Pharmaceuticals, Inc. Securities Class Action

After three years of vigorous litigation, Berman Tabacco is proud to announce the final approval of a $17.5 million settlement in litigation against Portola Pharmaceuticals, Inc. (“Portola”).  On March 6, 2023, the Honorable Vince Chhabria of the Northern District of California granted final approval to the settlement.  Berman Tabacco is the sole Lead Counsel representing Lead Plaintiff Alameda County Employees’ Retirement Association (“ACERA”) in a securities class action suit against Portola, certain former officers and directors, and the underwriters for the company’s secondary public offering.  ACERA was joined in prosecuting this action by additional plaintiff Oklahoma Firefighters Pension and Retirement System.

Portola developed and commercialized treatments for thrombosis and other hematologic diseases.  Portola’s primary product was Andexxa, a reversal drug for apixaban- and rivaroxaban-treated patients with life-threatening or uncontrolled bleeding.  The action alleged that defendants issued materially false and misleading statements related to the sales of Andexxa in its public statements, including secondary public offering materials.  First, the complaint alleged that the company misrepresented that it complied with GAAP (Generally Accepted Accounting Principles), where it recognized revenue in violation of relatively new GAAP rule ASC-606 and thus materially under-reserved for returns.  Second, the complaint alleged that the company misrepresented customer demand for and utilization of Andexxa for those that purchased it (e.g., hospitals and hospital-system pharmacies), both as to depth (regularity of usage) and breadth (types of bleeds prescribed for).

“Under ACERA’s active leadership, we are happy to have achieved this result following hard-fought litigation,” commented San Francisco Partner Daniel Barenbaum.  “This outcome underscores the crucial role that large public funds play in protecting our markets when they commit to acting as lead plaintiff in securities litigation.”

The $17.5 million settlement will provide relief to a class of investors who purchased Portola common stock from January 8, 2019 through February 28, 2020.

The case is Hayden v. Portola Pharmaceuticals, Inc., et al., No. 3:20-cv-00367-VC (N.D. Cal.).  The Berman Tabacco litigation team included Nicole Lavallee, Daniel E. Barenbaum, Patrick T. Egan, Jeffrey V. Rocha, Christina M. Sarraf, Mackline Bastien, and Berna M. Lee.

 

 

Todd Seaver Selected as one of Who’s Who Legal’s 2023 Thought Leaders for USA and Competition – Plaintiff

Who’s Who Legal (WWL), a publication of U.K.-based Law Business Research Ltd., an independent London-based publishing group, has recognized San Francisco partner Todd A. Seaver in two of its Thought Leader publications for 2023.  He has been selected for the WWL Thought Leaders: Competition – Plaintiff (2023) as well as the WWL Thought Leaders: USA (Competition – Plaintiff) (2023) (the inaugural edition).  According to WWL, these are a highly selective guides that features only “the very best in the world in their field, without exception” and states that these individuals “are worthy of special mention owing not only to their vast expertise and experience advising on some of the world’s most significant and cutting-edge legal matters, but also their ability to innovate, inspire, and go above and beyond to deliver for their clients.”  Todd was previously selected for Thought Leader: Competition – Plaintiff honors in 2019-2020 and 2022, and he has also been recognized by Global Competition Review in its Who’s Who Legal: Competition guide each year since 2017.

Danielle Smith and Christina M. Sarraf Appointed to the Executive Committee of Northern California Federal Bar Association

The Northern District of California Chapter of the Federal Bar Association (FBA) has appointed its 2023 Officers.  Berman Tabacco is pleased to announce that Associates Danielle Smith and Christina M. Sarraf have been appointed to the Executive Committee.  As members of the Executive Committee, Danielle and Christina will work closely with the N.D. Cal. federal judges to coordinate educational opportunities for the local bar.

The FBA, founded in 1920, holds itself out as being dedicated to the advancement of the science of jurisprudence and to promoting the welfare, interests, education, and professional development of all attorneys involved in federal law.  Among other things, the organization advocates making changes to and improving the federal legal system via a network of close to 100 chapters.  The Northern District of California Chapter claims itself to be one of the most active chapters in the country, committed to “serving the needs of federal practitioners, Judges, and courts, as well as the Northern District of California community as a whole.”

Delaware Law Change Allows Companies to Shield Corporate Officers From Liability

A recent change in Delaware law is likely to trigger a wave of management-sponsored stockholder votes seeking to amend certificates of incorporation to protect corporate officers from liability for breaches of their fiduciary duty of care.

Effective August 1, 2022, the Delaware legislature amended Section 102(b)(7) of the Delaware General Corporation Law (“DGCL”) to allow companies to limit the monetary liability of certain executives for duty of care breaches.

Prior to the statutory amendment and since 1986, the protections in Section 102(b)(7) were only available to shield corporate directors from liability for breaches of their fiduciary duty of care—the fiduciary duty that requires directors and officers to make informed and careful business decisions that pursue the corporation’s interests.  As amended, Section 102(b)(7) now states that a certificate of incorporation may expressly contain “a provision eliminating or limiting the personal liability of a director or officer to the corporation or its stockholders for monetary damages for breach of fiduciary duty [. . . .]”

The statute states that an “officer” shall mean any person “deemed to have consented to service by the delivery of process to the registered agent of the corporation pursuant to § 3114(b) of Title 10.”   In effect, it would apply to any of the following individuals:

  • a president, chief executive officer, chief operations officer, chief financial officer, chief legal officer, controller, treasurer, and chief accounting officer;
  • someone identified in the corporation’s SEC public filings as a “highly compensated executive officer” of the corporation; and
  • someone who has consented to being identified as an officer for purposes of accepting service of process.

No other officers, employees, and agents are entitled to the liability protections of Section 102(b)(7).

Despite this broad move toward insulating officers, the protections offered under Section 102(b)(7) have some limits.  First, Section 102(b)(7) shields officers from liability only for monetary damages; an officer’s conduct is still subject to equitable remedies such as rescission (the undoing or cancellation of the contract between parties) or injunctive relief (such as an injunction delaying a vote on a merger or acquisition).  Second, the statute only applies to breaches of the fiduciary duty of care and not breaches of the duty of loyalty.  This is consistent with the prior version of Section 102(b)(7), which allowed for the exculpation of duty of care breaches by directors but not breaches of the duty of loyalty.

Third, and critically, Section 102(b)(7)(v) expressly excludes from its protective reach derivative actions brought by stockholders on behalf of the corporation, but instead include only direct actions (for example, a traditional class action securities lawsuit).  This is in contrast to the breadth of protections offered to directors under Section 102(b)(7), which does not carve out derivative claims as assertable against directors.  Thus, this exception in the new amendment allowing derivative claims to be brought against officers leaves open to plaintiffs an important mechanism for protecting shareholders and corporations.  This exception was recently clarified to include oversight claims against officers by Vice Chancellor Laster, in In Re McDonald’s Corporation Stockholder Derivative Litigation, C.A. No. 2021-0324-JTL, 2023 WL 407668 (Del. Ch. Jan. 26, 2023).

From the stockholders’ perspective, approval of these broader protections for C-suite executives (albeit without exculpation from derivative claims) marks an additional erosion of their ability to take action for stamping out corporate mismanagement.  As stockholders’ rights continue to erode, their check on the decisions of senior executives diminishes, which could lead to more reckless conduct by officers.

The defense bar has widely praised the DGCL amendment.  First, those in that bar see the amendment as a means to attracting and retaining officer candidates and a key lever for lowering costs of Director & Officer Insurance.  Some in the defense bar also see the amendment as creating an important deterrent against what they perceive to be frivolous plaintiff-driven litigation brought to secure excessive fees.

Still, it is unclear whether stockholders and proxy advisers will be eager to adopt these charter amendments in the coming year. The optics of asking stockholders at either a special or annual meeting to vote to limit the monetary liability of officers may cause some companies to refrain from pushing through a vote on this measure, as such an amendment would leave those voting stockholders with fewer tools to later address wrongful conduct on the part of the corporation and its officers.

Car Buyers in Berman Tabacco’s Longstanding Antitrust Case Achieve $82 Million Settlement on Eve of Trial

After nearly 20 years of litigation and just three weeks prior to the start of trial, Berman Tabacco, as lead counsel in an antitrust case against several leading automakers, successfully negotiated an $82 million settlement with the last remaining automaker defendant, Ford Motor Company of Canada, Limited (“Ford Canada”). The longstanding class action, pending before Judge Anne-Christine Massullo in San Francisco Superior Court and captioned In re Automobile Antitrust Cases I and II, JCCP Nos. 4298, 4303, was originally filed in early 2003 on behalf of new car buyers in California. The case alleged that several of the world’s largest automakers—including Ford, GM, Chrysler, Toyota, Honda, and Nissan—conspired to keep discounted new cars and trucks from Canada from entering the U.S. market, which allegedly kept car prices higher for consumers in California and across the United States.

The California action was one of several actions brought that involved similar allegations—including multiple state court actions and a large federal multidistrict litigation. Berman Tabacco, representing plaintiff car buyers, served as lead counsel in the federal multidistrict litigation and as lead trial counsel in the California action.

The recent settlement with Ford Canada came about after over a decade of hard-fought litigation in the California state trial court and appellate practice in the California Court of Appeal. Twice during this period, the trial court granted judgment in favor of Ford Canada; and each time, Berman Tabacco succeeded in convincing the California Court of Appeal to reverse and reinstate the claims. In particular, in 2016, the California Court of Appeal found that plaintiffs had produced sufficient evidence of an unlawful antitrust conspiracy to have their claims against Ford Canada be presented to a jury. See In re Automobile Antitrust Cases I and II, 1 Cal. App. 5th 127 (2016).

Ultimately, after intensive preparation for a jury trial, the parties settled on the proverbial eve of trial. The settlement, which is now final, provides $82 million in cash for the benefit of California consumers who purchased new cars in California from January 1, 2001 to April 30, 2003. With prior settlements that plaintiffs achieved in various related cases, this settlement with Ford Canada brings the total recovery for car buyers to nearly $138 million.

San Francisco partner Joe Tabacco, who first launched the investigation into the alleged conspiracy back in 2002, remarked: “This truly marathon case would not have concluded successfully without the sustained efforts of many fine lawyers—including partners Todd Seaver and Matt Pearson—who toiled for years to get the case across the finish line. The perseverance paid off, and the settlement represents an excellent result for car buyers in the class.”

Berman Tabacco Welcomes Michael Stocker Dark, Of Counsel, to its San Francisco Office Team

Berman Tabacco is pleased to welcome Michael Stocker Dark as Of Counsel in its San Francisco office.  Mike joined the firm in 2023 after serving as Deputy Inspector General for the County of Los Angeles and as a principal litigator and case developer for a leading plaintiff class action firm in New York City, representing U.S. and European institutional investors.

In his 25-year career in investor and consumer protection and government oversight, Michael has played a leading role in developing and litigating cases. Relying on his background in complex financial investigation and analysis, he has pursued cases on behalf of consumers and institutional investors stemming from scandals at major investment banks, anticompetitive practices at leading drug manufacturers, and manipulation of market indexes. He worked on the litigation teams pursuing some of the most significant securities class action recoveries in history, from defendants including Bear Stearns, insurance giant AIG, and Wellcare Health Plans, Inc.

This work has seen him repeatedly recognized as a leading litigator in the National Law Journal’s Plaintiffs’ Hot List and in Benchmark Litigation’s California edition under Securities. In 2016 Michael was elected to the American Law Institute for his legal work and extensive writing and commentary on securities, business, and consumer protection issues. He is an emeritus board member of the Weinberg Center for Corporate Governance.

SEC Pressures Auditors to Be More Proactive in Detecting Fraud

In a recent interview with The Wall Street Journal (“WSJ”), Paul Munter, the Acting Chief Accountant of the Securities and Exchange Commission (“SEC”), warned that, amidst a market selloff and fears of a recession, more companies could feel pressure to make misrepresentations in their financial statements, emphasizing the auditors’ responsibility to detect them. The interview comes on the heels of an October 11, 2022 written statement by Munter released by the SEC’s Office of the Chief Accountant (“OCA”), which outlined those responsibilities with respect to fraud detection.

According to Munter, the current economic environment and resulting uncertainties tend to lead to heightened fraud risk. The WSJ cites two active multi-billion dollar actions (in Germany and the United Kingdom) against Ernst & Young (“EY”), which is accused of alleged failings in its audits of two corporations—financial technology company Wirecard AG and hospital operator NMC Health PLC.  Stateside, the WSJ reports, the SEC is similarly getting tougher on lax accountants, with record monetary sanctions having been issued in the most recent fiscal year.

Notably, under Public Company Accounting Oversight Board (“PCAOB”) auditing standards, auditors for publicly traded companies have a responsibility to consider fraud and obtain reasonable assurances about whether the financial statements are free of material misstatements, irrespective of whether caused by fraud or error.

In Munter’s October OCA written statement, he noted that PCAOB inspections consistently find instances where auditors (1) fail to apply due professional care and professional skepticism when considering fraud or (2) respond insufficiently to fraud risks and red flags. Munter emphasized in his October written statement that auditors must have “a questioning mind” and “exercise professional skepticism” when conducting audits.

Even seemingly small quantitative misstatements should be scrutinized.  As the SEC has previously advised, such minor misstatements in financial statements should not be presumed to be immaterial, as qualitative factors may cause misstatements of quantitatively small amounts to be material.

A big problem, as Munter sees it, is when auditors seek to excuse their lack of fraud detection by focusing on what is outside of their purview rather than taking a proactive approach to identifying fraud.  Munter’s October OCA statement warns that auditors should not treat the auditing standards as an exhaustive checklist, but should instead tailor audits to be responsive to both the identified fraud risk and changing business environments.

It is in part for this reason that Munter said he wanted to send a “very strong reminder to audit firms” about their responsibilities.

This reticence on the part of auditors to identify fraud and material misstatements may be fueled by ever-present potential conflicts of interest.  The WSJ notes that there still exists a basic conflict in the industry, where accounting firms are paid by the companies that they audit, making it less likely that they will confront the bad behavior of their benefactors.

Auditors can face these pressures to neuter diligence both externally (from corporate clients) and internally (from within their own audit firms). Externally, the auditor’s client could, for instance, insist on tight deadlines or apply audit fee pressures. Internally, a company’s internal audit team could face resource constraints, time pressures, or internal operational metrics and systems.  Any or all of these situations could serve to discourage skepticism among auditors.

A real-world example of these types of conflicts were on display in the 2001 Enron collapse, where a partner at Enron’s auditor (Arthur Andersen LLP) had objected that his advice against certain accounting practices was being ignored. After an Enron executive complained, the audit partner was removed from the Enron audit team.

And those conflict-of-interest problems do not appear to have dissipated.  More recently, in September 2022, a former EY employee filed a lawsuit against the audit firm claiming that she was punished for flagging concerns about potential fraud in 2020 by two large audit clients.

Thus, as Munter noted in his October OCA statement, a company’s “[m]anagement is in a unique position to perpetrate fraud, and instances of fraud often involve management override of controls, including concealment of evidence or misrepresentation of information.”

Munter explained in his written statement that such actions can only be effectively countered through the diligence and awareness of auditors.  “Auditors must remain diligent when considering and responding to this risk and remain aware of techniques used by management to circumvent existing controls. Additionally, if an auditor believes that an identified misstatement might be indicative of fraud, they should perform procedures to obtain additional audit evidence and evaluate the related implications.”

*  *  *

One positive indicator that auditors are leaning into their fraud-detection responsibilities comes from a recent EY report (perhaps as a reaction at least in part to the recent enforcement actions brought against it) that it has begun to use new seemingly-novel tools to ferret out fraud (supported by, for instance, machine learning and artificial intelligence (AI)). According to the WSJ, EY’s fraud detection measures have further expanded to the use of those AI tools to parse ledgers for suspicious transactions, the mining of social-media posts, and the more proactive use of forensic-accounting specialists to search for potential accounting violations at high-risk companies.

Time will ultimately tell if these new efforts are reactionary responses to recent enforcement actions or instead will pave the way for more auditors to act proactively to identify fraud.

SEC Approval of Dodd-Frank ‘Clawback Rules’ Will Require Recovery of Erroneously Awarded Executive Compensation

The approval of recent proposed rules by the U.S. Securities and Exchange Commission (“SEC”) will force companies to recoup executive bonus pay in the event of significant accounting errors or misstatements.

The SEC voted 3-2 on October 26, 2022 to finalize the “clawback rules,” implementing Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 over a decade after its enactment.  The clawback rules will require the national securities exchanges to adopt listing standards compelling issuers to implement policies for the recovery of incentive-based compensation awarded to current and former executive officers based on erroneous or false financial results.  The policies must provide for a three year look back period.

“I believe that these rules will strengthen the transparency and quality of corporate financial statements, investor confidence in those statements, and the accountability of corporate executives to investors,” said SEC Chair Gary Gensler. “Through today’s action and working with the exchanges, we have the opportunity to fulfill Dodd-Frank’s mandate and Congress’s intention to prevent executives from keeping compensation received based on misstated financials.”

The SEC first proposed compensation recovery rules back in 2015 under former President Barack Obama.  The clawback rules did not receive further attention under former President Donald Trump and then-SEC Chair Jay Clayton.  However, upon President Biden’s naming Gensler as SEC chair, the comment period was reopened on a proposal for similar rules in both October 2021 and June 2022.  The rules were adopted by the SEC with all Democrats approving and all Republicans dissenting.  GOP lawmakers took issue with certain elements of the final rules, criticizing as overly broad the breadth of listed potential triggering restatements and the definition of “executive officer.”

In practice, the rules will be triggered in the event of a restatement due to material non-compliance with any financial reporting requirements.  The rules are more expansive than those first proposed in 2015, which would have only applied if a company identified significant accounting errors requiring a restatement of previously issued financial results.  These restatements are often referred to as “Big R” restatements.  The final rules, on the other hand, require companies to recover not just for Big R restatements, but also in the event of an error that would be considered a material misstatement “if the error were left uncorrected in the current report or the error correction was recognized in the current period” (“little r” restatements).

Prior to the approval of these new rules, it had become widespread practice for corporate boards to include provisions requiring these clawbacks in compensation agreements.  Still, these rules will surpass the requirements of previously voluntary measures, which generally impose a higher bar for triggering repayment to the company.

A set of existing clawback rules under Section 304 of the Sarbanes-Oxley Act of 2002—which were similar, but narrower than the new SEC rules——already required the repayment of incentive-based compensation in the event of an accounting restatement.  However, those already existing clawback rules only apply to the chief executive officer and chief financial officer positions and are triggered in the event of a restatement resulting from misconduct.  The new Dodd-Frank rules just approved by the SEC apply to a much broader group of executive positions, including the president, principal financial officer, principal accounting officer (or, if none, the controller), any vice president in charge of a principal business unit, division or function, and any other person who performs policy-making functions for the company.

Under the new rules, companies will be required to file their recoupment policies as an exhibit to their annual reports.  The filed policy must include a number of detailed disclosures, including:

  • The date the company was required to prepare an accounting restatement and the total amount of erroneously awarded compensation;
  • Any outstanding amounts that remain due from any current or former named executive officer for 180 days or more; and
  • Details regarding any reliance on certain impracticability exceptions under the rules, which identifies situations where recovery is excused because it is impractical to obtain it.

Issuers that do not adopt these policies and comply with the requirements of the rules will be subject to delisting.

The final rules will become effective 60 days following publication of the adopting release in the Federal Register, with a one-year deadline for the listing standards to become effective following publication.

Daily Journal Names Berman Tabacco Partner Joseph J. Tabacco, Jr. as a 2022 “Top Antitrust Lawyer” in California

San Francisco-based named partner Joseph J. Tabacco, Jr. was recognized as a Top Antitrust Lawyer in the Daily Journal’s 2022 list of Top Antitrust Lawyers in California.  This is the second time Joe has received this honor.  The list, compiled from nominations submitted statewide, honors leading antitrust practitioners for their work in plaintiffs, defense, and government antitrust work.

Joe has long been recognized by clients and lawyers on both sides of the bench as a leading plaintiffs’ antitrust and securities class action attorney.  He has recovered billions of dollars on behalf of investors, businesses, and consumers prosecuting and, in some instances, trying antitrust and securities cases.

The Daily Journal highlighted two of Joe’s cases for recognition.  The first is Automobile Antitrust Cases I and II, JCCP Nos. 4298 and 4303 (Cal. Super. Ct. San Francisco Cty.), where, after two decades of hard-fought litigation in related cases in both federal and state court, including multiple appeals, Joe and the firm obtained an $82 million dollar settlement from the last remaining defendant, Ford Motor Company of Canada, Limited.  Together with the prior settlements in the related federal action, the firm recovered $137.85 million for class members.  These companion cases alleged that major automakers unlawfully conspired to stop the export of less expensive new Canadian vehicles from entering the United States.

The second action, In re California Gasoline Spot Market Antitrust, No. 3:20-cv-03131-JSC (N.D. Cal.), is ongoing, and alleges an unlawful scheme by gasoline trading companies in Houston and Hong Kong where traders are alleged to have manipulated the spot market for gasoline, leading California consumers to pay billions of dollars more at the pump for gasoline than they would have absent such conduct.

“We are thrilled for Joe and grateful to the Daily Journal for its continued recognition of his important contributions to and leadership within the California antitrust bar,” said Berman Tabacco partner Daniel E. Barenbaum.

Berman Tabacco Partner Kathleen Donovan-Maher Selected by Boston Magazine as a 2022 Top Lawyer

For the second consecutive year, Boston Office Managing Partner Kathleen Donovan-Maher has been selected as one of the Top Lawyers by Boston Magazine in its second annual list of the “region’s best and brightest legal minds.”  The list was compiled through a two-step peer-review process (in partnership with DataJoe Research) across several practice areas.  The process included (i) peer voting and (ii) a further review by an “an advisory board of select lawyers.”  The recipients were ultimately “chosen for their credentials and the high number of votes they received.”

Kathleen focuses her practice on litigating complex class actions, including in the practice areas of securities, RICO, and consumer litigation, in addition to serving as Managing Partner of the Boston office and a member of the firm’s Executive Committee.

“Once again, we congratulate Kathleen on being recognized as a Top Lawyer by her peers and Boston Magazine,” commented Boston Partner Leslie R. Stern.  “It is gratifying to have Kathleen’s dedication, hard work, and successes on behalf of her clients recognized year after year.”

Boston Magazine is a publication that has focused for over 40 years on the Boston area.  It has “been named among the three best city magazines in the nation seven times by the City and Regional Magazine Association.”

Berman Tabacco Partnering to Sponsor BASF’s Women’s Impact Network: No Glass Ceiling 2.0 Fourth Annual Conference

As a member of the Bar Association of San Francisco (BASF), Berman Tabacco Partner Nicole Lavallee is pleased to announce that Berman Tabacco is a sponsor for the BASF’s Women’s Impact Network: No Glass Ceiling 2.0 Fourth Annual Legal Trailblazers Conference to be held between 1:00-4:45 p.m. on Thursday, November 17, 2022 at Golden Gate University, 536 Mission Street, San Francisco.

The conference will cover the following topics:

  • Women in Law: Discovering the True Meaning of Success
    Panel speakers are Pat Gillette, JAMS Mediator and Author; Michelle Banks, Senior Advisor, Barker Gilmore; Maja Larson, Adjunct Law Professor, University of Seattle Law & Consultant and Board Advisor; and Zeynep Goral, Attorney and Writer;
  • Advocating for Women’s Reproductive Rights
    Panel speakers are Gilda Gonzalez, President and CEO, Planned Parenthood; Teresa L. Johnson, Partner, Arnold & Porter; and
  • Law Firm Equity
    Panel speakers are Joanna Storey, BASF’s Vice-Chair of the Legal Ethics Committee, Klinedinst Law; Lindsey Mignano, Barristers Board President & Attorney for Startups & Small Businesses, SSM; Kayla Delgado Grundy, Employment Law, Orrick.

A reception will follow the program from 4:45-6:00 p.m.  For further information, see here.

Seven Berman Tabacco Attorneys Recognized by Massachusetts Super Lawyers Magazine

Berman Tabacco is pleased to announce that seven attorneys from Berman Tabacco’s Boston office have been recognized by the Massachusetts Super Lawyers magazine, published by Thomson Reuters.  Partners Norman Berman, Kathleen Donovan-Maher, Patrick T. Egan, Nathaniel L. Orenstein, and Steven J. Buttacavoli, and attorney Jay Eng were selected as 2022 Super Lawyers and Partner Steven L. Groopman was selected as a 2022 Rising Star.

Super Lawyers, a Thomson Reuters company, states that it is “a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.”  Super Lawyers states that it recognizes the top 5% of attorneys in each state, as well as the top 2.5% for Rising Star attorneys, chosen by their peers and through independent research, peer nominations, and peer evaluations.

Benchmark Litigation Ranks Berman Tabacco as a “Top Plaintiffs” Firm for 7th Consecutive Year

The 2023 edition of Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, has issued its rankings profiling U.S. law firms.  Berman Tabacco was ranked as a Top Plaintiffs firm (in a select group of 12 firms) for the 7th consecutive year for its work representing individuals and institutions injured by violations of the securities and antitrust laws.  The firm was also ranked in the top category of Highly Recommended – the 12th consecutive year that the firm has received the Highly Recommended ranking from Benchmark Litigation.  The firm was also ranked as one of the top firms in California in the Plaintiff category (one of the top 5) and the Securities practice area, and it was also listed among the top dispute resolution firms in San Francisco.  Benchmark Litigation notes that Berman Tabacco has been referred to by peers as “one of the premier plaintiff shops.”

In addition to the firm’s rankings, nine partners have been recognized by Benchmark Litigation:

  • Norman Berman was ranked as a Local Litigation Star in the Securities practice area.
  • Joseph J. Tabacco, Jr. was ranked as a California Litigation Star and Local Litigation Star in Competition/Antitrust and Securities practice areas.
  • Kathleen M. Donovan-Maher was ranked as a Local Litigation Star in Securities and Competition/Antitrust practice areas.
  • Nicole Lavallee was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Leslie R. Stern was ranked as a Local Litigation Star in the Securities practice area.
  • Todd A. Seaver was ranked as a California Litigation Star and Local Litigation Star in the Plaintiff Class Action and Securities practice areas.
  • Daniel E. Barenbaum was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Patrick T. Egan was ranked as a Local Litigation Star in Securities and Competition/Antitrust practice areas.
  • Nathaniel L. Orenstein was ranked as a Future Star.

“Berman Tabacco is deeply honored that Benchmark Litigation has again recognized the firm in its 2023 edition,” said Kathleen Donovan-Maher, managing partner of the firm’s Boston office, “it is very rewarding to have our hard work and achievements on behalf of our clients acknowledged year-after-year.”

U.S. News & World Report and Best Lawyers® Ranks Berman Tabacco as a Top Tier firm in Securities and Antitrust in its Thirteenth Edition of “Best Law Firms”

Today, U.S. News & World Report and Best Lawyers® released their Best Law Firm rankings for 2023.  They have ranked Berman Tabacco both nationally and in the San Francisco metropolitan area as leaders in the areas of Litigation-Antitrust (for the fifth time) and Litigation-Securities (for the fourth time).   The Best Law Firms rankings are based on a combination of client feedback, information provided on law firm surveys, and Best Lawyers® peer review.  According to U.S. News & World Report and Best Lawyers, of the more than 22,000 firms, only 2,071 firms received a national law firm ranking in this edition.

To be eligible for consideration as a Best Law Firm, a firm must have at least one attorney ranked in the current edition of The Best Lawyers in America®.  Berman Tabacco has three ranked attorneys:  Joseph J. Tabacco, Jr. has been recognized in the areas of Litigation (Securities) and Litigation (Antitrust), Nicole Lavallee has been recognized in the area of Litigation (Securities), and Christopher T. Heffelfinger has been recognized in the area Litigation (Antitrust).  Best Lawyers® holds itself out as one of the oldest and most respected peer-review publications, with the 2023 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 12.2 million peer evaluations, and recognizing attorneys in 75 national practice areas.  “The legal community views ‘Best Law Firms’ rankings as the top marker of excellence for the reason that our methodology is comprehensive, rigorous and historically proven,” says CEO of Best Lawyers Phillip Greer. “Our extensive process guarantees this designation is bestowed upon only the best legal practices.”

Metropolitan San Francisco

  • Tier 1 in Litigation – Antitrust
  • Tier 1 in Litigation – Securities

National Rankings

  • Tier 2 in Litigation – Antitrust
  • Tier 2 in Litigation – Securities

SEC Adopts New ‘Pay-Versus Performance’ Rule on Executive Compensation Disclosures

The U.S. Securities and Exchange Commission (“SEC”) has adopted a new rule requiring companies to disclose information comparing executive compensation to the company’s overall financial performance.

The SEC announced the adoption of the so-called “pay-versus-performance” rule requirements on August 25, with SEC Chair Gary Gensler noting the new rules will “help investors receive the consistent, comparable, and decision-useful information they need to evaluate executive compensation policies.”

This change comes after Congress in 2010 directed the SEC under the Dodd-Frank Act to adopt rules mandating that public companies clearly describe the relationship between the compensation that companies actually pay to executives and the company’s financial performance.

Under the new rule, a company must provide the following disclosures relative to executive pay:

  • A table disclosing specified executive compensation and financial performance measures for its five most recently completed fiscal years;
  • Reporting on total shareholder return (“TSR”), the TSR of companies in its peer group, net income, and a financial performance measure chosen by the company;
  • A description of the relationships between the executive compensation actually paid and each of the performance measures, as well as the relationship between the company’s TSR and the TSR of its selected peer group; and
  • A list of three to seven financial performance measures that it determines are its most important performance measures for linking actually paid executive compensation to company performance.

While companies already disclose both net income on their income statements and TSR in their proxy filings, the new rule now require companies to set out a clear description of the relationship between each of these performance metrics and the pay received by top executives.

The SEC first proposed the rule under former chair Mary Jo White in 2015, but the agency did not move the amendments forward at that point. In January 2022, the SEC reopened the comment period for the rule, requesting, among other things, specific feedback about the initial requirement that companies name and rank the five most important factors they used for determining executive pay. After public comment, the final rule grants more flexibility in identifying the important factors, allowing companies to disclose between three and seven of the most important measures in an unranked list.

In its release on the adoption, the agency notes that smaller reporting companies will be subject to scaled disclosure requirements—such as reporting three instead of five years of disclosures—consistent with their existing scaled executive compensation disclosure requirements.

The Commission voted 3-2 in favor of the proposed rule amendments, with Republican Commissioners Mark Uyeda and Hester Peirce voting against the adoption. In a statement about the agency’s adoption of the amendments, Commissioner Peirce stated that the new rulemaking “will elicit costly, complicated, disclosure of questionable utility.”

Commissioner Jaime Lizárraga, however, heralded the adopted rulemaking.

“I commend SEC Chair Gary Gensler for advancing this important priority that makes executive pay more accountable to shareholders,” Lizárraga said. “With these vital reforms, investors will gain critical tools to make informed decisions on their investments and on their advisory votes on executive compensation.”

The amendments are set to go into effect 30 days after the adopting release is published in the Federal Register, meaning companies must begin to comply with these new provisions in statements requiring Item 402 executive compensation disclosures for fiscal years ending on or after December 16, 2022.

Click here to read the full text of the final rule.

Berman Tabacco Appointed Lead Counsel in Inotiv, Inc. Securities Class Action

On September 12, 2022, the Honorable Philip P. Simon of the U.S. District Court for the Northern District of Indiana appointed Berman Tabacco as sole Lead Counsel in the securities class action lawsuit against Inotiv, Inc. and certain of its executive officers.  The action was brought on behalf of all persons who acquired the common stock of Inotiv during the period September 21, 2021 and June 13, 2022.  The Order further appointed Berman Tabacco’s client, Oklahoma Police Pension and Retirement System, as Lead Plaintiff.

The complaint alleges that defendants made materially false and misleading statements and/or material omissions concerning the company’s business, operations, and regulatory compliance policies, specifically related to its acquisition of Envigo RMS, LLC and the existence of widespread violations of federal animal welfare regulations at an Envigo dog breeding facility located in Cumberland, Virginia that led the U.S. Department of Justice to take action to rescue more than 4,000 animals and led to the shuttering of the facility.

The case is: In re Inotiv, Inc. Securities Litigation, No. 4:22-cv-00045-PPS-JEM (N.D. Ind.).  The litigation team includes Patrick T. Egan, Steven J. Buttacavoli, and Christina L. Gregg from the Boston office.

Lawdragon Recognizes Eight Berman Tabacco partners in its 2022 500 Leading Plaintiff Financial Lawyers

Industry observer Lawdragon has named eight Berman Tabacco partners to its 2022 list of the 500 Leading Plaintiff Financial Lawyers for the fourth consecutive year.  They are: Norman Berman, Joseph J. Tabacco, Jr., Kathleen M. Donovan-Maher, Nicole Lavallee, Leslie R. Stern, Christopher T. Heffelfinger, Todd A. Seaver, and Kristin Moody.

“We are grateful for Lawdragon’s continued recognition of our colleagues and the critical work they do on behalf of our clients and those injured by corporate misconduct,” said Daniel E. Barenbaum, a partner in Berman Tabacco’s San Francisco office.

The 500 Leading Plaintiff Financial Lawyers list includes lawyers who represent “plaintiffs in securities and other business litigation, antitrust, whistleblower claims and increasingly complex financial litigation and data privacy invasions.”  According to Lawdragon, the 500 Leading Plaintiff Financial Lawyers are chosen based on Lawdragon’s editorial research “through submissions, journalistic research and editorial vetting from a board of [] peers.”

Best Lawyers® Recognizes Berman Tabacco Attorneys for the Sixth Consecutive Year

Berman Tabacco is pleased to announce that five Berman Tabacco attorneys have again been recognized by The Best Lawyers in America® in their 29th edition (2023 ed.), which was released on August 18, 2022.

Three partners have been recognized by The Best Lawyers in America publication.  Joseph J. Tabacco, Jr. and Christopher T. Heffelfinger have been recognized in the areas of both Antitrust Litigation and Securities LitigationNicole Lavallee has been recognized in the area of Securities Litigation.

Additionally, partner Carl Hammarskjold and associate Colleen Cleary and have been recognized for the third consecutive time in The Best Lawyers in America: Ones to Watch for their work in Mass Tort Litigation / Class Actions – Plaintiffs.

“We thank Best Lawyers for its continuing recognition of Berman Tabacco’s attorneys and work they do on behalf of our clients, and we congratulate our colleagues for this honor,” commented Daniel Barenbaum, a partner in the firm’s San Francisco office.

Best Lawyers states that it is one of the oldest and most respected peer-review publications and “has become universally regarded as the definitive guide to legal excellence.”  For the 2023 edition, over 13 million peer evaluations, which resulted in more than 144,573 leading lawyers being included in 150 practice areas.

ESG Funds Reportedly Face SEC Scrutiny Over Voting on Social Issues

In an effort aimed at the environmental, social, and governance (“ESG”) investment industry, the U.S. Securities and Exchange Commission (“SEC”) has reportedly been investigating how vote trading impacts fund decisions on ESG issues.

Lawyers with the SEC Enforcement Division’s Asset Management Unit have reportedly been questioning firms offering ESG funds over how they lend shares and whether there are policies in place for recalling votes before corporate elections.

It has been reported that “sustainable” exchange-traded funds and mutual funds managed $2.5 trillion globally as of the end of June. This growth has reportedly fueled concerns by top regulators at the SEC that without measures in place requiring certain disclosures, firms lacking accountability may exaggerate the purported environmental and societal factors purportedly considered by the fund.

Specifically, shareholders can generally lend securities to other investors to hold temporarily, often for the purpose of shorting the stock or hedging. Because the owners lend their shares for a fee, this practice is often highly profitable for the lenders. When this is implemented in the ESG investment industry, the concern is that securities owners lend both their shares and their vote on decisions about critical ESG issues—therefore forgoing their own ability to affect ESG issues at the company while granting vote possession to short-sellers who have an oppositional interest in the fund.

The lending issue specifically brings into focus whether ESG funds and their respective fiduciaries can simultaneously meet claimed goals related to environmental, sustainability, and social governance issues while profiting from a short-selling practice that involves proxy voting.

In March 2021, former Democratic Commissioner and then-acting SEC chair Allison Herren Lee said funds should provide enhanced disclosures on how they vote for investors on related issues. In May, SEC chair Gary Gensler introduced a proposed rule that would require funds to disclose specifically how proxy voting fits into fund strategies that claim to consider ESG factors.

Supporters of the short-selling practice as it applies to all funds, including ESG, claim that money managers can recall shares if they want to vote on shareholder resolutions related to ESG issues.

This inquiry comes as the SEC under the Biden Administration continues to press regulation and enforcement of sustainability claims across the investment industry. In March 2021, the SEC announced the creation of a Climate and ESG Task Force in the Division of Enforcement to identify possible misconduct related to climate and ESG disclosures. News of this latest investigation comes as the SEC has both proposed significant new rules and initiated enforcement actions aimed at ESG-related disclosures.

The SEC has recently proposed three significant rules aimed at requiring ESG disclosures:

  1. Climate-related disclosures: On March 21, 2022, the SEC proposed a rule that would mandate certain climate-related disclosures for all companies with SEC reporting obligations under Securities Exchange Act of 1934 (“Exchange Act”) Section 13(a) or 15(d) for companies filing a registration statement pursuant to the Securities Act of 1933 (“Securities Act”). The rule would require disclosures in annual reports and registration statements related to direct and indirect greenhouse gas emissions, climate-related key performance metrics, and corporate governance practices mitigating climate risks.
  2. Investment adviser and investment company disclosures: On May 25, 2022, the SEC proposed a rule that would require funds and advisers engaging in ESG investing to provide more detailed disclosures related to the ESG strategies in fund prospectuses, annual reports, and adviser brochures. This would apply to registered investment companies, business development companies, registered investment advisers, and certain unregistered advisers. Related to this vote lending inquiry, this rule would also require enhanced disclosures by funds using proxy voting or relying on an issuer to implement ESG strategies, as well as information concerning their ESG engagement meetings.
  3. Extending the “Names-Rule” requirement: In an effort to combat “greenwashing,” or the process of conveying a false impression about an entity’s posture as environmentally conscious, on May 25, 2022, the SEC proposed an additional rule to amend the Investment Company Act “Names Rule” to address changes in the fund industry. Currently, the Names Rules requires registered investment companies whose names suggest a focus in a particular type of investment, industry, or geography to invest at least 80% of the value of their assets in those investments.

This proposed rule change would explicitly extend the Names Rule to funds indicating their investment decisions incorporate one or more ESG factors. In addition, the rule would make clear that integration funds—or funds that consider ESG factors along with, but not more significantly than, other factors—cannot use ESG-related terms in their names. In a statement on the proposed rule, Chair Gensler noted that the proposal “would modernize this key rule for today’s markets and enhance the transparency of the asset management field.”

While the SEC has yet to publicly announce any lawsuits related to this purported lending inquiry focusing on ESG funds, the agency recently began bringing cases and conducting investigations over ESG disclosures:

  • On May 23, 2022, the SEC announced a settlement with Bank of New York Mellon Investment Adviser Inc., in which BNY Mellon paid a $1.5 million penalty to settle allegations—which are neither admitted nor denied—that it made material misstatements and omissions regarding ESG factors related to its management of certain mutual funds.
  • On April 28, 2022, the SEC charged Brazilian mining company Vale S.A. with allegedly making false and misleading claims through its ESG disclosures regarding the safety of its Brumadinho dam prior to the dam’s collapse in January 2019. The collapse killed 270 people and caused significant environmental and social harm.
  • In June 2022, it was reported that the SEC is investigating Goldman Sachs over its ESG mutual funds.

While it is unclear where this purported investigation will lead, a focus on clarity in disclosures and adherence to stated investment characteristics can broadly be viewed as a positive development for investors in the marketplace.

Todd A. Seaver Selected as a Thought Leader: Competition

Who’s Who Legal (WWL), a publication of U.K.-based Global Competition Review and Law Business Research, has recognized San Francisco partner Todd A. Seaver in its publication WWL Thought Leaders: Competition.  According to WWL, this is a highly selective guide that features only those “scoring most highly” in their field and “are those individuals who have performed exceptionally well … with only a small proportion of those considered selected.”  Todd was previously selected for this honor in 2019 and 2020, and he has also been recognized by Global Competition Review in its Who’s Who Legal: Competition guides each year since 2017.

Legal Aid at Work Meritorious Service Award Given to Christopher T. Heffelfinger, a Partner in Berman Tabacco’s San Francisco Office

Christopher T. Heffelfinger, a long-time board member of Legal Aid at Work-Employment Law Center (LAW-ELC), was given a Meritorious Service Award in recognition of his long-standing support and work for the organization.  According to Legal Aid at Work, the Meritorious Service Award is given to current or former board members who “consistently and meaningfully” contribute their time and efforts to advancing the cause of Legal Aid at Work; it “recognizes those many contributions necessary to the continued success of the organization, including, by way of example, litigation and litigation support, finance, marketing, fundraising, operations, technology consulting, legal advice, and the provision of continuing education to staff members.”

Chris has been a LAW-ELC board member since 2010 and was Chair of the Development Committee and a member of the Executive Committee from 2015 to 2020.  He also taught a course on deposition taking to LAW-ELC staff attorneys.

Steven L. Groopman Recognized by Benchmark Litigation on its 40 & Under List

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, issued its 2022 edition of its 40 & Under list, which identifies “the best and brightest … emerging talent in litigation … across the US and Canada.”  Berman Tabacco is pleased to announce that Steven L. Groopman was named to Benchmark’s 40 & Under list for 2022 in the Plaintiff Class Action practice area.

Steve started with the firm in 2015 and is a Partner in the Boston Office.  He has represented the firm’s clients in multiple practices areas.  “The entire Berman Tabacco team congratulates Steve on this well-deserved recognition,” said Kathleen M. Donovan-Maher, Boston’s Managing Partner

Berman Tabacco Welcomes New Associate Christina Gregg To Its Boston Office

Berman Tabacco is pleased to welcome new associate Christina Gregg to its Boston office. Christina focuses her practice on securities and complex civil litigation.

Christina is a 2021 graduate of Suffolk University Law School. While in law school, Christina interned with the Massachusetts Attorney General’s Office in the Environmental Protection Division, where she assisted in both regulatory enforcement and consumer protection actions against ExxonMobil and Bayer AG. She also served as a legal intern for the Honorable David A. Lowy of the Massachusetts Supreme Judicial Court.

In law school, Christina served as managing editor of the Suffolk Law Journal of Trial & Appellate Advocacy and president of the Environmental Law Society. She also participated in a number of moot court competitions, including the Irving R. Kaufman Securities Law Moot Court Competition (semifinalist, 2021) and Hon. Walter H. McLaughlin Appellate Advocacy Competition (finalist, 2019).

Christina is passionate about social justice and community involvement. During law school, she served as a student attorney with the Suffolk Law Prosecutor’s Program, working in the Juvenile Unit of the Suffolk County District Attorney’s Office. She also served as a teaching fellow with the Marshall-Brennan Constitutional Literacy Project in a Boston public school.  In 2021, Christina received Suffolk University Law School’s Inaugural Chief Justice Ralph D. Gants Award, awarded to a graduating law student whose community and pro bono contributions have supported equal justice under the law in the spirit of the late Chief Justice.

Christina earned a B.A. in Journalism and Political Science from the University of Massachusetts Amherst in 2014.

Ten Berman Tabacco Attorneys Selected for Recognition by Northern California Super Lawyers Magazine, Including San Francisco Founding Partner Joseph J. Tabacco, Jr. Named to the “Top 100” Lawyers List

Berman Tabacco is pleased to announce that ten attorneys from Berman Tabacco’s San Francisco office—seven partners and three associates—have been selected for recognition by Northern California Super Lawyers magazine, published by Thomson Reuters.  The attorneys designated as 2022 Northern California Super Lawyers are partners Joseph J. Tabacco, Jr.; Nicole Lavallee; Todd A. Seaver; Daniel E. Barenbaum; Kristin Moody; Christopher T. Heffelfinger; and Matthew D. Pearson.  In addition, associates A. Chowning Poppler, Colleen Cleary, and Jeffrey V. Rocha have been designated as 2022 Northern California Rising Stars (a designation for attorneys under 40 or who have been in practice for less than 10 years).

Further, San Francisco office founding partner Joseph J. Tabacco, Jr. has once again been named to the Top 100 lawyers list, an honor he has received for the past 4 years.  Mr. Tabacco has long been recognized by Super Lawyers, having been selected as a top-rated antitrust litigation attorney each year since 2004.

Super Lawyers notes that it is “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  The publication states that it recognizes no more than the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

The Legal 500 Names Berman Tabacco As Litigation Leader In Securities And Antitrust

Berman Tabacco has again been recognized as a leader in plaintiffs’ securities and antitrust litigation by The Legal 500.  This is the sixth consecutive year that the firm has been recognized by The Legal 500.

The firm was ranked as a leading firm in both Dispute Resolution-Securities Litigation: Plaintiff and Antitrust-Civil Litigation/Class Actions: Plaintiff in The Legal 500’s 2022 U.S. edition.  The Legal 500 analysis notes that the securities practice group “handles a broad range of complex litigation” and the “team punches above its weight in handling high-value cases.”

The Legal 500 has been analyzing law firms worldwide for the past 33 years and they “highlight the practice area teams who are providing the most cutting edge and innovative advice.”  According to The Legal 500, their research is based on “feedback from 300,000 clients worldwide, submissions from law firms and interviews with leading private practice lawyers, and a team of researchers who have unrivalled experience in the legal market.”

Berman Tabacco And Its Attorneys Again Recognized As Securities Litigation Leaders By Chambers USA

Berman Tabacco has once again been recognized as a leader in securities litigation in both the California (Litigation) and USA-Nationwide (Securities Litigation) guides published by Chambers USA, the U.S.-based arm of Chambers and Partners.  Chambers released its 2022 rankings on June 1st, stating that the firm “always has a strong understanding of the case” and the team is “very responsive and efficient,” and further that “[t]hey’re a longstanding, respected plaintiffs’ firm.”  In addition to the firm, both Joseph J. Tabacco, Jr. and Nicole Lavallee were individually recognized as among the top U.S. litigators in securities litigation in California.

This is the 16th consecutive year that Joe has been ranked by Chambers in securities litigation, which quoted a client or counsel who noted that Joe is “an outstanding plaintiff’s lawyer” and “a very strong and strategic plaintiffs’ attorney.”  Nicole, the Managing Partner of Berman Tabacco’s San Francisco office and a member of the firm’s Executive Committee, was recognized for the second time by Chambers in securities litigation, which quoted a client or counsel who stated that Nicole is “a really terrific plaintiff lawyer and a real advocate in the community.”

“We are deeply honored that Chambers USA once again recognized the firm in its 2022 rankings and highlighted Joe and Nicole for the work they do on behalf of the firm’s clients,” said Daniel Barenbaum, a partner in Berman Tabacco’s San Francisco office.  “This recognition is particularly gratifying as it is indicative of the exemplary work and tireless dedication that each of our attorneys delivers to our clients every day.”

Ranked in Chambers 2022 - Berman Tabacco     Ranked in Chambers 2022 - Joseph Tabacco     Ranked in Chambers 2022 - Nicole Lavallee

Berman Tabacco Welcomes Two New Associates to its San Francisco Office Team

Berman Tabacco is pleased to welcome two new associate attorneys to the firm in its San Francisco office.

Christina M. Sarraf

Christina focuses her practice on securities ligation. Prior to joining the firm, she worked as an associate in the San Francisco office of the nation’s largest injury firm where she represented consumers in class action litigation in both state and federal court. Christina played an important role in a variety of high-profile privacy, automotive, and other consumer product cases against large tech companies and automobile manufacturers. She has also advised Silicon Valley startups on corporate compliance and intellectual property protection. Christina earned her J.D. at the University of New Mexico School of Law. While in law school, she externed at the Sixth District Court of Appeal for the State of California and clerked at Bay Area Legal Aid in San Francisco and various private firms in New Mexico.

Alex Vahdat

Alex focuses his practice on complex securities and antitrust litigation.  Prior to joining the firm, he focused his practice on commercial and employment matters. He also represented whistleblowers in qui tam actions under the False Claims Act.  Alex is a graduate of the University of California, Davis, where he earned his J.D. from the School of Law in 2012 and his B.A. in Political Science in 2007.  While in law school, Alex interned for the U.C. Davis School of Law Civil Rights Clinic, where he represented indigent clients alleging civil rights abuses. Alex was also an editor for the UC Davis Business Law Journal and participated in moot court competitions.

Berman Tabacco’s San Francisco Office Has Moved

Berman Tabacco is pleased to announce that the San Francisco office has moved effective May 1, 2022.  Our telephone and fax numbers remain the same.  Our new address is:

Berman Tabacco
425 California Street, Suite 2300
San Francisco, CA 94104

SEC Proposes New Disclosure Requirements For SPACs

The U.S. Securities and Exchange Commission (“SEC”) recently proposed a set of new rules regulating special purpose acquisition companies (“SPACs”) that will essentially make SPAC transactions more in line with traditional initial public offerings (“IPOs”) in terms of disclosure, marketing, and issuer obligations. According to SEC Chair Gary Gensler, since SPACs present an alternative method to go public from traditional IPOs, the proposed rules are representative of Aristotle’s famous maxim to “treat like cases alike” in terms of investor protection.

A SPAC, also known as a blank-check company, is typically a shell company that is organized for the purpose of merging with or acquiring one or more unidentified target companies (a “de-SPAC transaction”) within a certain time frame (often two years) that conducts an initial public offering of $5 million or more in units consisting of redeemable shares and warrants.

If adopted, the proposed rules would require SPAC financial statements to be more closely aligned with the financial statements required in registration statements for initial public offerings. Specifically, the SEC’s proposed rules would:

  • Require additional disclosures about the sponsor(s) of the SPAC, including the sponsors’ compensation, potential conflicts of interest, and dilution, including a statement concerning whether the de-SPAC transaction and any related financing transaction are fair or unfair to investors;
  • Require that disclosure documents in de-SPAC transactions be disseminated to investors at least 20 calendar days in advance of a shareholder vote on the merger;
  • Subject a target company and its signatories to liability under Section 11 of the Securities Act for an IPO registration statement filed by a SPAC;
  • Require that any business combination of a public shell company with a non-shell company entity be deemed a “sale” to the shell company’s shareholders for the purposes of the Securities Act;
  • Require a company to re-determine whether it qualifies as a smaller reporting company following a SPAC business combination, prior to its first SEC filing;
  • Deem any SPAC underwriter who takes steps to facilitate a de-SPAC transaction, or any related financing transaction, to be engaged in a distribution and to be an underwriter in the de-SPAC transaction; and
  • Remove the safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995 (PSLRA) for SPACs, including with respect to fiscal projections of target companies, by amending the definition of a “blank check company” to encompass SPACs.

The SEC noted that a number of factors may have prompted the proposed changes, including relatively poor returns for investors in companies following a de-SPAC transaction; inadequate disclosures about potential benefits, risks, and effects for investors; a lack of information about the potential benefits for the sponsor and other affiliates of the SPAC; and inadequate disclosures about potential conflicts of interest between sponsors and retail investors. The SEC expects the proposed new rules to improve the usefulness and clarity of the information provided to investors and to provide investors with improved and potentially earlier access to more consistent, comprehensive, and readily comparable information to enable them to make more informed voting, investment, and redemption decisions in connection with SPAC transactions.

The proposed rules surrounding disclosure, marketing, and issuer obligations could also address concerns raised by the Council of Institutional Investors Research and Education Fund, which has previously pointed out the disconnect that exists between the interests of investors and the interests of SPAC sponsors, who can be handsomely rewarded simply for closing a deal, regardless of the viability of the newly public company as a long-term investment.

On the other hand, the proposal is viewed by some as unduly stifling. Dissenting commissioner Hester Peirce stated that “[t]he proposal—rather than simply mandating sensible disclosures around SPACs and de-SPACs, something I would have supported—seems designed to stop SPACs in their tracks.” She added that “[t]he typical SPAC would not meet the proposal’s parameters without significant changes to its operations, economics, and timeline.”

The proposed amendments are currently open for public comment until May 31, 2022.  Comments may be submitted electronically at https://www.sec.gov/rules/proposed.shtmlor via email torule-comments@sec.govSubmissions should reference File Number S7-13-22.  If comments are sent via email, this file number should be included on the subject line of the email.

Berman Tabacco Listed in ISS SCAS’ The Top 100 U.S. Class Action Settlements of All Time

Institutional Shareholder Services’ Securities Class Action Services (ISS SCAS) has published The Top 100 U.S. Class Action Settlements of All-Time (as of December 31, 2021), which, as reported by ISS SCAS, is an annual report that identifies the largest securities class action settlements filed after the passage of the Private Securities Litigation Reform Act of 1995.  The cases reported are ranked by the total value of the settlement fund.  According to the report, in 2021 ISS SCAS recorded 116 approved monetary securities class action settlements in the United States with a combined value of $3.51 billion.

Berman Tabacco was once again listed as one of the firms with the most settlements on the Top 100 list, with six settlements totaling $2,150,900,000.

Berman Tabacco Shortlisted as a Finalist for California Plaintiff Firm of the Year for 2022 by Benchmark Litigation

Berman Tabacco is honored to have been selected by Benchmark Litigation as one of four finalists in the California Plaintiff Firm of the Year category for its Benchmark Litigation Awards 2022.  This is the fourth consecutive year that Berman Tabacco has received this honor.  In addition, name partner Joseph J. Tabacco, Jr. has been selected for the second consecutive year as one of five finalists in the Plaintiff Litigator of the Year category.  Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, is hosting its tenth annual Benchmark Litigation Awards on April 7, 2022 at the JW Marriott in San Francisco.

In 2022, the firm was selected by Benchmark California as a Tier 1 firm—the highest rank awarded— in its Plaintiff Work  category, with partners Joseph J. Tabacco, Jr., Nicole Lavallee, Todd A. Seaver, and Daniel E. Barenbaum designated as Litigation Stars.  Nationally, the firm was recognized as a Top 10 Plaintiffs firm (for the 6th time) and in the top category of Highly Recommended (for the 11th time).

These are illustrative of similar rankings within Benchmark Litigation’s National and California rankings, both for the firm and its attorneys. Boston partners Norman Berman, Kathleen Donovan-Maher, Leslie Stern, and Patrick T. Egan were designated as Massachusetts Litigation Stars, and Nathaniel Orenstein was designated as a Massachusetts Future Litigation Star.  In California regional rankings, the firm was recognized as a Tier 1 firm in the San Francisco region, with San Francisco partners Joseph J. Tabacco, Jr., Nicole Lavallee, Todd A. Seaver, and Daniel E. Barenbaum designated as both California State Litigation Stars and San Francisco Local Litigation Stars.

“We appreciate Benchmark Litigation’s continued recognition of our firm’s and attorneys’ work on behalf of our clients,” said Boston partner Patrick Egan.  “Recognition of the firm is a testament to the extraordinary efforts made by every member of our team to provide our clients with the best possible counsel.”

Justice Breyer, Judge Jackson and Shareholder Rights at the Supreme Court

On February 25, 2022, President Biden announced Judge Ketanji Brown Jackson as his nominee to replace retiring Justice Stephen Breyer on the United States Supreme Court. Judge Jackson has a long, diverse resume, with experience as a law clerk (at the district, appeals and Supreme Court levels), in private litigation, as a public defender and, for the past decade, as a trial and appellate judge. If confirmed, Judge Jackson will be the first Black woman appointed to the Supreme Court, as well as the first former public defender.

As the Supreme Court has drifted right during the Trump years, Judge Jackson is expected to preserve the current ideological balance on the Court. But while Justice Breyer was a consistent supporter of shareholder rights, he authored rulings that both increased and decreased plaintiffs’ burdens in prosecuting securities class action. Judge Jackson, on the other hand, comes to her nomination with decades of legal experience in a broad range of disciplines, but with no track record in shareholder litigation.

Justice Breyer’s Legacy on Shareholder Rights

During his twenty-seven-year tenure on the Court, Justice Breyer has been a steady protector of the rights of shareholders. He has long recognized and supported the private right of action under federal securities laws. Further, he has voted to strengthen shareholders’ ability to preserve the fraud-on-the-market presumption in proving reliance at class certification, recognized in Basic v. Levinson. Justice Breyer also authored Merck & Co., Inc. v. Reynolds, which held that statute of limitation for a plaintiff to file a federal securities fraud lawsuit begins to run as soon as a plaintiff discovers, or should have discovered, the facts showing a violation of securities law, including facts that the defendant knew that the statements were false.

In the securities law context, however, Justice Breyer will most be remembered as the author of Dura Pharmaceuticals, Inc. v. Broudo, which held that plaintiffs must show that a defendant’s material misrepresentation or omission caused a stock’s decline, rather than an intervening event. By clarifying that it is not enough for a plaintiff to merely allege that the price was artificially inflated by a defendant’s misrepresentation, Justice Breyer set the stage for the core proximate cause/economic loss analysis so pivotal to private securities shareholder litigation under Section 10(b) of the Securities Exchange Act of 1934.

Judge Jackson – A Shareholder Rights Blank Slate

During the nomination ceremony, President Biden praised Judge Jackson as “a proven consensus builder, an accomplished lawyer” and “a distinguished jurist.” After Judge Jackson offered an introduction to her family history and legal career, she commented, “[I]f I am fortunate enough to be confirmed . . . I can only hope that my life and career, my love of this country and the Constitution, and my commitment to upholding the rule of law and the sacred principles upon which this great nation was founded will inspire future generations of Americans.”

Judge Jackson has been nominated after serving eight years as a district court judge, and less than a year as an appellate judge on the Court of Appeals for the D.C. Circuit. During her tenure on the bench, Judge Jackson has not issued any rulings related to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) or other shareholder-rights issues. This prompts the question: if confirmed, what impact will Judge Jackson have on securities litigation and investor protection? Given her background, and particularly her experience as a former clerk to Justice Breyer, Judge Jackson has the potential to be a reliable vote to preserve the private right of action and shareholder rights. But, of course, time will tell. With no securities litigation cases pending before the Court, the impact for investors of the new Court make-up could take years to play out.

Judge Jackson’s confirmation hearings are set to commence on March 21.

Berman Tabacco Settles Healthcare Services Group Securities Class Action

On January 12, 2022, the Honorable Eduardo C. Robreno of the Eastern District of Pennsylvania granted final approval to a $16.8 million settlement of a securities fraud class action brought by Berman Tabacco on behalf of its client against Healthcare Services Group Inc. (“HCSG”) and certain of its current and former officers. Berman Tabacco is sole Lead Counsel representing a state public pension fund in the class action suit.

HCSG is one of the largest providers of housekeeping, laundry, and dietary services to hospitals and other healthcare organizations.  The action alleged that, during the class period, defendants issued materially false and misleading statements and failed to disclose “earnings management” practices that allowed HCSG to consistently meet or beat earnings per share (“EPS”) estimates, which, in turn, caused the price of the company’s stock to be artificially inflated.  In addition, the action alleges that HCSG and defendants failed to disclose the existence of an ongoing SEC investigation into the Company’s EPS practices.

In a 33-page Memorandum approving all aspects of the settlement, Judge Robreno concluded that it was “clear” that each of the Rule 23(e) factors governing class action settlements supported approval of the settlement and that additional considerations established by the Third Circuit further favored approval of the settlement.  The Court also found that the overall fairness of the settlement was underscored by the fact that, as Lead Counsel, Berman Tabacco had satisfied a “heightened standard … designed to ensure that class counsel has demonstrated sustained advocacy throughout the course of the proceedings and has protected the interests of all class members.”

The settlement will provide relief to a class of investors that purchased HCSG common stock from April 14, 2014 through February 9, 2021.  For more information on the settlement or claims process, please see HCSGSecuritiesLitigation.com.

“We are very happy that the Court approved the settlement of this hard-fought litigation and we are proud to have worked alongside our client to obtain this result for them and other HCSG investors,” commented Berman Tabacco partner Patrick T. Egan.

The case is Utah Retirement Systems v. Healthcare Services Group, Inc., et al., No. 2:19-CV-01227-ER (E.D. Pa.).  The litigation team includes Patrick T. Egan and Steven J. Buttacavoli from Berman Tabacco’s Boston office and Nicole Lavallee and Jeffrey V. Rocha from the firm’s San Francisco office.

Berman Tabacco Welcomes Danielle Smith, Associate Attorney, to its San Francisco Office Team

Berman Tabacco is pleased to welcome Danielle Smith as an associate attorney in its San Francisco office.  Prior to joining the firm in 2022, Danielle focused her practice on complex civil litigation in the area of securities fraud, particularly claims arising under the Securities Exchange Act of 1934 and the Securities Act of 1933. She has also previously advised public entities in municipal law and labor and employment matters.  Danielle is a 2012 graduate of Harvard Law School. Before studying law, Danielle earned a B.A. in History from Columbia University.

Steven Groopman Promoted to Partner

Berman Tabacco is proud to announce that Steven Groopman has been elevated to the position of Partner effective January 1, 2022.

Steve started with the firm in 2015 and has represented the firm’s clients in a host of cases, spanning many practices areas.  From securities litigation and stockholder derivative suits to ERISA healthcare litigation and consumer protection class actions, Steve has excelled at strategic and creative thinking in complex, cutting-edge matters, obtaining hard fought victories for our clients and the classes they represent.

Recently, Steve was a key member of the litigation team that secured a $186.5 million settlement on behalf of a class of individuals who took out high interest rate loans from American Web Loan (“AWL”).  AWL is an online lender alleged to have circumvented state and federal law, including RICO, usury laws and other laws against high-interest lending to make loans of between $300 and $2,500 that carry annual interest rates as high as 726%.  The $186.5 million settlement provided $86 million in cash recovery for the class, cancellation of $100.5 million worth of outstanding class period loans and other significant non-monetary and injunctive relief.

Currently, Steve is litigating two significant derivative actions.  First, Steve is pursuing claims to hold vaccine manufacturer Emergent BioSolution’s board and top executives responsible for the Company’s alleged failure to implement safety and sterility measures, which resulted in the destruction of millions of doses of COVID-19 vaccines.  Second, Steve is litigating a derivative action concerning Walmart’s role in the opioid crisis, having allegedly sold massive amounts of controlled substances without the necessary compliance systems mandated by the Drug Enforcement Agency pursuant to the Controlled Substances Act.

“We congratulate Steve on his new role as Partner,” said Boston Managing Partner  Kathleen M. Donovan-Maher .  “Steve’s expertise, quick legal mind and passion for helping others have been a tremendous asset to our firm.  We look forward to his continued success.”

Partner Nathaniel Orenstein added, “Steve instantly recognizes ways in which our clients are impacted by corporate malfeasance, identifies creative and effective ways for our clients to protect their rights, and works tirelessly on their behalf.”

Prior to joining Berman Tabacco, Steve served as a law clerk to the Hon. Dickinson R. Debevoise on the U.S. District Court for the District of New Jersey.  Earlier in his career, Steve worked as an associate at a litigation and white-collar defense boutique law firm in New York.

Steve was named a Rising Star by New England Super Lawyers magazine (2017-2021).

San Francisco Magazine Features Its Annual List of Top Women Attorneys in Northern California

The December issue of San Francisco Magazine features its annual list of Top Women Attorneys of Northern California based on Super Lawyers’ rankings.  Berman Tabacco is pleased to announce that four attorneys from the San Francisco office—two partners and two associates—have been featured in this list.

San Francisco Managing Partner Nicole Lavallee has been designated a Super Lawyer in the Securities Litigation category for the fifth consecutive year (2017-2021) and partner Kristin J. Moody has been selected for the same honor for the second consecutive year (2020-2021).  In addition, Ms. Lavallee was featured in the Top 50 Women in Northern California, a list of the women lawyers who ranked “top of the list.”

Associates A. Chowning Poppler and Colleen Cleary have been designated as 2021 Northern California Rising Stars (a designation for attorneys under 40 or who have been in practice for less than 10 years).  Ms. Poppler has been recognized as a Rising Star for the past five years, this year in Civil Litigation: Plaintiff (2017-2021) and Ms. Cleary has been recognized as a Rising Star in Antitrust Litigation (2021).

Berman Tabacco Partner Kathleen Donovan-Maher Selected as 2021 Top Lawyer by Boston Magazine

Boston Managing Partner Kathleen Donovan-Maher has been selected as one of the Top Lawyers of 2021 by Boston Magazine in its inaugural list of the “best lawyers in the region.”  The list was compiled through a two-step peer-review process across several practices areas, including voting and a further review by an “an advisory board of select lawyers, chosen for their credentials and the high number of votes they received.”

Kathleen focuses her practice on litigating complex class actions including securities, RICO, and consumer litigation, in addition to serving as Managing Partner of the Boston office and a member of the Firm’s Executive Committee.  Recently, Kathleen led a consumer class action brought on behalf of individuals who took out high interest rate loans from American Web Loan AWL, an online lender alleged to have circumvented state and federal law, including RICO, usury laws and other laws against high-interest lending to make loans of between $300 and $2,500 that carry annual interest rates as high as 726%.  Earlier this year, the Court granted final approval of the $186.5 million settlement, which provides for an $86 million cash recovery for the class, cancellation of $100.5 million worth of outstanding class period loans and other significant non-monetary and injunctive relief.

“We congratulate Kathleen on being selected a ‘Top Lawyer’ by Boston Magazine and her peers,” commented Boston Partner Leslie R. Stern, “it is well earned in light of Kathleen’s decades of successes representing shareholders and consumers.”

Boston Magazine is a publication that has focused on the Boston area for more than 40 years and has “been named among the three best city magazines in the nation seven times by the City and Regional Magazine Association.”

Eight Berman Tabacco Attorneys Recognized by New England Super Lawyers Magazine

Berman Tabacco is pleased to announce that eight attorneys from Berman Tabacco‘s Boston office—five partners and three associates—have been recognized by the New England Super Lawyers Magazine, published by Thomson Reuters.  Partners Norman Berman, Kathleen Donovan-Maher, Nathaniel L. Orenstein, Steven J. Buttacavoli, and Bryan A. Wood were selected as 2021 New England Super Lawyers (this is the sixteenth time that Norman Berman has been recognized) and associates Lindsey Silver, Steven L. Groopman, and M. Dalton Rodriguez were selected as 2021 New England Rising Stars.

Super Lawyers, a Thomson Reuters company, states that it is “a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.”  Super Lawyers states that it recognizes the top 5% of attorneys in each state, as well as the top 2.5% for Rising Star attorneys, chosen by their peers and through independent research, peer nominations, and peer evaluations.

U.S. News & World Report and Best Lawyers® Ranks Berman Tabacco as a Top Tier firm in Securities and Antitrust in its Twelfth Edition of “Best Law Firms”

U.S. News & World Report and Best Lawyers® have released their Best Law Firm rankings for 2022.  They have ranked Berman Tabacco both nationally and in the San Francisco metropolitan area as leaders in the areas of Litigation-Antitrust (for the fourth time) and Litigation-Securities (for the third time).   The Best Law Firms rankings are based on a combination of client feedback, information provided on law firm surveys, and Best Lawyers® peer review.  According to U.S. News & World Report and Best Lawyers, of the more than 22,000 firms reviewed, only about 2,000 received a national law firm ranking in this edition.

To be eligible for consideration as a Best Law Firm, a firm must have at least one attorney ranked in the current edition of Best Lawyers®.  Berman Tabacco has three ranked attorneys:  Joseph J. Tabacco, Jr. has been recognized in the areas of Litigation (Securities) and Litigation (Antitrust), Nicole Lavallee has been recognized in the area of Litigation (Securities), and Christopher T. Heffelfinger has been recognized in the area Litigation (Antitrust).  Best Lawyers® holds itself out as one of the oldest and most respected peer-review publications, with the 2022 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 8.3 million peer evaluations, and recognizing attorneys in 75 national practice areas and 127 metropolitan practice areas.  Phil Greer, the CEO of Best Lawyers said, “We are proud that Best Law Firms rankings continuously act as a top marker of distinction throughout the legal industry.  The evaluation process for the 2022 Best Law Firms publication has remained just as rigorous and discerning as it was when we created the publication 12 years ago.”

Ranked in US News-Best Lawyers & Law Firms 2022 - Berman Tabacco

Metropolitan San Francisco

  • Tier 1 in Litigation – Antitrust
  • Tier 1 in Litigation – Securities

National Rankings

  • Tier 2 in Litigation – Antitrust
  • Tier 3 in Litigation – Securities

 

Berman Tabacco Settles Sterling Bancorp Securities Class Action

On September 23, 2021, the Honorable Judith E. Levy of the Eastern District of Michigan granted final approval to a $12.5 million settlement of a securities fraud class action brought by Berman Tabacco on behalf of its client against Sterling Bancorp, Inc. (“Sterling”). Berman Tabacco is sole Lead Counsel representing Oklahoma Police Pension and Retirement System in the class action suit against Sterling, certain of its current and former officers and directors, and the underwriters for the company’s initial public offering (“IPO”). The $12.5 million settlement represents over 20% of the maximum damages had plaintiffs prevailed on all claims.

Sterling, headquartered in Southfield, Michigan, is the unitary thrift holding company of Sterling Bank and Trust. The company specializes in residential mortgages. This case focused on the rapid rise and dramatic fall of Sterling’s core loan program, the Advantage Loan Program or ALP, which represented more than 70% of the Company’s revenue and assets. As alleged, Sterling and the ALP operated in a highly regulated environment and were subject to residential lending regulations and strict Bank Secrecy Act and Anti-Money Laundering laws (“BSA/AML”). These laws required that Sterling maintain robust, sophisticated, and effective underwriting, internal controls, and due diligence systems as well as documentation and procedures to verify borrowers’ identity, income, ability to repay, and sources of funds. In this heightened regulatory environment, Defendants repeatedly touted its “disciplined” and “conservative” underwriting, risk management, and internal controls.

As alleged in the complaint, however, underwriting, internal controls, and risk management for the ALP were practically non-existent; Sterling was not in compliance with BSA/AML and residential lending laws, there was almost no documentation required to verify ALP borrowers’ identity, employment, or sources of cash they used to obtain the mortgages, and the ALP loans were riddled with red flags of money laundering. Ultimately, Sterling was forced to shut down the ALP due to widespread issues with its loan origination process; numerous employees were terminated or abruptly resigned, including all three Officer Defendants and other top management; and Sterling and the ALP’s lending practices were subject to an internal review and are currently under a criminal DOJ investigation and a formal OCC investigation.

The settlement will provide relief to a class of investors that purchased Sterling common stock from November 17, 2017 through March 17, 2020.

“Balancing the strength of our allegations, with ongoing civil and criminal investigations into the company, we are pleased with both the timing and results of this settlement—for our client and the class,” commented Berman Tabacco partner Kristin J. Moody.

The case is Oklahoma Police Pension & Retirement System v. Sterling Bancorp, Inc, et al., No. 5:20-cv-10490-JEL-EAS (E.D. Mich.). The litigation team includes partners Kristin J. Moody from Berman Tabacco’s San Francisco office and Patrick T. Egan from Berman Tabacco’s Boston office.

Benchmark Litigation 2022 Ranks Berman Tabacco as a “Top Ten Plaintiffs” Firm in the U.S. for the Sixth Consecutive Year

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, has issued its 2022 rankings profiling U.S. law firms.  Berman Tabacco was ranked as a Top Ten Plaintiffs firm for the sixth consecutive year for its work “on behalf of individuals and institutions who have suffered financial harm due to violations of securities or antitrust laws.”  The firm also ranked in the top category of Highly Recommended 2022 – the eleventh time the firm has received the Highly Recommended ranking from Benchmark Litigation.  In California, the firm was ranked as one of the top firms in the Plaintiff category (one of the top 5) and the Securities practice area, and it was also listed among the top plaintiff firms in San Francisco.  Benchmark Litigation notes that Berman Tabacco has been referred to by peers as ‘one of the premier plaintiff shops.’”

In addition to the firm’s rankings, ten of the firm’s partners were recognized by Benchmark Litigation:

  • Norman Berman was ranked as a Local Litigation Star in the Securities practice areas.
  • Joseph J. Tabacco, Jr. was ranked as a California Litigation Star and Local Litigation Star in Competition/Antitrust and Securities practice areas.
  • Kathleen M. Donovan-Maher was ranked as a Local Litigation Star in Securities and Competition/Antitrust practice areas.
  • Nicole Lavallee was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Leslie R. Stern was ranked as a Local Litigation Star in the Securities practice area.
  • Todd A. Seaver was ranked as a California Litigation Star and Local Litigation Star in the Plaintiff Class Action and Securities practice areas.
  • Daniel E. Barenbaum was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Patrick T. Egan was ranked as a Local Litigation Star in Securities and Competition/Antitrust practice areas.
  • Bryan A. Wood was ranked as a Local Litigation Star in Securities and Competition/Antitrust practice areas.
  • Nathaniel L. Orenstein was ranked as a Future Star.

“We are honored that Benchmark Litigation has recognized Berman Tabacco in its 2022 rankings for the firm’s tireless dedication to achieving great results for our clients,” said Kathleen Donovan-Maher, managing partner of the firm’s Boston office.

Lawdragon Again Recognizes Eight Berman Tabacco partners in its 2021 500 Leading Plaintiff Financial Lawyers

For the third consecutive year, industry observer Lawdragon has named eight Berman Tabacco partners to its 2021 list of the 500 Leading Plaintiff Financial Lawyers:

The list includes lawyers who represent “plaintiffs in securities and other business litigation, antitrust, whistleblower claims and increasingly complex financial litigation and data privacy invasions.”  According to Lawdragon, The 500 Leading Plaintiff Financial Lawyers are chosen based on Lawdragon’s editorial research “through submissions, journalistic research and editorial vetting from a board of [] peers.”

Best Lawyers® names Joseph J. Tabacco, Jr. Lawyer of the Year in Securities Litigation for 2022 and again Recognizes Berman Tabacco Attorneys for the Fifth Consecutive Year

Berman Tabacco is pleased to announce that San Francisco founding partner Joseph J. Tabacco, Jr. has been selected as Lawyer of Year in Securities Litigation by The Best Lawyers in America® in their 28th edition (2022), which was released on August 19, 2021.According to Best Lawyers, the “Lawyer of the Year honors are awarded to only one lawyer per practice area in each region with extremely high overall feedback from their peers, making it an exceptional distinguishment.”  Joe was recognized by Best Lawyers in the areas of Securities and Antitrust Litigation, along with San Francisco Managing Partner Nicole Lavallee, who was recognized in the area of Securities Litigation, and partner Christopher T. Heffelfinger, who was recognized in the area of Antitrust Litigation.  This is the fifth consecutive year that Berman Tabacco attorneys have been recognized by Best Lawyers.

Additionally, one partner—Carl Hammarskjold—and two associates—Colleen Cleary and A. Chowning Poppler—have been recognized for the second consecutive year by The Best Lawyers in America: Ones to Watch for their work in Mass Tort Litigation / Class Actions – Plaintiffs.

“We are thrilled for Joe’s well-deserved recognition and appreciate Best Lawyers’ acknowledgement of Berman Tabacco attorneys and their dedicated efforts on behalf of our clients,” commented Daniel Barenbaum, a partner in the firm’s San Francisco office.

Best Lawyer states that it is one of the oldest and most respected peer-review publications and has become universally regarded as the definitive guide to legal excellence.  For the 2022 edition, more than 10.8 million evaluations were analyzed, which resulted in more than 66,000 leading lawyers being included in 147 practice areas which, they state, results in the recognition of approximately 5% of lawyers in private practice across the country.

Berman Tabacco and its Attorneys Again Recognized as Litigation Leaders by The Legal 500

Berman Tabacco and several of its partners continue to be recognized as leaders in their areas of practice by some of the legal industry’s leading publications, including The Legal 500.  This is the fifth consecutive year that the firm has been recognized by The Legal 500.

The firm was recently ranked as a leading firm in both Dispute Resolution-Securities Litigation: Plaintiff and Antitrust-Civil Litigation/Class Actions: Plaintiff in The Legal 500’s 2021 U.S. edition.  The ranking highlights client testimonials including that the “lawyers at Berman Tabacco prioritize client involvement in key decision making and work hard to ensure that the client understands the implications of each phase of litigation” and that it “matters to them that they are working to achieve results for the benefit of each member of the pension fund, most of whom will never know about the litigation.”  Five of the firm’s partners received recognition from the publication.  Joseph J. Tabacco, Jr., Todd Seaver, and Patrick Egan were recommended under the category Antitrust-Civil Litigation/Class Action: Plaintiff.  And Joseph J. Tabacco, Jr., Nicole Lavallee, and Leslie Stern were recommended under the category Dispute Resolution-Securities Litigation: Plaintiff.

Berman Tabacco Client Awarded SEC Whistleblower Bounty

Today, the U.S. Securities and Exchange Commission (“SEC”) announced awards totaling nearly $1.6 million to two whistleblowers who “provided valuable information that assisted the staff in an existing investigation,” noting that the “whistleblowers not only stepped forward to report suspicious conduct, but also continued to provide critical additional assistance.”  Berman Tabacco partner, Bryan A. Wood, represented one of the whistleblowers, an outside analyst.

In announcing the awards, the SEC noted that “[w]histleblowers can provide a wealth of information and ongoing assistance that helps the SEC bring enforcement actions quicker and more efficiently.” The SEC awarded one whistleblower approximately $1,000,000, while granting a $525,000 award to Berman Tabacco’s client. The SEC praised both whistleblowers for providing “valuable information that assisted the staff in an existing investigation,” adding that the “independent analysis” provided by Berman Tabacco’s client “was helpful to the staff by narrowing the investigation’s focus” and “assisted the staff and informed the final charges brought by the Commission.”

“We are very pleased at this outcome,” commented Mr. Wood. “Today’s announcement reaffirms the SEC’s commitment to reward the work of outside analysts for the critical information and insight they provide to the launch and advancement of regulatory enforcement actions.”

Generally, the SEC does not disclose details about its whistleblower awards and, in this matter, the whistleblower has chosen to remain anonymous.  Since its inception, the SEC’s Office of the Whistleblower has paid out approximately $950 million to 193 individuals.

“Not only do we applaud the tireless efforts of our client to identify this fraud from afar and explain its mechanics to regulators, but also the SEC itself for recognizing that outside analysts serve a vital function in enforcing our federal securities laws,” noted Mr. Wood. “It is our sincere hope that the SEC continues to compensate this important class of whistleblowers for the immeasurable contributions they provide in the ongoing fight against securities fraud.”

Berman Tabacco is one of the country’s highly ranked class action law firms representing institutions and individuals in lawsuits, seeking to recoup losses caused by corporate and board misconduct and violations of the securities and antitrust laws.  Since 2011, the firm’s whistleblower department has represented clients before the U.S. Securities and Exchange Commission, the Internal Revenue Service and the Commodity Futures Trading Commission. In addition, we assist whistleblowers in rooting out fraud against the government through litigation brought pursuant to federal and state false claims acts, commonly known as qui tam cases. If you are considering submitting a whistleblower tip to the SEC, we urge you to contact us for a free consultation.

Insider Giving Sparks Interest of Academics, Market Participants

In recent months, considerable attention has turned to a phenomenon dubbed “insider giving.”  Insider giving includes many of the same traits as the more commonly-known insider trading, but instead of the purchase or sale of stock based on material non-public information, insider giving involves the donation of stock to a nonprofit organization—at a time when the donor possesses inside information that would have prevented them from purchasing or selling shares.

Several large insider donations of stock have made waves for their timing.  In one particularly notorious example, following a massive, speculative increase in the price of Kodak stock, Kodak director George Karfunkel donated nearly half of his shares—worth $116 million at the time—to his own charity.  Kodak shares had skyrocketed from $2 per share to more than $33 per share, and Karfunkel donated at the peak before Kodak’s share price dramatically fell back to Earth.  Such a timely donation allows an insider to both avoid the capital gains tax on the appreciation of the stock and maximize the value of the donation and resulting tax deduction.  Additionally, giving of that nature harms unknowing market participants when the charity sells donated insider shares before the inside information becomes public.

A new study by four authors to be published in the Duke Law Journal (but already posted online) reveals large shareholders’ charitable donations to be “suspiciously well-timed.”  The study reviewed all stock donations by large shareholders of American public companies from 1986 to 2020.  The 9,000 donations involved approximately 2.1 billion shares worth $50 billion.  The authors found that stock prices rose by approximately 6% during the year prior to the donation and fell by approximately 4% the following year, with donations coinciding with the average maximum price over the two-year period.

Such incredibly timed donations certainly raise suspicions.  The authors attribute these results to shareholders’ possession of inside information, as well as backdating of donations to favorable dates.  Insiders can report stock donations as many as 410 days after the donation—as opposed to two days for stock trades.  The study finds insider giving both “a potent substitute for insider trading” and “far more widespread than previously believed.”

A prior 2016 study published by three of the four authors in the University of Pennsylvania Journal of Business Law observed a similar phenomenon among executives.  The authors noted that “empirical evidence suggests that corporate insiders use their access to inside information to time their stock donations prior to price declines and thereby increase their federal income tax deductions.”

An oft-cited 2008 study by Professor David Yermack of the NYU Stern School of Business—which seemingly kicked off this field of inquiry—found donations of public-company stock by CEOs or Board Chairs to their own family foundations suspiciously well timed.  Yermack found that such donations “occur at peaks in company stock prices, following run-ups and just before significant price drops.”  He also found donations by this group to other recipients “well timed, as they occur at local maximums in company stock prices, but the typical price decline after these gifts is less pronounced….”

While the authors of these studies suggest existing laws could apply to insider giving schemes under certain circumstances, more robust oversight would occur with modifications to current legislation and rules.  The authors of the 2016 study make several suggestions, including the following.  First, they suggest requiring disclosure of insider giving within two days of the gift, in line with the reporting requirements for insider trading.  Second, they suggest that Sarbanes-Oxley could be amended to apply disclosure requirements to gifts of stock and to further confirm the circumstances under which the federal securities laws would apply to donations of stock.  Third, they offer that the average stock price over the previous 90 days be used as the value of the donation for deduction purposes—a suggestion in line with the 90-day look-back period baked into the federal securities laws.

While both a problem and potential solutions have been identified, it remains to be seen whether Congress or the SEC will take action to address the concerns raised by academia and the press.

 

Twelve Berman Tabacco Attorneys Selected by Northern California Super Lawyers Magazine, Including San Francisco Founding Partner Joseph J. Tabacco, Jr. and Managing Partner Nicole Lavallee Named to the “Top 100” Lawyers List and Managing Partner Nicole Lavallee Named to the “Top 50 Women” List

Berman Tabacco is pleased to announce that twelve attorneys from Berman Tabacco‘s San Francisco office—eight partners and four associates—have been selected for recognition by Northern California Super Lawyers magazine, published by Thomson Reuters.  The attorneys designated as 2021 Northern California Super Lawyers are partners Joseph J. Tabacco, Jr.; Christopher T. Heffelfinger; Nicole C. Lavallee; Todd A. Seaver; Daniel E. Barenbaum; Kristin Moody; Matthew D. Pearson; and Carl N. Hammarskjold.  In addition, associates A. Chowning Poppler, Colleen Cleary, Jeffrey Miles, and Jeffrey V. Rocha have been designated as 2021 Northern California Rising Stars (a designation for attorneys under 40 or who have been in practice for less than 10 years).

In addition, Nicole Lavallee, the Managing Partner of the San Francisco Office, has been named to two of Super Lawyers’ “Top Lists”―Top 50 Women and Top 100 lawyersSan Francisco office founding partner Joseph J. Tabacco, Jr. has once again been named to the Top 100 lawyers in 2021.  Mr. Tabacco has long been recognized by Super Lawyers, having been selected as a top-rated antitrust litigation attorney each year since 2004.

Super Lawyers notes that it is “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  The publication states that it recognizes no more than the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

SEC Puts New Proxy Adviser Rules on Ice

At the beginning of June, the U.S. Securities and Exchange Commission (“SEC”) Division of Corporate Finance, at the direction of SEC Chair Gary Gensler, announced that it is re-examining Trump-era proxy adviser interpretation and rules that it had issued over the past two years.  The SEC also stated that it will not be recommending enforcement actions against proxy advisers arising out of those rules during the period in which the SEC is considering further regulatory action in this area.

In 2019, the SEC issued interpretation and guidance stating that voting advice provided by proxy firms should be considered a “solicitation” under federal proxy rules (making proxy firms potentially liable for materially misleading or false statements) and anti-fraud rules and regulations should apply to that advice. (For additional background and information, see our 2019 article on this subject.)  This interpretation and guidance sparked a partisan debate among the Commissioners.  Republican Commissioners supported the interpretation, as they were concerned that proxy firms had become too influential in shaping corporate governance without sufficient regulation.  Democrats were opposed because they feared the rules were seeking a solution to a problem that did not exist, would suppress the free and full exercise of shareholder voting rights, and would harm investors’ ability to obtain unbiased advice and hold corporate executives accountable.

In 2020, the Commissioners passed the SEC’s 2019 interpretation in a 3-1 vote, with lone Democrat Commissioner Allison Herren Lee casting her vote in opposition.  In a public statement of dissent, Commissioner Lee highlighted that there was no evidence that there was a problem with proxy advisory firms’ voting recommendations and therefore the rules added unnecessary complexity and cost into a system that was working.  She also underscored that there was almost universal opposition from investors, the supposed beneficiaries of the rules.  Nonetheless, in the waning months of the Trump administration, the rules were enacted and codified in a package that also required proxy advisers to provide more robust disclosures on potential conflicts of interest and permitted companies additional leeway to review and respond to proxy firms’ recommendations prior to shareholders voting. (For additional information on those recent rules, see our 2020 article on the subject.)  The SEC’s rules became effective on November 2, 2020, but they did not require proxy firms to be compliant with them until December 1, 2021.

There was concern that these rule changes would have introduced delay and uncertainty into the proxy advisory process, where firms would have been required to provide clients with notice of multiple events, including conveying management’s views on proxy recommendations to clients, effectively requiring consideration of those corporate rebuttals prior to voting.  This would have made it harder and more costly for shareholders to cast their votes, especially in reliance on independent and unbiased advice, which in turn would have made it more difficult for investors to hold management accountable.

As a result of these new rules, proxy firms—including the two largest, Institutional Shareholder Services Inc. (“ISS”) and Glass, Lewis, & Co. (“Glass Lewis”)—were facing the possibility of being hampered in their efforts to effectively advise institutional investors on how to vote on everything from merger proposals to CEO pay to climate and diversity policies for companies in which their clients were invested.  Therefore, in response to the proposed rule changes, ISS sued the SEC in 2019 alleging that the new guidance and rules could increase compliance costs and make ISS vulnerable to litigation by regulators and public companies.  Following the SEC’s recent announcement that it would not be bringing enforcement actions on the rules and was considering further regulatory action, the lawsuit has been held in abeyance until either the SEC revisits the rules or December 31, 2021, whichever comes first.  In seeking to suspend the matter, the SEC stated that further regulatory action could “substantially narrow or eliminate” the issues in dispute.

ISS and Glass Lewis were not the only entities that welcomed the SEC Division of Corporate Finance’s recent announcement.  Groups representing institutional investors lauded the SEC for signaling a change of course on the new proxy adviser rules.  Council of Institutional Investors Executive Director Amy Borrus cheered, “[I]t’s Christmas in June for investors,” explaining that “institutional investors, who are the paying clients of proxy advisory firms, did not seek [the rule change], nor did they support it.”  Dennis Kelleher, president of the advocacy group Better Markets, said, “The actions by Trump’s SEC were wrong and likely illegal. Given that the SEC exists to protect investors, not incumbent management, today’s actions properly begin the process to restore investors’ rights and re-empower investors.”

Some business groups, including the U.S. Chamber of Commerce’s Center for Capital Market Competitiveness and the National Association of Manufacturers (“NAM”), were less enthusiastic.  “This rule was developed after years of debate and multiple rounds of public comment, and there is no justification for repealing it less than a year after finalization without any chance for its vital investor protections to take effect and be fairly evaluated,” said Aric Newhouse, NAM’s senior vice president of policy and government relations.

While the proxy adviser rules remain in flux, a fresh look provides another opportunity to weigh the fairness of the rules and strive to strike the right balance where investors are better advised and protected.

GameStopper: SEC to Review Market Structure and Rules Related to Meme Stocks

Securities and Exchange Commission (“SEC”) Chair Gary Gensler announced recently that, given the recent explosion of skyrocketing demand for retail-investor-led “meme stocks,” the SEC will be examining market structure and considering rule changes to ensure transparency, fairness, and efficiency from online brokers and wholesaler high-speed traders who execute the majority of those orders.

Meme stocks generally see remarkable price increases that are primarily fueled by people on social media (typically Reddit, Twitter, or Tik Tok), and the stocks rarely have the company fundamentals to support the rise in price that follows and are often highly volatile.  Once the upward momentum runs out and new investors stop purchasing the stock at higher prices, traders look to exit positions as quickly as possible, which can result in many unsophisticated investors – investors who are not well-versed in market dynamics and valuation – losing money.

This populist-investor uprising has been made possible, in part, by mobile applications such as the online brokerage Robinhood Markets Inc., whose claimed mission is to “democratize finance for all.”  It offers zero-commission trading in stocks and cryptocurrencies by using, instead, payment for order flow (“PFOF”).  With low barriers to entry, about half of Robinhood’s users are first-time investors with a median age of 31.  Most of Robinhood’s revenue comes from trading volume, so the more an investor trades, the more the company makes.  This incentive has led to criticism that Robinhood entices its investors to trade more and more through the “gamification” of trades, such as by allowing users to trade partial shares so that, it is argued, money spent seems inconsequential, with a similar appeal as that of a penny slot machine; offers free stock, which appears onscreen as a lottery ticket that a user scratches off; and shows digital confetti after placing a first trade, which could serve as a behavioral prompt encouraging more trading.

One of the most notable examples of a meme stock involved the struggling video game retailer GameStop Corp. (Ticker: GME).  In mid-December 2020, GameStop was trading at approximately $14 per share.  Several large hedge funds had borrowed GameStop shares and sold them short, betting that the stock would decrease in value and that the company might go out of business.  By mid-January 2021, however, online chatter in a retail investing forum on Reddit called WallStreetBets hyped the stock and talk turned to squeezing the hedge funds.  Subscribers to the forum quadrupled to more than five million, which was followed by millions of individual investors opting to buy shares of the seemingly faltering GameStop – not necessarily because they believed the company showed promise, but rather because they wanted to push the stock price up to trigger a short squeeze on the hedge funds, forcing the hedge funds to pay exorbitant amounts to buy the stock back.  By January 27, 2021, the stock had risen to $380 per share, 2,600% higher than where it was trading in Mid-December at $14 per share.  The next day, without warning or apparent justification, Robinhood announced that, in light of “recent volatility,” it was not allowing any users to purchase new shares of GameStop or other meme stocks.  Retail investors were outraged by the unilateral action, particularly where hedge funds who had initially shorted the stocks stood to immediately benefit at those individual investors’ expense.  While Robinhood’s knee-jerk action may have been spurred in part by the Depository Trust & Clearing Corporation requesting an enormous amount of additional collateral to match the new market value of the stock, retail investors saw conspiracy and a heavy hand on the scale of the established hedge funds.

As the story of GameStop illustrates, meme stocks can be wildly unpredictable.  In addition, many meme stock trades are executed outside of public exchanges, and so information about those trades is scarce.  The payment for order flow (“PFOF”) system, which online brokers such as Robinhood use behind the scenes instead of charging investors a commission, works as follows.  Individual investors buy or sell shares with online brokers who then have the orders filled by high-speed traders known as “wholesalers,” “high-frequency-trading firms,” or “market makers.”  A few high-speed trading firms – most notably Virtu Financial Inc. and Citadel Securities – dominate this field.  These wholesale firms fill the orders by buying or selling the shares as investors requested and then using complex algorithms skims small amounts off the prices that those investors get, keeping that skimmed amount for themselves.  In exchange for access to the orders, the wholesale firms pay rebates to the brokerage companies (for example, Robinhood) that routed the orders to them.  The rebates and price skimming are invisible to the investors placing the trade order, who as a general matter see the brokers as offering them commission-free trades.

SEC Chair Gensler seemingly agrees, recently pointing out that “[b]rokers profit when investors trade….  [H]igher trading volume generates more payment for order flow. What makes the current zero-commission brokerage environment different is that investors do not see their costs as they’re executing trades, so they may perceive them as free.”  In January 2021, nearly half (47%) of all trading was done with high-speed trading firms and broker-run trading venues known as dark pools, with the remaining 53% done on exchanges.

While PFOF is common, it is controversial because it can create an incentive for brokers to send investor orders to the high-speed trading firm that is willing to pay the brokerage the most in rebates, rather than to the one that provides the best deal for the investor (also known as “best execution”).  The SEC requires that brokers disclose to investors that they are engaging in PFOF and insure that investors are getting the best terms for their trades.  Brokers claim that PFOF results in investors getting better prices and faster execution; high-speed traders claim it increases liquidity and reduces costs to investors.  However, several studies have shown that small investors would be better off without PFOF.  Indeed, the United Kingdom, Australia, and Canada restrict PFOF.  SEC Chair Gensler is among those skeptics who is concerned that individual investors might get better prices on public exchanges.

There are also transparency issues with PFOF.  While public exchanges disclose their bids and offers and then compile the orders to publish a national best bid and offer for every stock, high-speed trading firms and dark pools do not reveal their pre-trade prices, making the public-exchange information incomplete.  Off-exchange venues have to execute trades at prices at least as good as the national best price, which comes from exchanges.  But the national best bid and offer might be a substandard benchmark because so many trades happen away from the exchanges that it may not adequately represent the market.

The SEC’s recent announcement is not the first time online brokers and high-speed traders and their business models have been scrutinized by regulators.  In September 2020, the Wall Street Journal reported that the SEC was investigating Robinhood for failing to fully disclose that it was engaging in PFOF between 2015 and 2018.  The SEC alleged that “Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.”  In December 2020, the Enforcement Division of the Massachusetts Securities Division filed a complaint alleging that Robinhood had engaged in illegal practices, including using gamification to lure inexperienced investors into trading and failing to have adequate controls to keep the service functioning during large market swings.  At the end of 2020, Robinhood agreed to pay $65 million to settle the SEC case.  Further, at the end of June 2021, Robinhood agreed to pay nearly $70 million to resolve a regulatory action brought by the Financial Industry Regulatory Authority (“FINRA”) alleging that the brokerage misled customers, approved ineligible traders for risky options trading, and failed to oversee technology that malfunctioned and locked millions out of trading.  Robinhood did not admit to wrongdoing in either the SEC or FINRA matters and disputes the allegations in the Massachusetts matter.

In making his announcement last month about considering rule changes to address these systemic issues, SEC Chair Gensler stated that the SEC’s current examination will be focused on ensuring that retail investors are getting the best prices on their trades.  To determine whether regulations need to be revamped, the SEC will broadly assess PFOF, conflict-of-interest issues PFOF raises, and the lack of competition among high-speed traders in the retail market and the system-wide risks that presents.  The SEC will also explore whether the national best bid and offer is being distorted by trading done off public exchanges, including as part of dark pools.

Time will tell whether changes will be made to the relevant regulatory structure and what those changes will be.  But SEC Chair Gensler’s comments point to a critical issue worthy of scrutiny, and any changes eventually made would likely be positive ones that shed light and offer transparency to individual (and relatively inexperienced) investors trading in this highly opaque space.

Three San Francisco Partners Recognized By Who’s Who Legal: Competition 2021 (Plaintiff)

Berman Tabacco is pleased to announce that Who’s Who Legal (WWL), a publication of U.K.-based Global Competition Review, has once again recognized San Francisco Partners Joseph J. Tabacco, Jr., Todd A. Seaver, and Christopher T. Heffelfinger as leaders in their field in the 2021 edition (published in June 2021) of Who’s Who Legal: Competition in the Plaintiff category.

Mr. Tabacco has been included in this publication for the past eight years, since the creation of the Plaintiff category.  This is the fifth consecutive year that Mr. Seaver has been selected and the second consecutive for Mr. Heffelfinger.  Mr. Seaver has also been recognized by WWL as a Thought Leader in Competition (2019-2020).

Alert: U.S. Supreme Court Issues Goldman Decision, Addresses Defendants’ Burden When Rebutting “Fraud on the Market” Presumption

Today, the U.S. Supreme Court issued its long-awaited decision in Goldman Sachs Group, Inc. v. Arkansas Teachers Retirement System, which reaffirmed (and for all intents and purposes left intact) the “fraud on the market” presumption—a presumption crucial to investor’s ability to prove reliance on a class-wide basis.  The Court did vacate and remand the case to the Second Circuit for further proceedings.  In the end, the decision proved a modest reaffirmation of current case law, with little controversy. As Tulane law professor Ann M. Lipton predicted following oral argument in March, while the appeal came “in like a lion,” it went “out like a lamb.”

[For a more detailed discussion of the history of the case and appeal, please see U.S. Supreme Court to Revisit “Fraud On The Market” Presumption | Berman Tabacco].

Justice Amy Coney Barrett delivered the opinion of the Court, which was joined in full by 4 justices (a mixture of liberal and conservative), and in part by 4 others. The Court reached two rulings: first, it affirmed the fraud on the market presumption of reliance and concluded that a defendant may rebut that presumption by pointing to the generic nature of alleged misstatements and showing that the statements had no impact on the price of the security, even where that evidence is also relevant to materiality; and second, the Court held that a defendant seeking to rebut the presumption has both the burden of production and the ultimate burden of persuasion.

Generic Statements and Fraud On The Market Presumption

The first issue addressed by the Court proved far less controversial than the second, given the parties’ evolving positions. In the end, the “parties’ dispute … largely evaporated,” and both parties—and the Court—agreed that the generic nature of any alleged misrepresentation can be important evidence of price impact that courts should consider at class certification.

(By way of brief background, plaintiffs alleged that Goldman’s statements about adhering to high ethical standards when managing conflicts of interests were false and misleading when made, which caused the price for Goldman’s stock to be artificial inflated. Before the district court, defendants argued that the statements were too generic to be actionable and that they had no price impact on Goldman’s stock price. On appeal, Goldman modified its position to argue that the generic nature of the statements was important evidence relevant to the price impact/class certification inquiry.)

In addressing this issue, the Court reiterated the fundamental importance of the fraud on the market presumption to establish reliance under the federal securities laws. The Court also restated a plaintiff’s burden to invoke the presumption, by proving: (a) that the alleged misrepresentation was publicly known; (b) that it was material; (c) that the stock traded in an efficient market; and (d) that the plaintiff traded the stock between the time the misrepresentation was made and when the truth was revealed. The Court reiterated that at the class certification stage, a plaintiff must prove each of these prerequisites, except for materiality, because under the Court’s Amgen decision, “materiality should be left to the merits stage because it does not bear on Rule 23’s predominance requirement.”

Then, the Court reaffirmed a defendant’s ability to rebut the presumption through “[a]ny showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decisions to trade at a fair market price.”  (quoting Basic v. Levinson, 485 U.S. 224, 248 (1988)). The Court stressed that “[i]n assessing price impact at class certification, courts ‘should be open to all probative evidence on that question—qualitative as well as quantitative—aided by a good dose of common sense.” Further, the Court noted that lower courts “may assess the generic nature of a misrepresentation at class certification even though it may be relevant to materiality, with which Amgen reserves for the merits.”

The Court explained why the generic nature of misstatements are relevant at the class certification phase, prior to a determination on the merits.  Specially, the Court recognized that “typically [plaintiffs] try to prove the amount of inflation indirectly: They point to a negative disclosure about a company and an associated drop in its stock price; allege that the disclosure corrected an earlier misrepresentation; and then claim that the price drop is equal to the amount of inflation maintained by the earlier misrepresentation.”  The Court then went on:

But that final inference—that the back-end price drop equals front-end inflation—starts to breakdown when there is a mismatch between the contents of the misrepresentation and the corrective disclosure. That may occur when the earlier misrepresentation is generic (e.g., “we have faith in our business model”) and the later corrective disclosure is specific (e.g., “our fourth quarter earnings did not meet expectations”).  Under those circumstances, it is less likely that the specific disclosure actually corrected the generic misrepresentation, which means that there is less reason to infer front-end price inflation—that is price impact—from the back-end price drop.

In the end, the Court vacated the lower court ruling and remanded the case back to the Second Circuit, because a majority of justices “doubt[ed]” whether the lower court properly considered the generic nature of the Goldman’s alleged misrepresentations.

Burden Of Production/Persuasion

The second question before the Court concerned whether a defendant seeking to rebut the presumption has only a burden of production or also the ultimate burden of persuasion. Here, the Court held that the defendant had both. The Court cited prior Supreme Court decisions requiring defendants to sever the link between the alleged misrepresentations and price impact, and found such language supported placing the burden of persuasion on defendants. Further, the majority noted that placing the burden of persuasion on plaintiffs would “effectively negate Halliburton II’s holding that plaintiffs need not directly prove price impact in order to invoke the Basic presumption.”

Concurring/Dissent

While all Justices concurred in some aspects of the majority opinion, there were two side opinions, concurring in part and dissenting in part.

Justice Sotomayor wrote separately to state that while she fully concurred with the majority’s reasoning on the law, she would simply affirm (as opposed to vacate and remand) because the Second Circuit “properly considered the generic nature of Goldman’s alleged misrepresentations.”

Justice Gorsuch (joined by Justices Thomas and Alito) dissented solely on the second issue, asserting that defendants should only bear the burden of production, and not the burden of persuasion, when it comes to showing a lack of price impact.

Impact Of Decision

Goldman is not a game-changer. As predicted following oral argument, the decision largely affirms the current state of the law. It firmly recognizes a plaintiff’s rights to invoke the fraud on the market presumption, and correctly placed the burden of persuasion for rebuttal of that presumption on the defendants.

Going forward, the battle lines at class certification for securities fraud cases will continue to focus on the line between arguments concerning price impact (which are allowable under Halliburton II and Goldman) and materiality (which is solely a merits issue, per Amgen). The Court’s decision provided little to no guidance to lower courts on where or how to draw this line. Thus, we expect that class certification will continue to involve extended proceedings and expert battles. In the end, however, we do not expect this decision will have a material impact on class certification rates for securities class actions.

SEC Proposes to Revamp Executive Stock Trading Plans to Close Potential Insider Trading Loopholes

The head of the Securities and Exchange Commission (“SEC”) recently announced that the SEC intends to revise existing rules regarding executive stock trading plans in an effort to add transparency and tighten restrictions.

Known as “Rule 10b5-1” trading plans, these plans allow corporate insiders to execute trades of the company’s stock on a pre-determined schedule, providing legal protection against potential allegations of insider trading on material nonpublic information.

Since the SEC passed the rule creating these plans in 2000, investors have long-criticized it for being too permissive as it arguably allows insiders to manipulate the system and reap windfalls.  For example, executives do not need to publicly disclose when they enter into a plan and they can easily amend the plan as long as they are not aware of material nonpublic information.  However, even if executives are in possession of material nonpublic information, they can cancel the plans and any associated trades at any time.  This aspect of Rule 10b5-1 trading plans is particularly controversial because it is seen as having the effect of allowing executives to set up routine sales, and they can then pause or cancel the sales if they know the company will be announcing news that will push the stock price higher.  SEC Chair Gary Gensler finds this practice “upside-down,” stating that it “may undermine investor confidence.”

Research shows that investors’ perceptions of the unfairness of these plans are not without support.  A January 2021 report published by the Stanford Closer Look Series and conducted by researchers at Stanford University, the University of Pennsylvania, and the University of Washington concluded that some executives use Rule 10b5-1 trading plans to conduct “opportunistic, large-scale selling of company shares.”  The researchers also found that some insiders set up plans for a single trade that occurred within 60 days of the plan’s creation.  On average, those trades allowed the executives to avoid losses of 4% (defined as the stock’s performance relative to industry peers during the six months following the first sale).  SEC Chair Gensler noted that this practice is also concerning, where “there’s currently no cooling-off period required before they make their first trade….  I worry that some bad actors could perceive this as a loophole to participate in insider trading.”

Although weaknesses in the rule have been apparent to many for years, in the past the SEC has stated it was focused on enforcement of violations rather than revising the rule.  And yet, the most recent enforcement action brought by the SEC related to trading associated with a Rule 10b5-1 trading plan was nearly a decade ago in January 2012.  SEC Chair Gensler said recently that now is the time to “freshen up” the rule: “In my view, these plans have led to real cracks in our insider-trading regime.”

The specific proposed rule changes are not yet known, but they could include, for example, more robust disclosures regarding the adoption, modification, and terms of trading plans.  Revisions to the rule could also curb the number of plans executives can set up, limit the number of plan modifications and cancellations, and require insiders to wait up to six months after a plan’s conception before trading.  For many investors, these changes cannot come soon enough.

Berman Tabacco And Its Attorneys Recognized As Litigation Leaders By Chambers USA

Berman Tabacco has been recognized as a leader in securities litigation for both California and Nationwide by Chambers USA, the U.S.-based arm of Chambers and Partners.  Chambers released its 2021 rankings today, stating that that the firm is “super responsive, cooperative and easy to work with,” and further that the “team works collaboratively and understands our needs.”  In addition to the firm, both Joseph J. Tabacco, Jr. and Nicole Lavallee were individually recognized as among the top U.S. litigators in securities litigation.  Chambers and Partners states that it is a U.K.-based independent research company that has been researching and ranking attorneys worldwide for over 30 years.

This is the 15th consecutive year that Joe has been ranked by Chambers, this year quoting a client or counsel as noting that Joe “has a strong reputation for securities litigation.”  Nicole, the Managing Partner of Berman Tabacco’s San Francisco office and a member of the firm’s Executive Committee, was recognized for the first time this year by Chambers, quoting a client or opposing counsel who stated that Nicole is “a good adversary, she is smart and puts up a good fight for her clients.”

“We are honored that Chambers has recognized the firm in its 2021 rankings and are pleased that it highlighted Joe’s and Nicole’s efforts on behalf of the firm’s clients,” said Kathleen Donovan-Maher, Managing Partner of Berman Tabacco’s Boston office.  “Their tireless dedication exemplifies the focused, conscientious representation that each of our attorneys provides to our clients.”

Watching The Detectives: A Call For More Investor Input At The PCAOB

Investors are worried about the Public Company Accounting Oversight Board (the “PCAOB” or “Board”).  Over the past few years, the Board, which was created to oversee the audits of public companies, has experienced significant turnover, terminations in key positions, decreased transparency in rulemaking, an overreliance on out-of-date industry standards, and a steady decline in enforcement actions.  Now, with Gary Gensler taking the reins at the Securities and Exchange Commission (“SEC”), investor advocates hope change is coming.

The PCAOB was created by Congress in 2002 with the enactment of the Sarbanes-Oxley Act (“SOX”) “to oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies the securities of which are sold to, and held by and for, public investors.”  SOX further authorized the PCAOB to establish investor advisory groups to better fulfill its mission through investor input.  The SEC has oversight over the PCAOB, including approval of the Board’s rules, standards, and budget.

Since 2002, the Board has suffered ups and downs, including its share of scandals.  But today, critics worry that it has become a toothless regulator, with the SEC taking active steps to curb the effectiveness of the PCAOB and its mission.  In 2017, the SEC replaced the entire board and terminated the general counsel, chief auditor, director of information technology, and other high-ranking staff.  In 2018, the PCAOB moved to reduce its own budget as part of a strategic plan that only mentioned “investor protection” once.  That same year, the Board halted all advisory group meetings, shutting the door on investor feedback.  Further, the Board has curtailed public comments in rulemaking, and it relies on auditing standards written by the American Institute of Certified Public Accountants (AICPA) that are over twenty years old.  Critics note, “[T]hese standards were written in an era of flawed self-regulation that failed to prioritize the interests of investors and the public. In fact, these standards also contributed to the failed audits of companies such as Enron.”  Equally troubling, the PCAOB has failed to conduct regular meetings, post agendas for the few meetings it does hold, and adopt whistleblower protections.

The Board’s inertia is most evident in the paucity of enforcement actions.  Throughout 2020—despite the pandemic—the SEC remained on track in terms of its expected number of enforcement actions relating to accounting and auditing.  While there was a slight dip in enforcement actions during the first quarter of 2020, the SEC’s enforcement activity quickly returned to pre-pandemic levels.  By contrast, the level of PCAOB enforcement actions has been in a tailspin.  According to a recent Cornerstone Research report, the PCAOB publicly disclosed only 13 enforcement actions involving auditors in 2020, which amounted to just half of the 24 actions it brought in 2019.  Moreover, the PCAOB’s enforcement actions saw a 39% drop as compared to the 2015-2019 period.

The PCAOB has pushed back against criticism, arguing that the lack of enforcement activity is a sign of success.  Spokesperson Jackie Contrell commented, “The Board’s strategic approach is to prevent audit violations from occurring in the first place, which if we do it effectively, will naturally lead to fewer enforcement cases. That’s a good thing for audit quality and investors.”

Not everyone is buying the PCAOB’s “less is more” explanation.  And now, with a new administration in Washington, and a new SEC chair, several former PCAOB Investor Advisory Group (“IAG”) members are pushing for change.

On April 19, 2021, a dozen former members of the PCAOB’s IAG wrote an open letter to SEC Chair Gensler highlighting the “urgent need to reinstate” the IAG and “restore investor trust and confidence in the quality of public company audits in the United States.”

The letter, which included signatories from CalPERS, COPERA, and former Chief Accountant of the SEC Lynn E. Turner, outlines a series of troubling actions at the PCAOB and highlights  several areas of concern, including the elimination of public comment from rulemaking, reliance on flawed and outdated auditing standards, and the failure to hold regular meetings, among others.  “We share these concerns about the overall direction of the PCAOB, including a significantly diminished emphasis on maintaining sufficient investor protections in the oversight of the financial reporting process.  This concern is further intensified by the appointment of PCAOB board members who lack independence and the PCAOB’s recent move to reduce auditor independence rules without any investor input whatsoever.”  The letter continued, “[G]iven the significant personnel changes, budget reductions and anti-regulatory activity at the PCAOB, there is considerable heavy lifting ahead to return the PCAOB’s focus to its primary mission of investor protection.  Given their track record, we do not believe the current PCAOB Board members are up to the task of re-focusing the PCAOB on its core mission because they are responsible for the dramatic shift away from what investors expect.”

As of this writing, neither Gensler nor the SEC has publicly responded to or commented on the letter.

The PCAOB was created in the aftermath of widespread accounting and auditing failures.  It serves as a watchdog over the watchdogs.  Independent auditors are key gatekeepers, reviewing a company’s financial statements.  Robust, independent auditors are vital to ensuring confidence in a company’s reported financial filings.  Likewise, rigorous oversight of those auditors is crucial to protect investors and our public markets.  It is time for investor voices to be heard again at the PCAOB.  One can only hope that SEC Chair Gensler agrees, as no one wants to return to the days of Enron and Arthur Andersen.

SEC Warns Investors About Risks and Invites Public Input Related to ESG Investing

Socially responsible funds—also known as environmental, social, and governance (“ESG”) investments—have become increasingly popular with investors in recent years.  In 2020, a record $51 billion flooded into sustainable U.S. funds.  This growing market has become the focus of regulators concerned that guidelines and disclosures have not kept pace with current trends and may not adequately protect investors.

Last month, the U.S. Securities and Exchange Commission (“SEC”) issued a Risk Alert related to “potentially misleading” claims about and inadequate controls for ESG investment options offered by investment advisers, registered investment companies, and private funds.

With rising demand for ESG products, investment advisers and funds have expanded their various approaches to ESG investing and increased the number of product offerings across multiple asset classes.  However, these investments present certain risks because there is a lack of standardized and precise ESG definitions.  For example, some advisers consider ESG factors alongside other investment-related factors, such as macroeconomic trends; others look to whether ESG investments would, on their own, “provide higher returns or result in better ESG-related outcomes.”

The alert warned that variable and imprecise terms can create confusion among investors if investment advisers and funds have not clearly and consistently articulated how they define ESG and use ESG-related terms.  While specific firms were not identified by the SEC, the alert described problem areas that include:

(1) potentially misleading statements of advisers and funds claiming to have formal processes in place for ESG investing when they do not;

(2) policies and procedures that are not reasonably designed to prevent violations of law or are not implemented;

(3) documentation of ESG investment decisions that are weak or unclear; and

(4) compliance programs that are not reasonably designed to guard against inaccurate ESG-related disclosures and marketing materials.

The SEC encouraged market participants promoting ESG investing to clients, prospective clients, investors, and prospective investors to evaluate their ESG investment options to ensure that the policies, procedures, and practices are reasonably designed and accurately conveyed.

This is the latest action that the SEC has taken this year reflecting the agency’s focus on ESG investing.  On March 4, 2021, the SEC announced that it was launching the Climate and ESG Task Force to “develop initiatives to proactively identify ESG-related misconduct,” including identifying any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.

Soon thereafter, on March 15, 2021, the agency invited investors, registrants, and other market participants to provide input on whether current disclosures adequately inform investors.  The SEC is seeking public input in order to update its 2010 guidance on climate change disclosure requirements.  Former Acting SEC Chair Allison Herren Lee explained at a virtual conference held by the Center for American Progress that the updated disclosures will seek to provide investors with the ESG-related information they are demanding to make more informed investment decisions.

The request for comments includes 15 questions aimed at gathering data to help create a “consistent, comparable and reliable” framework to bring the agency in line with what Lee referred to as a “shift in investor focus … over the last decade toward the analysis and use of climate and other ESG risks and impacts in investment decision-making.”  Submissions can be made by email or webform and are due by June 13, 2021 (within 90 days of the SEC’s March 15, 2021 statement).  The public has started to weigh in, including those who are critical of the entire endeavor.  The West Virginia Attorney General’s March 25, 2021 submission raises concerns about the SEC overstepping its mandate: “the Commission should stick to its core mission of requiring statements on matters that are material to future financial performance – not statements on issues that drive a political agenda.”  The Attorney General Patrick Morrisey voiced additional concerns, stating that “[i]f the Commission proceeds down this pathway, States and other interested stakeholders will not hesitate to go to court to oppose a federal regulation compelling speech in violation of the First Amendment.”  The public comments made to date can be viewed here.

U.S. Supreme Court to Revisit “Fraud On The Market” Presumption

In late March, the U.S. Supreme Court heard oral argument in a case that could redefine the “fraud on the market” presumption—a presumption crucial to investor’s ability to prove reliance on a class-wide basis. While early commentary foreshadowed a potential blockbuster decision altering the class certification landscape, statements by several Justices at oral argument signal a far more modest result is likely. As Tulane law professor Ann M. Lipton commented, while the appeal came “in like a lion,” it appears slated to go “out like a lamb.”

The case, Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, stems from the financial crisis of 2008. Goldman marketed and sold synthetic collateralized debt obligations while, allegedly, failing to disclose that Goldman or its major clients were heavily betting against the products. The plaintiff alleges that Goldman’s statements about adhering to high ethical standards when managing conflicts of interests were false and misleading when made, which caused the price for Goldman’s stock to be artificial inflated. The decade-old case has seen several twists and turns, including two trips to the Second Circuit Court of Appeals revolving around whether plaintiffs are entitled to presume reliance on the alleged misrepresentations or whether defendants have successfully rebutted the presumption of reliance.

By way of brief background: typically, fraud claims require proof of reliance, which if needed on an investor-by-investor basis would raise a host of individual issues that would prevent class certification in securities class actions. The fraud on the market theory established by the Supreme Court in Basic v. Levinson provides another option. Under this theory, reliance is presumed when a stock trades in an efficient market. In Halliburton II, the Supreme Court held that a defendant must have an opportunity to rebut the Basic presumption at the class certification stage by showing that the statements at issue did not affect the stock price. But, in its prior Amgen decision, the Court cautioned against delving into materiality at the class certification stage. This intersection of materiality and rebuttal evidence has proven a hurdle to defendants. In fact, since 2014’s Halliburton II decision, defendants successfully refuted price impact in only five cases.

Goldman hopes to reverse that trend. In fighting against class certification, Goldman attempted to rebut the presumption by relying on expert testimony that the alleged misrepresentations were too generic to have affected the company’s stock price. Further, Goldman argued that on 36 occasions during the class period, there were public reports about Goldman’s purported conflicts of interests and that those stories had no material effect on Goldman’s stock price.

Initially, the district court refused to consider Goldman’s expert evidence, citing the Supreme Court’s Amgen decision that courts should not consider materiality arguments when deciding a motion for class certification. The Second Circuit disagreed and directed the district court to consider Goldman’s expert evidence. On remand, the district court held an evidentiary hearing and again certified the class. This time, the Second Circuit affirmed, holding that the district court did not abuse its discretion, either in weighing the expert testimony or in rejecting Goldman’s argument that the challenged statements were too generic as a matter of law to have had a price impact.

The Supreme Court accepted Goldman’s appeal to address: (i) whether a defendant may rebut the presumption of class-wide reliance by pointing to the generic nature of the alleged misstatements in showing that the statements had no impact on the price of the security, even though that evidence is also relevant to the substantive element of materiality; and (ii) whether a defendant seeking to rebut the presumption has only a burden of production or also the ultimate burden of persuasion. Goldman maintains that the alleged actionable statements are far too generic to impact its stock price and that the “inflation maintenance” theory—that an alleged misstatement can have actionable “price impact” by maintaining a previously inflated stock price—effectively lowers the bar to such a degree that it makes the fraud on the market presumption essentially irrebuttable.

The lead-up to the Goldman argument generated a great deal of interest, amicus filings, and legal news coverage. This was driven by both the importance of the fraud on the market presumption to class certification, as well as because this will be the first securities class action that the Court considers since the passing of Justice Ruth Bader Ginsburg, who repeatedly sided with investors in prior decisions addressing the Basic presumption. Thus, many eyes are on her successor, Justice Amy Coney Barrett, who could now play a pivotal role in the decision.

But any predictions of a dramatic shift by the new Court were quickly brushed aside at oral argument, where several Justices commented that the case and arguments merited a narrower decision. For example, Justice Breyer commented, “This seems like an area that, the more that I read about it, the less that we write about, the better.” In addition, Justice Barrett noted that both parties “moved to the middle” on their arguments, which significantly narrowed the issues in dispute.  For example, while Goldman originally argued that the generic statements were not actionable as a matter of law, through briefing and oral argument it shifted its position to argue that the generic nature of the statements was merely a relevant factor to be considered, which the investors did not dispute.

Based on these comments, from different ends of the ideological spectrum, commentators are expecting a narrow decision, likely focused on the evidentiary burden a defendant must bear to rebut the presumption. The Court appears unlikely to broadly revisit Basic as a whole, or the “price maintenance” theory, but it is possible the Court will clarify its prior decisions on the line between materiality (Amgen) and rebutting the fraud on the market presumption (Halliburton II). A ruling is expected by summer.

Berman Tabacco Clients Awarded Over $50 Million in Second Largest SEC Whistleblower Award

Today, the U.S. Securities and Exchange Commission (“SEC”) announced an award of over $50 million to joint whistleblowers who provided “exemplary assistance” during the course of an investigation into “highly complex transactions” that resulted in the return of “tens of millions of dollars to harmed investors.” Represented by Berman Tabacco partner Bryan A. Wood, the whistleblowers will share the second largest award in the history of the SEC’s whistleblower program.

In announcing the award, the SEC noted that the “joint whistleblowers provided exemplary assistance to the SEC staff during the investigation, including meeting with staff numerous times and providing voluminous detailed documents.” Jane Norberg, Chief of the SEC’s Office of the Whistleblower, noted: “Today’s award is the second largest in the history of the program, reflecting the tremendous contribution of these joint whistleblowers to our ability to recover funds for harmed investors.”

“This is a tremendous result for these courageous whistleblowers,” commented Mr. Wood. “They dedicated countless hours to working closely with the SEC and the U.S. Department of Justice to provide critical information into this very complex fraud.”

Generally, the SEC does not disclose details about its whistleblower awards and, in this matter, the whistleblowers have chosen to remain anonymous. Since its inception, the SEC’s Office of the Whistleblower has paid out approximately $812 million to 151 individuals.

“Not only is this a great result for our clients, but it also serves as a testament to the perseverance and dedication of the SEC’s enforcement division, which was vigilant in pursuing this fraud,” noted Mr. Wood. “In addition, it is a triumph for the SEC’s Office of the Whistleblower, which really appears to be hitting its stride in serving courageous whistleblowers like our clients.”

Berman Tabacco is one of the country’s highly ranked class action law firms representing institutions and individuals in lawsuits, seeking to recoup losses caused by corporate and board misconduct and violations of the securities and antitrust laws. Since 2011, the firm’s whistleblower department has represented clients before the U.S. Securities and Exchange Commission (“SEC”), the Internal Revenue Service (“IRS”) and the Commodity Futures Trading Commission (“CFTC”). In addition, we assist whistleblowers in rooting out fraud against the government through litigation brought pursuant to federal and state false claims acts, commonly known as qui tam cases. If you are considering submitting a whistleblower tip to the SEC, we urge you to contact us for a free consultation.

Carl Hammarskjold Promoted to Partner

Berman Tabacco is proud to announce that Carl Hammarskjold has been elevated to the position of Partner effective January 1, 2021.

“We congratulate Carl on his new role as Partner,” said San Francisco Managing Partner Nicole Lavallee.  “Carl’s expertise in antitrust matters has been a tremendous asset to our firm.  We look forward to his continued success.”

Partner Todd Seaver added, “Carl’s promotion to Partner reflects his outstanding work and tireless efforts on behalf of our clients, as well as his strong skills as a litigator.”

Carl is based in the firm’s San Francisco office. He represents the firm’s clients and class plaintiffs in several financial market manipulation and antitrust class actions on behalf of investors alleging that major banks colluded to fix the prices of bonds and derivatives. These cases include Australian Dollar (Dennis, et al. v. JPMorgan Chase & Co., et al., No. 16-cv-06496 (S.D.N.Y)); Euribor (Sullivan v. Barclays PLC, et al., No. 13-cv-2811 (S.D.N.Y.)); Yen Libor (Sonterra Capital Master Fund, LTD. v. UBS AG, et al., No. 15-cv-5844 (S.D.N.Y.)); In re Mexican Government Bonds Antitrust Litigation, No. 18-cv-02830 (S.D.N.Y); and GSE Bonds (In re GSE Bonds Antitrust Litigation, No. 19-cv-01704 (S.D.N.Y.)). Plaintiffs in GSE Bonds reached settlements with all defendants totaling $386.5 million. To date, partial settlements have also been reached in the Euribor and Yen Libor actions in the amounts of $491.5 million and $307 million, respectively. Carl also represented the firm’s client and class plaintiffs in a nationwide antitrust class action—In re Lithium Ion Batteries Antitrust Litigation, No. 13-md-02420-YGR (N.D. Cal.)—on behalf of direct purchasers of lithium ion rechargeable batteries that resulted in settlements totaling $139.3 million.

Prior to joining Berman Tabacco in 2018, Carl worked for a San Francisco-based plaintiffs’ law firm specializing in antitrust class actions and other complex, multidistrict litigation in federal court.  He was also a business litigator at a large, national law firm.

Carl is rated AV Preeminent® by Martindale-Hubbell® and was selected by Northern California Super Lawyers magazine as a Rising Star in 2016-2020.  In 2021, Carl was recognized in The Best Lawyers in America® under Ones To Watch for Mass Tort Litigation / Class Actions – Plaintiffs (2021) and Northern California Best Lawyers under Ones To Watch for Mass Tort Litigation / Class Actions – Plaintiffs.

Berman Tabacco Shortlisted as a Finalist for California Plaintiff Firm of the Year for 2021 by Benchmark Litigation

Berman Tabacco is honored to have been selected for the third consecutive year by Benchmark Litigation as one of four finalists in the California Plaintiff Firm of the Year category for its Benchmark Litigation Awards 2021.   In addition, name partner Joseph J. Tabacco, Jr. has been selected as one of five finalists in the Plaintiff Litigator of the Year category.  Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, is virtually hosting its ninth annual Benchmark Litigation Awards on March 31, 2021.

In 2021, the firm was selected by Benchmark California as a Tier 1 firm—the highest rank awarded— in its Plaintiff Work category, with partners Joseph J. Tabacco, Jr., Nicole Lavallee, Todd A. Seaver, and Daniel E. Barenbaum designated as Litigation Stars.  Nationally, the firm was recognized as a Top 10 Plaintiffs firm (for the 5th time) and in the top category of Highly Recommended (for the 10th time).

These are illustrative of similar rankings within Benchmark Litigation’s National and California rankings, both for the firm and its attorneys. Boston partners Norman Berman, Kathleen Donovan-Maher, Leslie Stern, Patrick T. Egan, and Bryan Wood were designated as Massachusetts Litigation Stars, and Nathaniel Orenstein was designated as a Massachusetts Future Litigation Star.  In California regional rankings, the firm was recognized as a Tier 1 firm in the San Francisco region, with San Francisco partners Joseph J. Tabacco, Jr., Nicole Lavallee, and Daniel E. Barenbaum designated as both California State Litigation Stars and San Francisco Local Litigation Stars, and Todd A. Seaver was designated as a California Future Litigation Star.

“We are honored that Benchmark Litigation continues to acknowledge our firm for its steady, strong advocacy on behalf of our clients,” said San Francisco partner Daniel Barenbaum.  “Recognition of the firm is recognition of the extraordinary efforts made by each and every member of the Berman Tabacco team to provide those clients with the best possible counsel and representation.”

Court Approves Settlement in Sinclair Broadcast Group Derivative Action

On November 20, 2020, the U.S. District Court for the District of Maryland granted final approval of the settlement in the Sinclair Broadcast Group derivative action.  The settlement provides far-reaching corporate governance benefits to Sinclair and its shareholders, including substantial controls over how the Company interacts with its regulators and oversight over related-party transactions.  The settlement requires the Company to create two new Board committees and hire a Chief Compliance Officer.  The settlement further provides in excess of $25 million in recovery for the Company, a significant portion of which will come from executive chairman David D. Smith repaying $4.36 million in stock awards.

Berman Tabacco was Plaintiffs’ Co-Lead Counsel representing Norfolk County Retirement System in this shareholder derivative action against Sinclair Broadcast Group’s (“Sinclair”) controlling shareholders and Board of Directors in federal court in Maryland.  Plaintiffs alleged that Sinclair’s controlling shareholders and Board breached their fiduciary duties by knowingly and intentionally misleading the U.S. Federal Communications Commission in connection with a proposed merger between Sinclair and Tribune Media Company (“Tribune”).  Specifically, Sinclair and its controlling shareholder attempted to divest certain assets to companies with undisclosed relationships with Sinclair’s controlling shareholder.  This allegedly resulted in the cancellation of the merger, as well as Sinclair paying $60 million in damages to Tribune and paying $48 million in civil penalties to the FCC.

In approving the settlement, the Court was very complimentary of the plaintiffs, including the Norfolk County Retirement System, noting that “[w]ithout the participation of these sophisticated institutional plaintiffs, it is not likely that a significant recovery benefitting all of Sinclair’s shareholders would have materialized.”  Likewise, the Court recognized Berman Tabacco’s “substantial experience” and “skilled” representation in prosecuting this action.

“The excellent results achieved in this case demonstrate how sophisticated clients and skilled counsel can work together to hold corporate officers and directors accountable,” commented Berman Tabacco partner Nathaniel L. Orenstein.  “We are proud and grateful for the opportunity to represent the Norfolk County Retirement System and shareholders from across the country in this important work.”

The cases are Fire and Police Retiree Health Care Fund, San Antonio v. Smith, et al., No. 1:18-cv-03670-CCB (D. Md.) and Norfolk County Retirement System v. Smith, No. 18-cv-03952 (D. Md.) (Sinclair Broadcast Group Derivative Actions).  The litigation team includes Leslie Stern and Nathaniel L. Orenstein from Berman Tabacco’s Boston office.

U.S. News & World Report and Best Lawyers® Ranks Berman Tabacco in its Eleventh Edition of “Best Law Firms”

U.S. News & World Report and Best Lawyers® Ranks Berman Tabacco in its Eleventh Edition of “Best Law Firms”

U.S. News & World Report and Best Lawyers® have released their Best Law Firm rankings for 2021.  They have ranked Berman Tabacco both nationally and in the San Francisco metropolitan area as leaders in the areas of Litigation-Antitrust (for the third time) and Litigation-Securities (for the second time).   The Best Law Firms rankings are based on a combination of client feedback, information provided on law firm surveys, and Best Lawyers® peer review.  According to U.S. News & World Report and Best Lawyers, of the more than 15,500 firms reviewed, only about 2,100 received a national law firm ranking in this edition.

To be eligible for consideration as a Best Law Firm, a firm must have at least one attorney ranked in the current edition of Best Lawyers®.  Berman Tabacco has three ranked attorneys:  Joseph J. Tabacco, Jr. has been recognized in the areas of Litigation (Securities) and Litigation (Antitrust), Nicole Lavallee has been recognized in the area of Litigation (Securities), and Christopher T. Heffelfinger has been recognized in the area Litigation (Antitrust).  Best Lawyers® holds itself out as one of the oldest and most respected peer-review publications, with the 2021 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 8.3 million peer evaluations, and recognizing attorneys in 75 national practice areas and 127 metropolitan practice areas. Phil Greer, the CEO of Best Lawyers said, “For the 2021 Best Law Firms publication, the evaluation process has remained just as rigorous and discerning as it did when we first started 11 years ago.”

Ranked in US News-Best Lawyers & Law Firms 2021 - Berman Tabacco

Metropolitan San Francisco

  • Tier 1 in Litigation – Antitrust
  • Tier 2 in Litigation – Securities

National Rankings

  • Tier 2 in Litigation – Antitrust
  • Tier 3 in Litigation – Securities

 

Daily Journal Names Partner Nicole Lavallee as one of its “Top Women Lawyers” in California

Nicole Lavallee, the Managing Partner of Berman Tabacco’s San Francisco office and a member of the firm’s Executive Committee, has been named a Top Women Lawyer in California by the Daily Journal.  The list, compiled from nominations submitted statewide, honors leading women practitioners highlighting the victories of women lawyers in the courtroom and the advancements of women in law.

Nicole has vast, exceptional experience and has prosecuted dozens of high-profile complex securities cases for the firm, earning judicial praise for her work.  She focuses on financial justice through asset recovery for investors and is a lead partner of the Securities Practice Group.

New England Super Lawyers Magazine Recognizes Seven Berman Tabacco Attorneys

Seven attorneys from Berman Tabacco‘s Boston office have been recognized by the New England Super Lawyers Magazine, published by Thomson Reuters.  Norman Berman was designated a 2020 New England Super Lawyer in Securities Litigation for the fifteenth time.  Kathleen Donovan-Maher, Nathaniel L. Orenstein, and Bryan A. Wood were also designated as 2020 New England Super Lawyers. Nicole Maruzzi, Steven L. Groopman, and Corey W. Silva were designated as 2020 New England Rising Stars.

Super Lawyers, a Thomson Reuters company, states it is “a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.”  Super Lawyers states that it recognizes the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research, peer nominations and peer evaluations.

Benchmark Litigation 2021 Ranks Berman Tabacco as a “Top Ten Plaintiffs” Firm in the U.S. for the Fifth Consecutive Year

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, has issued its 2021 rankings profiling U.S. law firms.  Berman Tabacco was ranked as a Top Ten Plaintiffs firm for the fifth consecutive year for its work “on behalf of individuals and institutions who have suffered financial harm due to violations of securities or antitrust laws.”  The firm also ranked in the top category of Highly Recommended 2021 – the tenth time the firm has received the Highly Recommended ranking from Benchmark Litigation.  In California, the firm was ranked as one of the top firms in the Plaintiff (in the top 5) and Securities practice areas and was among the top firms in San Francisco (Tier 1).  A firm client remarked to Benchmark Litigation that “[a]mong plaintiffs’ securities firms, Berman Tabacco is top-flight” and a peer noted the firm was “one of the premier plaintiff shops.”  And an attorney from a defense firm noted:  “They have been ‘swinging for the fences,’ so to speak, and that’s a good thing. Plaintiff firms need to bring cases they believe in in order for people like us to take them seriously.  Berman Tabacco has been doing well with that.”

In addition to the firm’s rankings, ten of the firm’s partners were recognized by Benchmark Litigation:

  • Norman Berman was ranked as a Local Litigation Star in the Securities and FCPA practice areas.
  • Joseph J. Tabacco, Jr. was ranked as a California Litigation Star and Local Litigation Star in Competition/antitrust and Securities practice areas.
  • Kathleen M. Donovan-Maher was ranked as a Local Litigation Star in Securities and Competition/antitrust practice areas.
  • Nicole Lavallee was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Leslie R. Stern was ranked as a Local Litigation Star in Securities practice area.
  • Todd A. Seaver was ranked as a Future Star.
  • Daniel E. Barenbaum was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Patrick T. Egan was ranked as a Local Litigation Star in Securities and Competition/antitrust practice areas.
  • Bryan A. Wood was ranked as a Local Litigation Star in Securities and Competition/antitrust practice areas.
  • Nathaniel L. Orenstein was ranked as a Future Star.

“We are honored that Benchmark Litigation continues to recognize Berman Tabacco for its dedication to achieving great results for its clients,” said Kathleen Donovan-Maher, Boston managing partner.

Join Berman Tabacco partner Nicole Lavallee at BASF’s Inaugural Board Balance Conference on November 19, 2020

Berman Tabacco Partner Nicole Lavallee is honored to be involved in The Bar Association of San Francisco’s (BASF) inaugural Board Balance Conference, a diversity program and networking event sponsored by the Women’s Impact Network of BASF, to be held virtually from 2:00 p.m. – 7:00 p.m. on November 19, 2019.

As a member of the Steering Committee of BASF’ Women’s Impact Network, Nicole Lavallee has helped organize the Board Balance Conference.  The conference brings together leading women attorneys, recruiters and leadership coaches who have created their own paths to the boardroom who will share their stories and paths to success.  It will provide education about board membership, including practical advice on how to identify opportunities, and offer networking opportunities with board insiders.  The conference will address topics including:

  • Networking and building leadership and board skills during a crisis
  • Tackling racial inequality on boards
  • The unique contribution women can make to a board’s role in promoting socially desirable goals

For more information and a list of presenters, please see BASF calendar and printable flyer.  This program is eligible for one hour of MCLE in Legal Ethics (MCLE registration starts at 1:30 p.m.) (see flyer for more information).  The program is free.

The conference live link will be sent to all attendees 24 hours prior to the program start. This link will be included in the confirmation email.

The Passing of Justice Ginsburg and the Impact On Shareholder Rights

On Friday, September 19, 2020, Justice Ruth Bader Ginsburg died following her latest battle with cancer. The second-serving woman on the U.S. Supreme Court, Justice Ginsburg was a trailblazer, respected jurist, and a late-in-life popular cultural icon and role model: the Notorious R.B.G., clad in her “dissent” collar. Her death triggered shockwaves of emotions, with reflections on her long, storied career quickly turning to debates over when to confirm her successor. In death, just as in life, Justice Ginsburg will have a significant and lasting impact on our country.

A Pragmatic Leader

Countless obituaries and tributes have detailed Justice Ginsburg’s long career, from her humble origins in Brooklyn, to the top ranks of her law schools. When denied employment at law firms upon graduation, she found work as a law professor. She founded the Women’s Rights Project at the A.C.L.U., waging a lifelong battle for the equal protection for women. On a case-by-case, step-by-step process, she was vigilant in pursuing cases where women and men were targeted for disparate treatment. As an attorney, she argued six cases before Supreme Court, orchestrating challenges to persuade the Court to hold that the 14th Amendment guarantee of equal protection extended to sex discrimination. Ever the pragmatist, she understood that “[r]eal change, enduring change, happens one step at a time.”

In 1980, President Carter appointed Justice Ginsburg to the U.S. Appeals Court for the District of Columbia, where she served for 13 years, before being appointed to the U.S. Supreme Court by President Clinton in 1993. Overwhelmingly confirmed by a vote of 96 to 3, she went on to serve for 27 years, drafting over 200 majority opinions, including landmark equal protection cases. In one of her most significant decisions, she authored a majority opinion holding the all-male admissions policy at the Virginia Military Institute unconstitutional, ruling: “[i]nherent difference between men and women, we have come to appreciate, remain cause for celebration, but not for denigration of the members of either sex or for artificial constraints on an individual’s opportunity. Sex classifications . . . may not be used, as they once were, to create or perpetuate the legal, social, and economic inferiority of women.”

As the Court’s majority grew more conservative, Justice Ginsburg became known for her powerful dissenting opinions, often read from the bench, including in Bush v. Gore, voting rights cases, and, famously, in Ledbetter v. Goodyear Tire and Rubber Company, where her dissent to an onerous time limitation to bring Title VII challenges resulted in a change of the law through the enactment of the Lilly Ledbetter Fair Pay Act of 2009.

A Friend of Shareholders

During her tenure on the Court, Justice Ginsburg was a steady protector of the rights of shareholders. She long recognized and supported the private right of action under the federal securities laws, writing:  “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.”

Justice Ginsburg’s rulings strengthened shareholders ability to preserve the fraud-on-the-market presumption recognized in Basic v. Levinson in proving reliance at class certification. She pushed back at attempts by corporate defendants to accelerate merits inquiries to the class certification stage. For example, in joining the majority in Halliburton Co. v. Erica P. John Fund, Inc., which reaffirmed the applicability of the fraud-on-the-market presumption, Justice Ginsburg wrote a short concurring opinion emphasizing that the “Court’s judgment . . . should impose no heavy toll on securities-fraud plaintiffs with tenable claims.” In Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, Justice Ginsburg delivered the opinion of the Court holding that proof of materiality of alleged misrepresentations is not a prerequisite to class certification, and that the materiality of corporation’s alleged misrepresentations and omissions was a question common to all class members.

Justice Ginsburg also strove to hold all wrongdoers accountable, including so-called secondary actors likes auditors, customers, and vendors, although, here, she advocated through her dissents. For example, in 1994, she dissented from the majority opinion in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., which held that private plaintiffs could not maintain aiding and abetting claims under Section 10(b). Justice Ginsburg joined a dissenting opinion that stressed the importance of holding secondary actors liable under the federal securities laws as aiders and abettors, and the value of allowing private litigants to pursue such claims. In 2008, she again dissented from a ruling that vendors and customers could not be liable under the federal securities laws. In Stoneridge Investment Partners, LLC v Scientific-Atlanta, Inc., the dissenters highlighted that the vendors and customers knowingly played a necessary role in the alleged fraud by entering into sham transactions to deceive auditors and inflate financials. As Justice Ginsburg and the other dissenting Justices found, the financial fraud could not have occurred “absent the knowingly fraudulent actions” of the customers and vendors and, thus, such conduct is a “deceptive device” action under 10(b) in a private right of action. While the Court’s conservative majority rolled back the rights of investors to pursue participants in securities fraud, Justice Ginsburg vigilantly tried to stem the tide.

Justice Ginsburg also sought to ensure that investors were not barred unfairly from the courthouse steps due to arbitrary timing constraints. In Merck & Co, Inc.  v. Reynolds, she voted with the majority in holding that the time for a plaintiff to file a federal securities fraud lawsuit begins to run as soon as a plaintiff discovers, or should have discovered, the facts showing a violation of securities law, including facts that the defendant knew that the statements were false. In California Public Employees’ Retirement Systems v. ANZ Securities, Inc., she dissented from an opinion that the class action tolling doctrine established in American Pipe & Construction Co. v. Utah, does not extend to the three-year statute of repose contained in the Securities Act of 1933. In her dissent, Justice Ginsburg stated that she would have ruled that the timely filing of a putative class action on behalf of an investor class effectively commences a class member’s action arising from the same set of alleged misrepresentations or omissions. Further, she warned that that majority ruling would force investors to file protective complaints or motions to intervene to preserve their individual claims.

This is not to say that Justice Ginsburg was slavishly pro-plaintiff. In Tellabs, Inc. v. Makor Issues & Rights, Ltd., she wrote the majority opinion establishing a heightened pleading standards for plaintiffs; she concurred in Morrison v. National Australia Bank, which limited the extraterritorial reach of the federal securities laws. And in China Agritech, Inc. v. Resh, she drafted the majority opinion that held that upon denial of class certification, a putative class member may not, in lieu of promptly joining an existing suit or promptly filing an individual action, commence a class action anew beyond the time allowed by the applicable statute of limitations.

Uncertain Future

Justice Ginsburg’s death comes weeks before the opening of the Court’s 2020-21 term and less than two months before the presidential election. On September 26, 2020, President Trump nominated Judge Amy Coney Barrett to succeed Justice Ginsburg, and Senate Major Leader Mitch McConnell announced plans to bring the nominee before the Senate for a vote, possibly before the election. Critics, meanwhile, accused Sen. McConnell of hypocrisy, given his refusal to hold a vote on President Obama’s nomination of Judge Merrick Garland in 2016, almost 9 months before election day and before party nominees had even been solidified. Vice President Biden has stated, “The voters should pick the president, and the president should pick the justice for the Senate to consider.” Either way, there will be a vigorous fight and this issue will take center stage in the election.

Any eventual replacement could have a significant impact on shareholder rights. As noted above, Justice Ginsburg was a loyal vote in favor of an expansive fraud-on-the-market presumption in securities litigation. This fall, the Court will consider whether to take an appeal on that very issue. See Supreme Court 2020 Term – A Preview. And while a conservative majority could curtail the scope of investor protections, Justice Ginsburg’s dissents will live on. As Justice Ginsburg once remarked, “Dissents speak to a future age. It’s not simply to say my colleagues are wrong and I would do it this way, but the greatest dissents do become court opinions.”

Supreme Court 2020 Term – A Preview

October 5, 2020 marks the first Monday in October, and the opening of the Supreme Court’s 2020-21 term. A dark cloud will hang over the proceedings, coming just weeks after the death of Justice Ruth Bader Ginsburg and during a continuing pandemic. The Justices will gather—via telephone—as a group of eight. Meanwhile, a debate rages whether Judge Amy Coney Barrett can be confirmed in the waning weeks of a presidential election.

Depending on timing, the next Justice could play a pivotal role in the 2020-21 Supreme Court term. The Court is poised to hear a number of significant cases, including disputes: exploring the scope of and limits on religious freedom in the context of discrimination claims; challenging the Affordable Care Act; questioning whether Google is liable for billions in a dispute over its Android operating system; and defining the limits of personal jurisdiction and rules of criminal procedure.

As for investor rights, while there are no pending cases that directly impact federal securities laws, there is a petition for review that could redefine the fraud-on-the-market presumption established in Basic Inc. v. Levinson—a presumption crucial to investor’s ability to prove “reliance” in claims brought under Section 10(b) of the Securities Exchange Act of 1934. Justice Ginsburg repeatedly sided with investors in prior decisions addressing this presumption. Her successor could play a pivotal role in deciding whether the Court will entertain the appeal and address the issue.

In Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, defendants appeal from the grant of class certification in a case stemming from the financial crisis of 2008. In their petition for review, the defendants raise two issues: (i) whether a defendant may rebut the presumption of class wide reliance by pointing to the generic nature of the alleged misstatements in showing that the statements had no impact on the price of the security, even though that evidence is also relevant to the substantive element of materiality, and (ii) whether a defendant seeking to rebut the presumption has only a burden of production or also the ultimate burden of persuasion. Several business advocacy groups, including the U.S. Chamber of Commerce, have filed amicus briefs asking the Court to take up the case and reverse the lower court decisions. The Goldman investor’s response will be filed later this month. The Court will decide whether to hear the petition likely later this year.

Finally, the question remains: if confirmed, what impact will Judge Amy Coney Barrett have on securities litigation and investor protection. On this, her record is slim. Judge Barrett has only spent three years as an appeals court judge on the U.S. Court of Appeals for the Seventh Circuit, after a long stint in academia. She has not issued any rulings related to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) or other investors rights issues. This is not surprising, as the Seventh Circuit traditionally has far fewer PSLRA filings than the Second, Third and Ninth Circuits. In this respect, she may be a blank slate.

Judge Barrett, however, is also a former clerk to former Justice Antonin Scalia and in her Rose Garden speech noted that that Scalia’s “judicial philosophy is mine, too.” In this respect, Judge Barrett could be a threat to the private right of action and fraud-on-the-market doctrine. Prior to his death, Justice Scalia often dissented from rulings preserving the fraud-on-the-market presumption, calling the private right of action under the federal securities laws “a relic of the heady days in which this Court assumed common-law powers to create causes of action” and outright stating that Basic v. Levinson should be overruled. Current Justices Thomas and Alito shared this view. Now, with a new conservative majority, and the possibility of the Goldman Sach’s appeal, a worst-case scenario exists for the Court to roll back investor protections under the federal securities laws. But, of course, time will tell.

Lawdragon Recognizes Eight Berman Tabacco partners in its 500 Leading Plaintiff Financial Lawyers for 2020

For the second consecutive year, industry observer Lawdragon has named eight Berman Tabacco partners to its 2020 list of the 500 Leading Plaintiff Financial Lawyers: Norman Berman, Joseph J. Tabacco, Jr., Kathleen M. Donovan-Maher, Nicole Lavallee, Leslie R. Stern, Christopher T. Heffelfinger, Todd A. Seaver, and Kristin Moody.

The list includes lawyers who “specialize in representing plaintiffs in securities and other business litigation, antitrust, and whistleblower claims” and “the heart and soul of this list takes on the plight of plaintiffs who often can’t afford to go to court for the wrong they’ve been done” and in many cases “these firms will shoulder the risk and take the cases on contingency.”  The 500 Leading Plaintiff Financial Lawyers are chosen based on Lawdragon’s editorial research of “top verdicts and settlements” combined with extensive peer discussions nationwide regarding “whom they admire and would hire to seek justice for a claim.”

Berman Tabacco Defeats Motion to Dismiss in AmerisourceBergen Derivative Action

Berman Tabacco recently secured a favorable ruling permitting a shareholder derivative suit to proceed against the directors and officers of pharmaceutical sourcing and distribution company AmerisourceBergen Corporation (“Amerisource” or “the “Company”).

The action alleges that, for nearly thirteen years, Amerisource, through a subsidiary headed by the Company’s current Chairman, President, and Chief Executive Officer, operated an illegal pre-filled syringe program that created, packaged, and shipped millions of single-dose syringes containing cancer medications to oncology centers, hospitals, and physicians, exposing vulnerable cancer patients to potential harm.  The Company allegedly profited by creating pre-filled syringes from excess drug product leftover in vials provided by drug manufacturers to help with accurate dosage.  By pooling the overfill from multiple drug vials, Amerisource was able to create more doses than it bought from the drug manufacturers.  This practice allegedly violated federal and state drug safety laws and regulations.  Additionally, the pre-filled syringes of oncology drugs were allegedly prepared under unsterile and unclean conditions, exposing cancer patients with weakened immune systems to hazardous contaminants.

San Antonio Fire & Police Pension Fund, represented by Berman Tabacco, as well as other institutional investors alleged in an action on behalf of the Company’s shareholders that the directors and officers of Amerisource acted in bad faith and breached their fiduciary duties by failing to establish and implement an adequate reporting system to ensure that the Company and its subsidiaries operated in compliance with the law and by failing to act on red flags involving the pre-filled syringes program when they were raised.  They allege that the Board’s failure allowed the Company to engage in illegal conduct for years and caused the Company’s subsidiary to enter a criminal guilty plea, pay a $208 million criminal fine, a $52 million criminal forfeiture, and an additional $625 million civil settlement.

On August 24, 2020, Vice Chancellor Glasscock of the Delaware Chancery court denied the Company’s motion to dismiss.  Vice Chancellor Glasscock noted in his decision that the alleged facts indicate that Amerisource “operated a criminal enterprise” and that the complaint adequately alleged that the Company’s directors “permitted a woefully inadequate reporting system” with respect to its subsidiary and consciously disregarded evidence of corporate misconduct.  He further noted that the allegations brought in the action are a “prime example” of a company “flouting laws meant to ensure the safety and purity of drugs destined for patients suffering from cancer.”

According to Boston Partner Nathaniel L. Orenstein, “We are pleased by this ruling and hope that we can hold individuals accountable for their role in Amerisource’s conduct that led to the guilty plea.”

The case is Teamsters Local 443 Health Services & Insurance Plan, et al. v. John Chou, et al., C.A. No. 2019-0816-SG (Del. Ch.).  Berman Tabacco’s litigation team includes Nathaniel Orenstein, and Berna Lee from Berman Tabacco’s Boston office and Nicole Lavallee of the firm’s San Francisco office.

Best Lawyers® Recognizes Berman Tabacco Attorneys for the Fourth Consecutive Year

Berman Tabacco is pleased to announce that six Berman Tabacco Attorneys have been recognized by The Best Lawyers in America® in its 2021 edition, released on August 20, 2020.

Three partners have been recognized the primary The Best Lawyers in America publicationJoseph J. Tabacco, Jr. has been recognized in the areas of Securities and Antitrust Litigation, Christopher T. Heffelfinger has been recognized in the area of Antitrust Litigation, and Nicole Lavallee has been recognized in the area of Securities Litigation.

Additionally, three associates—Colleen Cleary, A. Chowning Poppler and Carl Hammarskjold—have been recognized in the inaugural 2021 edition of The Best Lawyers in America: Ones to Watch for their work in Mass Tort Litigation / Class Actions – Plaintiffs.

“We are gratified by Best Lawyers’ expanding recognition of Berman Tabacco attorneys and their extraordinary efforts on behalf of our clients, and we congratulate our hard-working colleagues,” commented Daniel Barenbaum, a partner in the firm’s San Francisco office.

Best Lawyers states that it is one of the oldest and most respected peer-review publications and “has become universally regarded as the definitive guide to legal excellence.”  For the 2021 edition, 9.4 million votes were analyzed, which resulted in more than 67,000 leading lawyers being included in 148 practice areas.

Berman Tabacco Settles Sinclair Broadcast Group Derivative Action

Berman Tabacco is Plaintiffs’ Co-Lead Counsel representing Norfolk County Retirement System in a shareholder derivative action against Sinclair Broadcast Group’s controlling shareholders and Board of Directors in federal court in Maryland.  Plaintiffs allege that Sinclair’s controlling shareholders and Board breached their fiduciary duties by knowingly and intentionally misleading the U.S. Federal Communications Commission in connection with certain related party transactions involved in a proposed merger between Sinclair and Tribune Media Company (“Tribune”).  This allegedly resulted in the cancellation of the merger, as well as Sinclair paying $60 million in damages to Tribune and paying $48 million in civil penalties to the FCC.

The case has settled and provides far-reaching corporate governance benefits to Sinclair and its shareholders, including substantial controls over how the Company interacts with its regulators and oversight over related-party transactions.  The settlement requires the Company to create two new Board committees and hire a Chief Compliance Officer.  The settlement further provides in excess of $25 million in recovery for the Company, a significant portion of which will come from executive chairman David D. Smith repaying $4.36 million in stock awards.  Plaintiffs’ motion for preliminary approval of the settlement was filed on July 23, 2020.

“This settlement is important because it implements very robust corporate governance reforms and holds an alleged wrongdoer personally accountable for injury to the Company,” commented Berman Tabacco partner Nathaniel L. Orenstein,  “this settlement will help ensure the company follows the rules and protects minority shareholders.”

The cases are Fire and Police Retiree Health Care Fund, San Antonio v. Smith, et al., No. 1:18-cv-03670-CCB (D. Md.) and Norfolk County Retirement System v. Smith, No. 18-cv-03952 (D. Md.) (Sinclair Broadcast Group Derivative Actions).  The litigation team includes Leslie Stern and Nathaniel L. Orenstein from Berman Tabacco’s Boston office.

For more information about the settlement, please read the following:

 

Berman Tabacco Welcomes New Associates to its Boston Office Team

Berman Tabacco is pleased to welcome two new associates to the Boston office, Lindsey Silver, who joined the firm in June, and M. Dalton Rodriguez, who joined the firm in July.

Lindsey Silver

Lindsey focuses her practice on securities litigation, including cases against pharmaceutical manufacturers.  She is currently a member of the litigation team pursuing claims against Portola Pharmaceuticals, Inc. and its top executives for allegedly misleading the market about sales of its primary drug, Andexxa.

Prior to joining the firm, Ms. Silver worked as an associate for over seven years at Wilmer Cutler Pickering Hale and Dorr LLP in Boston, where she focused primarily on securities litigation, regulatory investigations, and appeals, as well as other complex business litigation. She played a critical role in a variety of high-profile cases on behalf of clients in the financial, pharmaceutical, and biotechnological industries in both state and federal court. She has significant experience in drafting dispositive and non-dispositive motions, defending depositions, and managing document discovery.

During law school, Ms. Silver interned with the Hon. Nancy Gertner on the U.S. District Court for the District of Massachusetts, and in the Trial Division of the Massachusetts Attorney General’s Office. Before law school, Ms. Silver worked as a paralegal at a labor and employment law firm in Boston.

M. Dalton Rodriguez

M. Dalton Rodriguez focuses his practice on securities litigation. He is currently a member of the litigation team pursing a derivative action on behalf of investors of Sinclair Broadcast Corporation, Inc. In that action, Berman Tabacco’s client alleges that Sinclair’s controlling shareholder and Board breached their fiduciary duties by knowingly and intentionally misleading the U.S. Department of Justice and U.S. Federal Communications Commission in their review of the proposed merger between Sinclair and Tribune Media Company. This allegedly resulted in the cancellation of the merger, which has cost Sinclair hundreds of millions of dollars to date.

Prior to joining the firm, Dalton worked as an associate at Ropes & Gray LLP in Boston for more than four years, where he focused on bankruptcy and other complex business litigation, internal investigations related to legal and regulatory compliance, and proceedings before the U.S. Securities and Exchange Commission. He also maintained a substantial pro bono practice focused on issues affecting the LGBTQ community and immigrant rights.

While in law school, Dalton was an editor for the Stanford Journal of Civil Rights and Civil Liberties and the Stanford Journal of Complex Litigation. He also served as an accounting instructor for Project ReMADE and as social chair for Stanford OutLaw.

Berman Tabacco Secures Key Ruling Permitting the Bulk of Consumers’ State Law Claims Against American Express to Proceed

On April 30, 2020, U.S. District Court Judge Nicholas G. Garaufis (E.D.N.Y.) decided that consumers may pursue the bulk of their antitrust and consumer protection claims against American Express for barring merchants from steering customers to lower-cost payment alternatives.  The decision is a key procedural victory for the class action plaintiffs and paves the way for this class action on behalf of consumers who do not have an American Express card to proceed with the prosecution of the action.

Within the highly concentrated market for credit card services, American Express is the second-largest competitor in terms of market share.  According to the complaint, American Express’s behavior has unlawfully restrained trade since at least 2010, resulting in higher prices for credit card transactions and higher retail prices on goods and services across the board.  The class action seeks damages from American Express for the overcharges inflicted on consumers caused by its anti-steering rules imposed on merchants.

Earlier this summer, the court appointed Berman Tabacco Co-Lead Counsel.

“This is an important case that is at the cutting edge of competition in the payments industry,” says Berman Tabacco partner Todd A. Seaver.  “We allege that American Express uses its market power to inflict what amounts to a tax on everyone who buys goods or services from U.S. merchants.  In so doing, we argue that American Express has effectively caused all of us to pay higher prices at the cash register so that it can shower rewards and perks on the wealthiest American Express cardholders. ”

The case is captioned Oliver, et al. v. American Express Co., et al., No. 1:19-cv-00566-NGG-SMG (E.D.N.Y.).  The litigation team includes Joseph J. Tabacco, Jr., Todd A. Seaver and Colleen Cleary from Berman Tabacco’s San Francisco office.

Daily Journal Names Partner Joseph J. Tabacco, Jr. to the 2020 “Top Antitrust Lawyers” in California

San Francisco-based founding partner Joseph J. Tabacco, Jr. was named a Top Antitrust Lawyer in the Daily Journal’s inaugural list of Top Antitrust Lawyers in California for 2020.  The list, compiled from hundreds of nominations submitted statewide, honors leading antitrust practitioners for their work in plaintiffs, defense, and government antitrust work.

Joe Tabacco has long been recognized by clients and lawyers on both sides of the bench as a leading plaintiffs antitrust and securities class action attorney.  He has recovered billions of dollars on behalf of investors, business, and consumers and the classes that they represent prosecuting and, in some instances, trying antitrust and securities cases.

The Daily Journal highlighted two of Joe’s cases—one is one of the newest antitrust class action cases that he filed, and the other is one of the oldest that is still active.  The new case—Bogard Construction Inc. v. Vitol Inc., et al. No. 3:20-cv-03267-JSC (N.D. Cal.)—alleges an unlawful scheme by gasoline trading companies in Houston and Hong Kong in which traders are alleged to have manipulated the spot market for gasoline, leading California consumers to pay billions of dollars more at the pump for gasoline absent such conduct.  The other case—Automobile Antitrust Cases I and II, JCCP Nos. 4298 and 4303 (Cal. Super. Ct. San Francisco Cty.)—is a long-standing antitrust class action against automobile manufacturers alleging that they unlawfully conspired to stop the export of cheaper new Canadian vehicles to the United States.  It could be set for trial as early as the end of this year.

Nine Berman Tabacco Attorneys Selected by Northern California Super Lawyers Magazine, Including Joe Tabacco as one of the “Top 100 Super Lawyers in Northern California”

Berman Tabacco is pleased to announce that nine attorneys from Berman Tabacco‘s San Francisco office—six partners and three associates—have been selected for recognition by Northern California Super Lawyers magazine, published by Thomson Reuters.  The attorneys designated as 2020 Northern California Super Lawyers are partners Joseph J. Tabacco, Jr., Christopher T. Heffelfinger, Nicole C. Lavallee, Todd A. Seaver, Daniel E. Barenbaum, and Kristin Moody.  In addition, associates A. Chowning Poppler, Carl N. Hammarskjold, and Jeffrey V. Rocha have been designated as 2020 Northern California Rising Stars (a designation for attorneys under 40 or who have been in practice for less than 10 years).

San Francisco office founding partner Joseph J. Tabacco, Jr. has once again been selected as one of the Top 100 Super Lawyers in 2020.  Joe has long been recognized by Super Lawyers, having been selected as a top-rated antitrust litigation attorney each year since 2004.

Super Lawyers notes that it is “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  The publication states that it recognizes no more than the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

Berman Tabacco Appointed Lead Counsel in Securities Class Action Against Portola Pharmaceuticals, Inc.

On April 22, 2020, Berman Tabacco was appointed Lead Counsel representing the sole Lead Plaintiff Alameda County Employees’ Retirement Association in this class action, brought on behalf of investors in Portola Pharmaceuticals, Inc. (“Portola”), a biopharmaceutical company that develops and commercializes treatments for thrombosis and other hematologic diseases.  Portola’s primary product is Andexxa, a reversal drug for apixaban- and rivaroxaban-treated patients with life-threatening or uncontrolled bleeding.  The action currently alleges that, between January 8, 2019 and February 26, 2020, defendants issued materially false and misleading statements related to the sales of Andexxa.

Lead Plaintiff filed its consolidated amended complaint on May 20, 2020, alleging violations of Sections 10(a) and 20(a) of the Securities Exchange Act of 1934, and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933.  Specifically, the complaint alleges that defendants’ positive statements about the company’s business, operations, and prospects were material misrepresentations of fact and/or lacked a reasonable basis.  The company is alleged to have misrepresented (1) customer demand (from hospital and hospital-system pharmacies); (2) customer utilization of Andexxa for those that purchased it, both as to depth (regularity of usage) and breadth (types of bleeds prescribed for); and (3) Portola’s financial reporting regarding reserve for product returns (including that Portola had not established adequate reserve for returns of prior shipments of short-dated or previous-generation product).

The case is Hayden v. Portola Pharmaceuticals, Inc., et al., No. 3:20-cv-00367-VC (N.D. Cal.).  The litigation team includes Nicole Lavallee, Daniel Barenbaum, and Jeffrey Rocha from Berman Tabacco’s San Francisco office, and Jay Eng and Lindsey Silver from the firm’s Boston office.

$143 Million Settlement Approved in Columbia Gas Litigation

On February 12, 2020, Essex County Superior Court Judge Lang granted final approval of Plaintiffs’ $143 million settlement agreement with Columbia Gas that will be used to compensate individuals and businesses within the class who were impacted by the natural gas explosions that occurred on September 13, 2018.

Berman Tabacco serves on the Executive Committee and Plaintiffs’ Steering Committee in this consolidated class action lawsuit against Bay State Gas Company (doing business as Columbia Gas of Massachusetts) and NiSource, Inc. (collectively “Columbia Gas”) and certain Columbia Gas contractors, for their alleged failure to properly maintain natural gas pipelines servicing parts of the Merrimack Valley area of Massachusetts.  As alleged, due to this failure, the Massachusetts towns of Andover, North Andover, and Lawrence suffered a series of natural gas explosions on September 13, 2018 caused by a sudden spike in pressure within the gas pipelines that created ruptures in them and filled homes and businesses with large amounts of natural gas that ultimately ignited.

As reported, there were at least 60 explosions in the three towns affected by the disaster.  One death and several injuries have been reported and 12 homes were destroyed.  In addition, more than 8,000 people were forced to flee their homes because of the dangers posed by the ruptured gas lines.  A local fire chief described the scene as “Armageddon.”

The cases are Accomando v. Bay State Gas Company, No. 18-77CV01355B (Mass. Super. Ct. Essex County), and In re: Columbia Gas Cases, No. 18-77CV01343G (Mass. Super. Ct. Essex County).  The litigation team includes Bryan A. Wood and Nathaniel L. Orenstein from Berman Tabacco’s Boston office.

Berman Tabacco Appointed Lead Counsel in Securities Class Action Against Sterling Bancorp, Inc.

On May 1, 2020, Berman Tabacco was appointed interim Lead Counsel representing sole Lead Plaintiff Oklahoma Police Pension and Retirement System in Oklahoma Police Pension and Retirement System v. Sterling Bancorp, Inc., et al., No. 2:20-cv-10490 (E.D. Mich.).  The case is a securities fraud class action lawsuit against Sterling Bancorp, Inc. (“Sterling” or the “Company”), certain of its current and former officers and directors, and the underwriters for the Company’s initial public offering (“IPO”), brought on behalf of investors who purchased or otherwise acquired Sterling common stock from November 17, 2017 through and including December 8, 2019 (the “Class Period”), and investors who purchased or otherwise acquired Sterling common stock in or traceable to the Company’s IPO.

Sterling, headquartered in Southfield, Michigan, is the unitary thrift holding company of Sterling Bank and Trust.  The Company specializes in residential mortgages but offers a broad suite of products to the residential and commercial markets as well as retail banking services.  Throughout the Class Period, the Company’s largest lending product was its Advantage Loan Program, constituting the majority of the Company’s loans.  On December 9, 2019, the Company disclosed that it “voluntarily and temporarily suspended its Advantage Loan Program in connection with an ongoing internal review of the program’s documentation.”  On that same day, shares of Sterling common stock fell $2.16 per share to close at $7.29 per share, a decline of nearly 23%.

The complaint filed in this class action alleges that, throughout the Class Period, defendants made untrue statements of material fact and omitted other facts necessary to make the statements not misleading and further failed to disclose material facts concerning, inter alia, the Company’s loan underwriting, risk management, and internal controls, including repeatedly touting its strict underwriting, asset quality, and the Advantage Loan Program.

The litigation team includes Kristin J. Moody and Carl N. Hammarskjold from Berman Tabacco’s San Francisco office and Patrick T. Egan and Nicole Maruzzi from the firm’s Boston office.

Berman Tabacco Defeats Motion to Dismiss In Healthcare Services Securities Litigation

Berman Tabacco has prevailed over a motion to dismiss securities fraud claims against Healthcare Services Group, Inc. (“HCSG”) and several of its executive officers.  Berman Tabacco is Lead Counsel representing a state public pension fund in this securities fraud class action lawsuit brought on behalf of all persons who acquired HSCG common stock during the period between April 8, 2014 and March 4, 2019.

HCSG is one of the largest providers of housekeeping and laundry services to hospitals and other healthcare service organizations.  The action alleges that, during the class period, defendants issued materially false and misleading statements and failed to disclose “earnings management” practices that allowed HCSG to consistently meet or beat earnings per share estimates, which, in turn, caused the price of the company’s stock to be artificially inflated.  In addition, the action alleges that HCSG and defendants failed to disclose the existence of an ongoing SEC investigation.

On April 24, 2020, Judge Eduardo C. Robreno of the United States District Court for the Eastern District of Pennsylvania issued an Order that denied Defendants’ Motion to Dismiss.  The Court found that Lead Plaintiff’s “Amended Complaint sufficiently plead[] facts which satisfy the elements of a [Securities Exchange Act] section 10(b) violation, and the control necessary for a section 20(a) violation.”

Boston Partner Patrick T. Egan, stated, “We are encouraged by the Court’s ruling and look forward to litigating this case on behalf of our client and the proposed class.”

The case is Koch v. Healthcare Services Group, Inc., et al., No. 2:19-CV-01227-ER (E.D. Pa.).  The litigation team includes Patrick T. Egan and Steven J. Buttacavoli from Berman Tabacco’s Boston office and Nicole Lavallee and Victor S. Elias from the firm’s San Francisco office.

Joseph J. Tabacco, Jr. Recognized As Litigation Leader By Chambers USA

Chambers USA released its 2020 rankings on April 23, 2020. Joseph J. Tabacco, Jr. was again recognized—for the 14th consecutive year—as among the top securities litigators in the United States. Chambers noted that Joe “is a highly regarded plaintiff[s’] lawyer who regularly advises on high-stakes class actions and derivative suits.” They further stated that a client characterized Joe as “an organized multi-tasker,” with “vast experience and knowledge.”

Navigating These Uncharted Waters

All of us at Berman Tabacco hope you and your families are healthy and safe during these unprecedented times.

While the ebb and flow of daily life has changed dramatically for all of us in response to this COVID-19 pandemic, rest assured that the counsel and service our firm provides remains uninterrupted.  For the health and well-being of our Berman Tabacco family and the community at large, our physical offices remain closed.  Our virtual offices, however, are open and thriving.

We are completely operational.  With the help of our excellent IT staff, we continue to provide our clients with the same level of legal service we always have:  advising clients on sensitive and important matters; taking on new cases and representations; drafting complaints, briefs and other submissions; negotiating discovery and settlement agreements; and much more.  As a national practice with physical locations in Boston and San Francisco, Berman Tabacco has always had the technical infrastructure to deliver full service remotely.  Our attorneys and staff have full access to their work computer desktops and files, and they can be reached directly on their office telephones as though nothing has changed.

While we can no longer walk down the hall to speak to with our colleagues in their offices, the lack of physical space has in many ways brought us closer together.  We stay connected by phone and video, from one-on-one conversations to office gatherings.  We pick up our work extensions and speak regularly to one another. And we have Berman Tabacco tele- and video- conference lines available for impromptu or scheduled meetings.  In short, while life has changed in the short term, it is business as usual for Berman Tabacco.

Please do not hesitate to reach out—whether with questions or concerns, or just to talk.  We want to hear from you, and we stand ready to provide full and complete service.  We appreciate your faith in us, and we do not take it for granted.

SEC Loosens Regulatory Requirements Amid Coronavirus

In recent weeks, the coronavirus—which has infected over 1.3 million people worldwide at the time of this writing—has radically changed how companies conduct business.  Directives to work remotely and “shelter in place” are now the norm, causing businesses to deal with scattering workforces, strained supply chains, and diminished demand.  In response, the U.S. Securities and Exchange Commission (“SEC”) is relaxing its filing requirements and offering guidance on how public companies should respond.

On March 4, 2020, the SEC issued an order that eased certain filing requirements in light of COVID-19.  The SEC granted a 45-day extension for public companies to file certain disclosure reports due between March 1, 2020 and April 30, 2020.  To qualify for an extension, the SEC said that companies need to submit materials to the SEC explaining why they cannot meet the compliance deadline and the impact COVID-19 has had on their business.  On March 25, the SEC extended its order to cover filings due through July 1, 2020.

Since then, the SEC has offered filers more relief, generally in the form of guidance and statements.  On March 27, 2020, the SEC eased compliance requirements for corporations even further, allowing companies unable to fulfill the notarization requirements to access the SEC’s filing system to submit forms without notarization as long as they explain how COVID-19 affected them and submit a notarized copy within 90 days of accessing EDGAR.  According to the SEC, this temporary rule will be in place through July 1, 2020.

Crowdfunding companies, too, are getting a break from filing reports that would otherwise have been due between March 26, 2020 and May 31, 2020.  The SEC has extended their filing deadlines by 45-days under the condition that the company informs investors that it is relying on the temporary final rule and explain why it could not meet the filing requirement earlier.

Municipal advisors are granted relief as well.  They have an additional 45-days to file annual updates that would have otherwise been due between March 26, 2020 and June 30, 2020.  Among other conditions, the municipal advisor must be unable to meet the filing deadline for its annual update due to circumstances related to the coronavirus and must provide a brief description of why it could not meet the filing deadline.

In addition to loosening filing requirements, the SEC’s Division of Corporate Finance offered detailed guidance on how companies should assess and communicate to investors the risks associated with COVID-19.  Although the Division urged timely reporting, it recognized that “it may be difficult to assess or predict with precision the broad effects of COVID-19 on industries or individual companies.”  The Division encouraged companies to “consider the need for COVID-19-related disclosures within the context of the federal securities laws and our principles-based disclosure system . . . .  It is only with this type of disclosure that all investors can make informed decisions.”  With these principles in mind, the Division set forth questions companies should be asking as they assess the impact coronavirus may have on their business.  Companies should consider topics ranging from their financial conditions to human capital resources and productivity.

Most recently, on April 2, 2020, Chairman Jay Clayton issued a statement explaining the steps the SEC has taken in response to COVID-19 and reassuring investors that the SEC “continue[s] to allocate our resources in the best interests of investors and our capital markets, with investor protection and market integrity front of mind.”  Chairman Clayton further announced that the deadline for Regulation BI and Form CRS will remain June 30, 2020.  Those mandates require SEC-registered investment advisors and SEC-registered broker-dealers to provide retail investors with a brief customer or client relationship summary, as well as notify investors of the services they are receiving and how they will be charged for those services.

Other changes to filing deadlines and processes have been and will no doubt continue to be announced.

The SEC’s recent initiatives may only be the tip of the iceberg.  With the number of coronavirus cases continuing to swell, the SEC is monitoring the situation and may take additional steps, including providing further filing extensions.  These extensions, along with any further guidance, afford companies much needed flexibility as they are dealing with the short- and long-term effects of the current crisis.  And they make good sense, as it is hard to close the books on year-end financials during this life-disruption and extreme social distancing.  But such actions come with a cost to investors.  At a time when market gyrations are monitored almost as closely as new COVID-19 diagnoses, investors should not and cannot be kept in the dark for long.  Companies must continue to be transparent about their financial condition, business prospects, and the risks and opportunities the current crisis presents.

For access to the SEC’s orders, visit https://www.sec.gov/rules/other.shtml.

Berman Tabacco Listed in ISS SCAS’ The Top 100 U.S. Class Action Settlements of All Time

Institutional Shareholder Services’ Securities Class Action Services (ISS SCAS) has published The Top 100 U.S. Class Action Settlements of All-Time (as of December 31, 2019), which, as reported by ISS SCAS, is an annual report that identifies the largest securities class action settlements filed after the passage of the Private Securities Litigation Reform Act of 1995.  The cases reported are ranked by the total value of the settlement fund.  According to the report, although in 2019 ISS SCAS recorded 101 approved securities class action settlements in the United States with a combined value of $3.17 billion, only two were large enough to qualify for this list (one for $389.6 million and another for $250 million).

For the fourth consecutive year, Berman Tabacco was listed as one of the firms with the most settlements on the Top 100 list, with seven settlements totaling $2,320,900,000.

Supreme Court Appears Willing to Maintain the SEC’s Ability to Recover Ill-Gotten Gains from Fraudsters

On March 3, 2020, the Supreme Court appeared unified during oral argument in Liu v. SEC to preserve one of the Securities and Exchange Commission’s most valuable enforcement tools: disgorgement.  Disgorgement requires violators of securities laws to forfeit their ill-gotten gains, and the SEC has used this equitable remedy for nearly 50 years.  The co-director of the SEC’s Division of Enforcement, Steven Peikin, emphasized in 2019 that “disgorgement is a central component of meaningful relief and often the surest way to restore at least a portion of investors’ losses.”

The Securities Exchange Act of 1934 (the “Act”) gives the SEC broad authority to enforce federal securities laws and to prescribe rules and regulations in the public interest or for the protection of investors.  While the statute specifically permits the SEC to seek injunctions, it is silent on disgorgement.  The source of the SEC’s authority to seek disgorgement comes from a 1971 Second Circuit case entitled SEC v. Texas Gulf Sulphur (446 F.2d 1301, 1308 (1971)), which found that district courts have general equitable power under Section 27 of the Act and that “the SEC may seek other than injunctive relief in order to effectuate the purposes of the Act, so long as such relief is remedial relief and is not a penalty assessment.”  Since then, district courts have consistently upheld the SEC’s authority to recover ill-gotten gains obtained through fraud or insider trading.  And the practice has been impactful: in 2016, the SEC obtained $3 billion in court-ordered disgorgement, more than double what it had collected in other types of monetary penalties.

This long-standing form of equitable relief was called into question in a mighty footnote in the Supreme Court’s 2017 Kokesh v. SEC opinion (137 S.Ct. 1635, 1642 at n.3).  There, the Court held that disgorgement constitutes a penalty and is therefore subject to a five-year statute of limitations.  A footnote in that decision stated that “[n]othing in this opinion should be interpreted as an opinion on whether courts possess authority to order disgorgement in SEC enforcement proceedings or on whether courts have properly applied disgorgement principles in this context.”  Many securities law scholars and practitioners predicted that this footnote would lead to a defendant challenging the SEC’s ability to seek disgorgement.

Sure enough, that defendant took the form of a California couple, Charles Liu and Xin “Lisa” Wang.  Before the Kokesh decision was issued in June 2017, the SEC filed suit against the couple in May 2016 in the Central District of California alleging that Mr. Liu and Ms. Wang defrauded 50 Chinese investors in an EB-5 Immigrant Investor Program.  (The EB-5 Program grants permanent residence – and a path to citizenship – to foreign investors who invest at least $500,000 toward job-creating real estate projects.)  The case alleged that the couple raised $26 million from investors who had been told that the money would be used to build a cancer research center.  But the center was never built.  Instead, the couple allegedly misappropriated the money for their personal use and funneled it into Chinese marketing firms.  The SEC charged them with making misstatements or omissions of material information when soliciting those investments.  In April 2017, the District Court granted summary judgment for the SEC, ordering the couple to pay $8.2 million in monetary penalties and to disgorge the $26 million of ill-gotten gains they took from the investors (they were also banned from participating in the EB-5 Program).

In June 2017, less than two months after summary judgment had been granted against the couple requiring disgorgement of $26 million, the Supreme Court issued its decision in Kokesh, which contained its now-infamous footnote.  Mr. Liu and Ms. Wang appealed the disgorgement decision against them to the Ninth Circuit, which upheld the judgment.

The couple then appealed to the Supreme Court to confront the footnote and decide “[w]hether the [SEC] may seek and obtain disgorgement from a court as equitable relief for a securities law violation even though this Court has determined that such disgorgement is a penalty.”  During oral argument, the Justices seemed united around fairness.  Justice Ginsburg asked, “Is it not an equitable principle that no one should be allowed to profit from his own wrong?”  Rather than doing away with the remedy altogether, Justice Gorsuch appeared to want assurance that the proceeds from disgorgement were returned to the harmed investors: “Would the government have any difficulty with a rule that the money should be returned to investors where feasible?”

These questions from both ends of the Supreme Court spectrum suggest that Justices both liberal and conservative seem to be supportive of the role that disgorgement may play in the SEC’s arsenal of available penalties and tools.  While time will tell, that time appears to be fast approaching in the form of an opinion in this consequential case.

Berman Tabacco Shortlisted as a Finalist for California Plaintiff Firm of the Year for 2020 by Benchmark Litigation

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, is hosting its second annual West-Coast US Awards Dinner 2020 on March 5th at The Saint Regis in San Francisco. Berman Tabacco is honored to have been selected, for the second year in a row, as one of four finalists in the California Plaintiff Firm of the Year category.

In the Benchmark California magazine, the firm was selected as a Tier 1 firm—the highest ranking awarded—in the Plaintiff Work and Securities/White-Collar Crime practice areas, with partners Joseph J. Tabacco, Jr., Nicole Lavallee, Todd A. Seaver, and Daniel E. Barenbaum designated as Litigation Stars.

This is illustrative of similar rankings on other lists within Benchmark Litigation’s National and California rankings, both for the firm and certain of its attorneys. Nationally, the firm was recognized as a Top 10 Plaintiffs firm (for the 4th time) and Highly Recommended (for the 9th time).  Boston partners Norman Berman and Patrick T. Egan were designated Massachusetts State Litigation Stars in Securities, Competition, FCPA and Enforcement, and General Commercial.  In California regional rankings, the firm was recognized as a Tier 1 firm in the San Francisco region, with San Francisco partners Joseph J. Tabacco, Jr., Nicole Lavallee, and Daniel E. Barenbaum designated as both California Litigation Stars and San Francisco Litigation Stars, in the Securities, Plaintiff, Antitrust, and Intellectual Property practice areas.

“We are humbled by Benchmark Litigation’s continued recognition of our firm and its attorneys for the hard work that we do each day advocating on behalf of our clients,” said San Francisco partner Daniel Barenbaum.

Berman Tabacco Files Securities Class Action Lawsuit Against Sterling Bancorp, Inc. (SBT)

SAN FRANCISCO  — On February 26, 2020, Berman Tabacco filed a class action lawsuit for violations of the federal securities laws against Sterling Bancorp, Inc. (“Sterling” or the “Company”) (NASDAQ: SBT), certain of its current and former officers and directors, and the underwriters for the Company’s initial public offering (“IPO”) on behalf of investors who purchased or otherwise acquired Sterling common stock from November 17, 2017 through and including December 8, 2019, (the “Class Period”) and investors who purchased or otherwise acquired Sterling common stock in or traceable to the Company’s IPO.

Berman Tabacco filed this action in the Eastern District of Michigan on behalf of its client, Oklahoma Police Pension and Retirement System.  The case is captioned Oklahoma Police Pension and Retirement System v. Sterling Bancorp, Inc, et al., No. 2:20-cv-10490.  A copy of the complaint is available on the firm’s website [here].

Sterling, headquartered in Southfield, Michigan, is the unitary thrift holding company of Sterling Bank and Trust.  The Company specializes in residential mortgages but offers a broad suite of products to the residential and commercial markets as well as retail banking services.  Throughout the Class Period, the Company’s largest lending product was its Advantage Loan Program, constituting the majority of the Company’s loans.

On December 9, 2019, the Company disclosed that it “voluntarily and temporarily suspended its Advantage Loan program in connection with an ongoing internal review of the program’s documentation.”  On that same day, shares of Sterling common stock fell $2.16 per share to close at $7.29 per share, a decline of nearly 23%.

The complaint filed in this class action alleges that, throughout the Class Period, defendants made untrue statements of material fact and omitted other facts necessary to make the statements not misleading and failed to disclose material facts concerning, inter alia, the Company’s loan underwriting, risk management and internal controls, including repeatedly touting its strict underwriting, asset quality and the Advantage Loan Program.

If you wish to serve as Lead Plaintiff for the Class, you must file a motion with the Court no later than Monday, April 27, 2020.  Any member of the proposed Class may move the Court to serve as Lead Plaintiff through counsel of their choice, or may choose to do nothing and remain a member of the proposed Class.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact Berman Tabacco Attorneys A. Chowning Poppler or Nicole A. Maruzzi at (800) 516-9926 or via email at cpoppler@bermantabacco.com or nmaruzzi@bermantabacco.com.

You may also submit information through our website at: https://www.bermantabacco.com/case/sterling/.

Contacts
A. Chowning Poppler
cpoppler@bermantabacco.com
(800) 516-9926

Nicole A. Maruzzi
nmaruzzi@bermantabacco.com
(800) 516-9926

Carl Hammarskjold Appointed to the Executive Committee of BASF’s Antitrust and Business Regulation Section

Berman Tabacco is pleased to announce that Carl Hammarskjold has been appointment to the Executive Committee of the Antitrust and Business Regulation Section of the Bar Association of San Francisco (BASF).  According to BASF, the Antitrust and Business Regulation Section educates practitioners and helps solve problems in the field of antitrust law.   It also sponsors educational programs and proposes changes to applicable statutes and regulations.  “I’m delighted to join the Antitrust Executive Committee,” says Carl.  “The antitrust bar in Northern California is special, both in terms of collegiality and quality of lawyering.  I’m thrilled to be able to contribute to the Section and help shape its events.”

Goldman Sachs Believes the Future is Female, Issuing New Mandate Regarding Board Diversity for IPOs it Underwrites

What a difference a decade makes.  Ten years ago, Goldman Sachs faced public outrage for its alleged role in misleading investors and profiting from likely-to-fail mortgage-backed securities.  Indeed, in 2010, the Securities and Exchange Commission (SEC) filed suit against the Wall Street bank claiming it committed fraud by bilking investors out of more than $1 billion by misstating and omitting key facts about a financial product tied to toxic subprime mortgages as the U.S. housing market was beginning to falter.  That same year, a class action lawsuit was filed against Goldman Sachs by three former female professional employees alleging systemic and pervasive gender discrimination, including paying women less than similarly situated men, disproportionately evaluating and promoting men over women, and fostering a “boys club” atmosphere that permitted a “culture of sexual harassment and assault” where women are either “sexualized or ignored.”  Goldman Sachs settled with the SEC for $550 million, and the gender discrimination class action is ongoing.

But it’s a new decade, and Goldman Sachs is leading by example and making headlines for entirely different reasons.  Last week, the Company announced that, starting on July 1, 2020, Goldman Sachs Group Inc. will only take a company public if it has at least one diverse board member, with a particular focus on women.  The new policy applies to Initial Public Offerings (IPOs) in the U.S. and Europe.  And starting in 2021, the bank will require companies going public to have two diverse board members.

As the top underwriter of U.S. offerings last year, this new policy reflects a refreshing shift from the IPO industry’s track record, to which Goldman contributed.  In 2019, 18 of the 59 companies Goldman Sachs helped to take public would not have met this new self-imposed diversity requirement, as those companies did not have a single female director at the time the SEC registration statement became effective.  As one of the underwriters for WeWork’s failed IPO, Goldman Sachs argued in 2019 that it would simply let investors decide if they liked a company’s board.  Speaking about the bank’s new proactive approach, Goldman Sachs’s CEO, David M. Solomon, stated that, rather than turn away companies that do not meet the new requirement, the bank could facilitate introductions to qualified board candidates.

With an eye toward long-term growth, Mr. Solomon further explained the policy: “We might miss some business, but in the long run, this I think is the best advice for companies that want to drive premium returns for their shareholders over time.”  Citing its own data, Goldman Sachs stated that companies with greater diversity performed better than those with less diverse boards.  More specifically, companies that had at least one diverse board member saw a 44% increase in their average share price within a year of going public, versus 13% at companies with no diverse board members.

Goldman Sachs has also made improving diversity a priority internally.  Four out of its 11 directors are women, and its Lead Director is a person of color.  The Company announced in March 2019 that it was setting arguably aggressive diversity goals for its staff as well.  Among the new analysts and entry-level associates it hires in the Americas, 14% would be Latino/Latina, 11% would be people of African descent, and half would be women.  For more senior positions, at least two diverse qualified candidates would be interviewed for any open role.

Increasingly, exploring ways to make the boardroom more reflective of society at large has been a focus of institutional investors, legislatures , and academics.  There is room to grow.  Women only hold 25% of board seats at S&P 500 companies.  Only 20 companies in the S&P 500 fully disclose ethnic diversity in senior management, and only 17 companies report ethnic diversity at the board level.

While significant progress still needs to be made to achieve equity, diversity, and inclusion in the boardrooms of corporate America, Goldman Sachs’s IPO policy appears to be a proactive step to open up a few seats at the table.

Sarah Khorasanee McGrath Elected as President Northern California Federal Bar Association

Berman Tabacco is pleased to announce that Sarah Khorasanee McGrath has been elected President of the Northern District of California Chapter of the Federal Bar Association (FBA) for 2020—its centennial term.  Sarah has a long history of commitment to and advocacy on behalf of the FBA, having previously held the following positions: President-Elect (2019), Treasurer (2018), Vice President (2016-2017) and Co-Chair of the Young Lawyers Division (2013-2015).

“I am honored to lead the FBA during FBA’s 100th anniversary term,” said Sarah. “I am eager to work with our team to support and grow our membership and continue to solidify our relationship with and celebrate our excellent Northern California federal judges.”

“Sarah’s elevation to President of the FBA puts the organization in good hands and speaks to her dedication and continued excellent service,” said San Francisco Partner Joe Tabacco, “We are proud of her and honored to have her representing Berman Tabacco.”

The FBA, founded in 1920, holds itself out as being dedicated to the advancement of the science of jurisprudence and to promoting the welfare, interests, education, and professional development of all attorneys involved in federal law.  Among other things, the organization advocates making changes to and improving the federal legal system via a network of close to 100 chapters.  The Northern District of California Chapter claims to be one of the most active chapters in the country, committed to “serving the needs of federal practitioners, judges, and courts, as well as the Northern District of California community as a whole.”

Sarah Khorasanee McGrath - Elected President of Northern California Federal Bar Association

 

Two San Francisco Partners Recognized By Who’s Who Legal: Competition 2019 (Plaintiffs)

Berman Tabacco is honored to announce that San Francisco Partners Joseph J. Tabacco, Jr. and Todd A. Seaver have again been recognized by Who’s Who Legal (WWL), a publication of U.K.-based Global Competition Review, as leaders in their field in the 2019 edition of Who’s Who Legal: Competition in the Plaintiff category.  Mr. Tabacco has been included in this publication for the past six years, since the creation of the Plaintiff category.  This is the third consecutive year for Mr. Seaver.  Mr. Seaver has also been recently recognized as a Thought Leader in Competition by WWL (2019-2020).

Forbes Names Berman Tabacco to its America’s Top Corporate Law Firms List

Berman Tabacco is pleased to announce that Forbes, known for it “Lists,” has named the firm to its 2019 inaugural list of America’s Top Corporate Law Firms. Forbes, in partnership with market research company Statista, created their first list of the top U.S. corporate law firms, in which they selected 243 firms based on survey responses from 2,500 lawyers.

Forbes reports that the American Bar Association states that there are more than 1.3 million lawyers practicing in over 40,000 firms in the United States.  Forbes Media holds itself out as a global media, branding and technology company, with a focus on news and information about business, investing, technology, entrepreneurship, leadership and affluent lifestyles.

Berman Tabacco Secures Positive Ruling In Sinclair Derivative Action

Berman Tabacco recently secured a positive ruling permitting two shareholder derivative suits to proceed against Sinclair Broadcast Group.

Berman Tabacco represents Norfolk County Retirement System in a derivative action on behalf of Sinclair alleging that Sinclair’s controlling shareholders and Board breached their fiduciary duties by knowingly and intentionally misleading the DOJ and FCC in their review of a proposed merger between Sinclair and Tribune Media Company, breaching the terms of a merger agreement with Tribune Media Company.  This allegedly resulted in the cancellation of the merger, which has already cost the company hundreds of millions of dollars.

Norfolk’s lawsuit seeks reforms to Sinclair’s corporate governance and internal procedures, restitution and disgorgement from Sinclair’s officers and directors, declaratory and equitable relief, and damages for Sinclair, as well as other forms of relief.

On December 9, 2019, Judge Catherine C. Blake of the United States District Court for the District of Maryland denied Defendants’ Motion to Dismiss or Stay without prejudice, permitting limited discovery on the issue of the formation and membership of Sinclair’s special litigation committee and its scope of authority at different points in the investigation.  In so ruling, the Court noted that the “unresolved questions surrounding the composition and scope of authority of the [special litigation committee] certainly do not ‘instill confidence.’”

According to Boston Partner Nathaniel L. Orenstein, the Sinclair team lead for Berman Tabacco, “We are very encouraged by the Court’s ruling and share the Court’s concerns about Sinclair’s supposed special litigation committee.”

The case is Norfolk County Retirement System v. Smith (Sinclair Broadcast Group Derivative Action), No. 18-cv-03952 (D. Md.).  The litigation team includes Leslie R. Stern and Nathaniel L. Orenstein from Berman Tabacco’s Boston office and A. Chowning Poppler of the firm’s San Francisco office.

Berman Tabacco Announces Client Recovery in $6.5 Million Self-Litigated False Claims Act Settlement Involving Eight Former Executives and Employees of Aegerion Pharmaceuticals, Inc.

Berman Tabacco announces a $6.5 million settlement in a False Claims Act case brought against eight former executives and employees of Aegerion Pharmaceuticals, Inc. (“Aegerion” or the “Company”) by three former employees.  The current settlement resolves claims alleging that defendants defrauded Medicare by causing the submission of payment claims for the prescription drug Juxtapid after promoting it for unapproved uses.  The Company previously reached a civil false claims settlement with the United States and certain individual states for $28.8 million and agreed to pay a criminal fine and forfeiture of $7.2 million, bringing the total recovery to the United States and certain individual states in this matter to $42.5 million.

The three whistleblowers or “Relators” were former sales representatives at Aegerion, each with decades of experience in the pharmaceutical, biotech, and health care industries.  They were each drawn to Aegerion by the promise of helping patients with a rare genetic disorder obtain potentially life-saving drug therapy.

Juxtapid is an orphan drug approved by the FDA to treat patients with homozygous familial hypercholesterolemia (“HoFH”), an extremely rare genetic disorder with low life expectancy.  In July 2013, shortly after the FDA approved Juxtapid, the whistleblowers brought their action alleging that the defendants aggressively promoted and distributed Juxtapid by targeting patients who did not suffer from HoFH.  For example, the whistleblowers alleged that Aegerion made false and misleading statements to doctors in order to have them prescribe Juxtapid more widely, notwithstanding the FDA’s efficacy and safety concerns that had prompted it to limit Juxtapid’s use to the treatment of HoFH.

In 2017, the United States intervened in the whistleblowers’ action for purposes of settling claims with Aegerion under an arrangement where Aegerion agreed to plead guilty to two misdemeanor charges.  The United States declined to intervene in the whistleblowers’ claims against Aegerion’s senior management and other individual defendants.  Since 2017, whistleblowers have self-litigated the action against these individuals and defeated multiple motions to dismiss the case.   Following a mediation, the parties agreed to a settlement whereby defendants collectively will pay $6.5 million to the United States, of which the whistleblowers will share approximately $1,787,500.  Defendants deny liability.

“This settlement draws to an end six years of litigation and represents a significant recovery for the United States,” commented Berman Tabacco partner Patrick Egan, lead attorney on the case.  “By self-litigating against the senior executives at Aegerion, the whistleblowers demonstrated their commitment and courage to take on the alleged architects of the scheme.”

“We are very proud of our clients.  Not only did they alert the government to what they witnessed firsthand, but they continued to fight on even after Aegerion had settled,” commented Rory Delaney, one of whistleblowers’ counsel from the outset.

The whistleblowers are represented by the attorneys of Berman Tabacco’s Boston office, including Patrick T. Egan, Bryan A. Wood, Stephen Ryan, Jr., and Nicole Maruzzi, alongside attorneys from Delaney Kester LLP, including Royston H. Delaney and Ilyas J. Rona of Boston, Massachusetts; and Charles F. Kester of Los Angeles, California.

Berman Tabacco is a national law firm representing whistleblowers nationwide in actions filed under the False Claims Act, as well as before the SEC, CFTC, IRS and state regulators in connection with their enforcement of federal and state laws.  The firm also represents institutions and individuals in lawsuits seeking to recoup losses caused by corporate board misconduct and violations of securities and antitrust laws.  The firm has 37 lawyers in Boston, Massachusetts and San Francisco, California.

Contact:

Patrick T. Egan

pegan@bermantabacco.com

(617) 542-8300

SEC Proposed Rule Changes Chip Away at Investors’ Rights

The U.S. Securities and Exchange Commission (“SEC”) recently proposed amendments to Securities Exchange Act of 1934 Rules 14a-2(b) and 14a-8 that could significantly hamper investors’ abilities to advocate for corporate policies and hold corporate insiders accountable.

Under the SEC’s proposed amendments, the eligibility requirements that a shareholder must satisfy to have a proposal included in a company’s proxy statement are substantially more difficult to meet than those in the current rules.  For example, while the proposed amendments would keep the minimum ownership value that is required to submit a proposal at $2,000, they would increase the minimum time a shareholder must have held those shares from one year to three.  Further, the proposed amendments would also limit access to a work-around of these minimum-value requirements.  Under the current rules, shareholders may own 1% of the company’s market value as an alternative route to meeting the ownership requirements; but the proposed amendments would require shareholders to have had continuous ownership of at least $15,000 for two years or $25,000 for one year.

While the SEC characterized the proposals as a way to “modernize” the thresholds and process by which shareholder proposals are included in proxy statements, there is a risk, beyond the changes above, that these rule changes could limit shareholders’ already tenuous influence over how companies address critical issues.  For example, the proposed amendments eliminate the provision allowing shareholders to pool their shares together to meet the 1% threshold—a critical component of the current rules.  As the CEO and President of impact investing advocate Ceres explained, “The SEC’s proposed changes to the shareholder proposal process are misguided and will take away an important resource for investors to manage all kinds of financial risk, from climate change to cybersecurity[] to human rights.”

Beyond that, the proposed amendments include a new provision that could create a significant chilling effect on potential challengers seeking to hold companies accountable: the proposed amendments would require proxy advisors to give companies the right to review and provide feedback on proxy voting advice before providing it to their clients.  While there is little downside to staying quiet, there is potentially great risk to speaking up.  If a proxy advisor is deciding how to advise shareholders regarding poor corporate performance, there are no risks to recommending that investors support management.  However, one SEC commissioner worries that a recommendation against management exposes the advisory firm to a potential lawsuit from the company at issue claiming that the proxy voting advice is misleading because the company is threatened by the methodology used by the advisor.

One of the two dissenting commissioners, Robert Jackson, stated that “[t]he SEC is interfering in decades-long relationships between investors and their advisors in a way that will significantly skew voting recommendations toward executives.  That will be especially true in cases, such as investor proposals to strengthen the link between CEO pay and performance, where proxy advisors have historically engaged in the careful, firm-specific analysis that such proposals require.”

Together, these proposals are in line with recent steps taken by the SEC to help out corporate America.  The SEC claims that these amendments will reverse a 20-year decline in the number of companies being listed on U.S. exchanges by modernizing disclosures and cutting regulatory costs for firms.

But these changes come at the expense of investors’ ability to vote in reliance on independent voting recommendations and submit shareholder proposals.  The Executive Director of the Council of Institutional Investors, Ken Bertsch, described the proposals as an attempt by the SEC to “shackle proxy advisory firms and limit shareholder proposals.”  In his view, “The rules are an unnecessary interference in the free market, and would impede investors’ voice on critical matters at U.S. public companies.”

*   *   *

The proposed amendments are currently open for public comment until February 3, 2020.  Comments may be submitted electronically at https://www.sec.gov/rules/proposed.shtml or via email to rule-comments@sec.gov.  Submissions regarding the amendments to the proxy rules should reference File Number S7-22-19.  Submissions regarding amendments to the shareholder proposals should reference S7-23-19. 

San Francisco Magazine Highlights the Top Women Lawyers in Northern California

The December issue of San Francisco Magazine­—The Power Issue—features the annual list of Top Women Lawyers of Northern California based on Super Lawyers’ rankings.  Berman Tabacco is pleased to announce that three attorneys from the San Francisco office have been included on this list.

San Francisco Managing Partner Nicole Lavallee has been selected as a member of the Top Women Attorneys list in the Securities Litigation category for the third consecutive year (2017-2019).  Of Counsel Sarah K. McGrath (Vice President of the Federal Bar Association, Northern District of California Chapter) was selected as a Rising Star in the Antitrust category for the sixth time (2013-2015, 2017-2019).  And Associate A. Chowning Poppler was selected as a Rising Star for Consumer Law for the third consecutive year (2017-2019).

U.S. News & World Report and Best Lawyers® Ranks Berman Tabacco in its Tenth Edition of “Best Law Firms”

U.S. News & World Report and Best Lawyers® have released their Best Law Firm rankings for 2020.  They have ranked Berman Tabacco both nationally and in the San Francisco metropolitan area as leaders in the areas of Litigation-Antitrust (for the second time) and Litigation-Securities.  The Best Law Firms rankings are based on a combination of client feedback, information provided on law firm surveys, and Best Lawyers® peer review.  According to U.S. News & World Report and Best Lawyers, of the almost 15,000 firms reviewed, only about 2,100 received a national law firm ranking in this edition.

To be eligible for consideration as a Best Law Firm, a firm must have at least one attorney ranked in the current edition of Best Lawyers®Berman Tabacco has two ranked attorneys:  Joseph J. Tabacco, Jr. has been recognized in the areas of Litigation (Securities) and Litigation (Antitrust), and Christopher T. Heffelfinger has been recognized in the area Litigation (Antitrust).  Best Lawyers® holds itself out as one of the oldest and most respected peer-review publications, with the 2020 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 11 million peer evaluations, and recognizing more than 98,460 attorneys in 146 practice areas.

Ranked in US News-Best Lawyers & Law Firms 2020 - Berman Tabacco

Benchmark Litigation 2020 Ranks Berman Tabacco as a “Top Ten Plaintiffs” Firm in the U.S. for the Fourth Consecutive Year

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, has published its 2020 Edition profiling U.S. law firms.  Berman Tabacco was ranked as a Top Ten Plaintiffs firm for the fourth consecutive year for its work “on behalf of individuals and institutions who have suffered financial harm due to violations of securities or antitrust laws.”  The firm also ranked in the top category of Highly Recommended 2020 – the ninth time the firm has received the Highly Recommended ranking from Benchmark Litigation.  In California, the firm was ranked as one of the top firms in the Plaintiff (in the top 5) and Securities practice areas and was among the top firms in San Francisco.  A firm client remarked to Benchmark Litigation that “[a]mong plaintiffs’ securities firms, Berman Tabacco is top-flight.”  And an attorney from a defense firm noted:  “They have been ‘swinging for the fences,’ so to speak, and that’s a good thing. Plaintiff firms need to bring cases they believe in order for people like us to take them seriously. Berman Tabacco has been doing well with that.”

In addition to the firm’s rankings, six of the firm’s partners were recognized by Benchmark Litigation:

  • Joseph J. Tabacco, Jr. was ranked as a California Litigation Star and Local Litigation Star in Antitrust, Securities, and Plaintiff practice areas.
  • Norman Berman was ranked in the Securities practice area.
  • Nicole Lavallee was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Todd A. Seaver was ranked as a Local Litigation Star and Future Star in the Plaintiff and Securities practice areas.
  • Daniel E. Barenbaum was ranked as a California Litigation Star and Local Litigation Star in Securities and Plaintiff practice areas.
  • Patrick T. Egan was ranked as a Local Litigation Star in Securities and Competition practice areas.

“We are honored that Benchmark Litigation continues to recognize Berman Tabacco for its dedication to achieving great results for its clients,” said Kathleen Donovan-Maher, Boston managing partner.

Berman Tabacco Attorneys Recognized by New England Super Lawyers Magazine, With Four Associates Designated “Rising Stars”

Five lawyers from Berman Tabacco‘s Boston office have been recognized by the New England Super Lawyers Magazine, published by Thomson Reuters.  Norman Berman has been designated a 2019 New England Super Lawyer in Securities Litigation for the fourteenth time.  Stephen Ryan, Jr., Steven L. Groopman, Corey W. Silva, and Nicole Maruzzi have been designated as 2019 New England Rising Stars.

Super Lawyers is “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  Super Lawyers states that it recognizes the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

Lawdragon Recognizes Eight Berman Tabacco partners in its 500 Leading Plaintiff Financial Lawyers

Respected industry observer Lawdragon has named eight Berman Tabacco partners to its 2019 list of the 500 Leading Plaintiff Financial Lawyers: Norman Berman, Joseph J. Tabacco, Jr., Kathleen Donovan-Maher, Nicole Lavallee, Leslie R. Stern, Christopher T. Heffelfinger, Todd A. Seaver, and Kristin Moody.

The list is a “curated look at the best of the U.S. plaintiff bar who specialize in representing individual investors and shareholders, … harmed by corporate misconduct or other failures.”  The 500 Leading Plaintiff Financial Lawyers are chosen based on Lawdragon’s editorial research of “top verdicts and settlements” combined with extensive peer discussions nationwide regarding “whom they admire and would hire to seek justice for a claim.”

Berman Tabacco Partners Joseph J. Tabacco, Jr. and Nicole Lavallee are honored to be involved in BASF’s Women’s Impact Network: No Glass Ceiling 2.0 Second Annual Conference

Berman Tabacco Partners Joseph J. Tabacco, Jr. and Nicole Lavallee are honored to be involved in The Bar Association of San Francisco’s (BASF) Women’s Impact Network: No Glass Ceiling 2.0 Second Annual Conference to be held between 3:00-6:00 p.m. (program), 6:00-8:00 p.m. (reception) on November 21, 2019 at the BASF Conference Center, 301 Battery Street, 3rd Floor, San Francisco, CA 94111.

As a member of the Steering Committee of BASF’ Women’s Impact Network, Nicole Lavallee has helped organize the panel titled “Own Your Path to a Seat in the Boardroom.”  The panel will introduce the “Board Balance” program to promote the representation of women on corporate boards.  The goal of Board Balance is to increase awareness of the value and need for female representation on boards and to encourage women attorneys to seek board positions by highlighting success stories and descriptions of pathways to readiness.  The panel includes Elona Baum, Managing Director of DEFTA partners, Magan Ray, shareholder at Greenberg Traurig, and Berman Tabacco partner, Joseph J. Tabacco, Jr., who is a director on the board of the publicly traded company, Overstock.com.   For more information, please see BASF calendar and printable flyer.

Berman Partner Bryan Wood Plays Role in Crafting Proposed Whistleblower Bill

On September 24, 2019, Senators Chuck Grassley (R-IA) and Tammy Baldwin (D-WI) introduced S. 2529, the Whistleblower Programs Improvement Act of 2019.  Senators Joni Ernst (R-IA) and Dick Durbin (D-IL) have signed on as co-sponsors.  Bryan Wood of Berman Tabacco, along with fellow members of Taxpayers Against Fraud Education Fund (“TAFEF”), provided key advice and counsel in connection with the legislation.

If passed in its current form, the bill would:

  • Legislatively overrule the Supreme Court’s decision in Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018) and extend the protections of the SEC and CFTC programs to whistleblowers who report allegations of wrongdoing internally but not to the Commissions;
  • Make modest improvements toward the timely processing of claims and prompt payment of awards under the SEC and CFTC programs;
  • Increase the amount the CFTC may hold in its Consumer Protection Fund from $100 million to $150 million; and
  • Bring the dispute resolution provisions of the SEC program into line with those contained in the CFTC statute, under which conditions of employment and contracts with individual employees, including mandatory arbitration agreements, are deemed invalid and unenforceable if they conflict or interfere with whistleblower protections.

“If enacted, this legislation will greatly improve the SEC’s whistleblower program, mostly importantly by enhancing retaliation protections and imposing certainty on the timing of award determinations,” said Wood.  “I am pleased to have worked with the TAFEF team to provide the whistleblower’s perspective on this important issue on behalf of our clients.”

The text of the bill as introduced can be found here.

2020 Best Lawyers® Recognizes Tabacco and Heffelfinger for the Third Consecutive Year

Berman Tabacco is pleased to announce that two of its San Francisco partners have again been recognized by The Best Lawyers in America and are included in their 2020 Edition.  Joseph J. Tabacco, Jr. has been recognized in the areas of Securities and Antitrust Litigation, and  Christopher T. Heffelfinger has been recognized in the area of Antitrust Litigation.  “Once again, Joe and Chris have been recognized for their work, leadership and reputation.  We could not be prouder of the work they do for our clients,” commented Nicole Lavallee, Managing Partner of Berman Tabacco’s San Francisco Office.  Best Lawyers©  states that it is one of the oldest and most respected peer-review publications, with the 2020 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 8.3 million peer evaluations, and recognizing more than 62,000 attorneys in 146 practice areas.

Berman Tabacco Boston Office Participates in Lawyers Have Heart 5K

The Boston Office of Berman Tabacco participated in the 2019 Lawyers Have Heart 5k in Boston, which is sponsored by the American Heart Association.  For nearly 100 years, the American Heart Association has been fighting heart disease and striving to save and improve lives.  The Lawyers Have Heart 5k helps serve these goals by gathering together thousands of legal professionals to run/walk to promote better heart health in Greater Boston.

Berman Tabacco Lawyers at Have Heart Annual 5K race in 2019

This year’s race marks the first time Berman Tabacco participated in the Lawyers Have Heart 5k. The 5k is just one part of the firm’s community service efforts.

In total, race participants raised over $500,000 for the American Heart Association. Boston Team Berman is proud to support the American Heart Association in its mission! More information about the organization is available at https://www.heart.org/en.

 

Joseph J. Tabacco, Jr. Selected as One of the Top 100 Super Lawyers in Northern California

Berman Tabacco is pleased to announce that San Francisco office founding partner Joseph J. Tabacco, Jr. has been selected as one of the Top 100 Super Lawyers in 2019 by the Northern California Super Lawyers Magazine.  Joe has long been recognized by Super Lawyers Magazine, having been selected as a top-rated antitrust litigation attorney each year since 2004.

Super Lawyers, published by Thomson Reuters, positions itself as “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  The publication states that it recognizes no more than the top 5% of attorneys in each state, chosen by their peers and through independent research.

Berman Tabacco Welcomes Jeffrey V. Rocha, Associate Attorney, to its San Francisco Office Team

Berman Tabacco is pleased to welcome Jeffrey V. Rocha as an associate attorney in its San Francisco office. Prior to joining the firm in 2019, Jeff focused his practice on commercial litigation in the areas of fraud and unfair business practices, as well as professional liability, consumer protection, transportation, and employment and labor. Jeff is a 2014 graduate of the University of San Francisco School of Law. Jeff was named a “Rising Star” by Northern California Super Lawyers Magazine in 2018 and 2019.

Before studying law, Jeff earned a B.S. in Business Administration with a concentration in Corporate Finance from California State University, Fresno. After completing his undergraduate studies, Jeff worked for a national brokerage firm as a series 7 and 63 licensed senior broker.

Northern California Super Lawyers Recognizes Berman Tabacco Attorneys

Seven attorneys from Berman Tabacco‘s San Francisco office have been again recognized by the Northern California Super Lawyers Magazine, published by Thomson Reuters.  Super Lawyers notes that it is “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  The publication states that it recognizes no more than the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

The attorneys from our San Francisco office who have been designated 2019 Northern California Super Lawyers are partners Joseph J. Tabacco, Jr., Christopher T. Heffelfinger, Nicole C. Lavallee, and Todd A. Seaver.  In addition, associates A. Chowning Poppler and Carl N. Hammarskjold and of counsel attorney Sarah Khorasanee McGrath have been designated as 2019 Northern California Rising Stars.

SEC Enforcement Actions Remain High Despite Government Shutdown

In the first half of fiscal year (“FY”) 2019, enforcement activity at the Securities and Exchange Commission (“SEC”) remained at near record levels, according to a recent Cornerstone Research report.  This front-loaded activity is remarkable considering that the agency had limited operations when the government was shut down for several weeks in December and January, less than 3 months after the fiscal year began on October 1.

Between October 2018 and March 2019, the SEC brought 52 new actions against public companies and their subsidiaries.  This represents a 225% increase compared to the same period last year when the SEC only brought 16 actions.  (While enforcement actions had gotten off to a relatively slow start during that comparable period in FY 2018, there were a record number of such actions brought in the second half of that fiscal year—55 actions.)

Of the 52 actions brought by the SEC during the first half of FY 2019, 25 involved investment adviser or investment company allegations against public companies and their subsidiaries.  This is the result of the SEC’s Share Class Selection Disclosure Initiative (“Initiative”) that was launched in February 2018.  That Initiative was created to address a trend that the SEC identified in recent years where investment advisers were selecting mutual fund share-classes that paid them a higher than necessary fee without disclosing the availability of lower cost share-classes in the same fund that were not as advantageous to the advisers.  The SEC had been concerned that many investment advisers were not complying with their obligation under the Investment Advisers Act of 1940 to fully dis

In the first half of fiscal year (“FY”) 2019, enforcement activity at the Securities and Exchange Commission (“SEC”) remained at near record levels, according to a recent Cornerstone Research report.  This front-loaded activity is remarkable considering that the agency had limited operations when the government was shut down for several weeks in December and January, less than 3 months after the fiscal year began on October 1.

Between October 2018 and March 2019, the SEC brought 52 new actions against public companies and their subsidiaries.  This represents a 225% increase compared to the same period last year when the SEC only brought 16 actions.  (While enforcement actions had gotten off to a relatively slow start during that comparable period in FY 2018, there were a record number of such actions brought in the second half of that fiscal year—55 actions.)

Of the 52 actions brought by the SEC during the first half of FY 2019, 25 involved investment adviser or investment company allegations against public companies and their subsidiaries.  This is the result of the SEC’s Share Class Selection Disclosure Initiative (“Initiative”) that was launched in February 2018.  That Initiative was created to address a trend that the SEC identified in recent years where investment advisers were selecting mutual fund share-classes that paid them a higher than necessary fee without disclosing the availability of lower cost share-classes in the same fund that were not as advantageous to the advisers.  The SEC had been concerned that many investment advisers were not complying with their obligation under the Investment Advisers Act of 1940 to fully disclose all material conflicts of interest related to their mutual fund share-class selection practices, and that harm to investors as a result of this lack of candor could be widespread.

As part of the Initiative, in order to motivate advisers to come forward and self-report possible disclosure violations relating to share-class selection, the SEC Division of Enforcement would recommend that the SEC accept favorable settlement terms for these self-reporting advisers, including declining to impose civil penalties on them.  On March 11, 2019, arising from the results of the Initiative, the SEC filed settled actions against 79 investment advisers, almost one-third of which were public companies and subsidiaries.  While the average monetary settlement at $3 million was just a fraction of the average from the same period the year before, that disparity is no doubt due to the Initiative’s mandate to forgo civil damages from self-reporters.  Overall, the SEC’s monetary settlements in public company and subsidiary actions totaled $742 million in the first half of FY 2019.

With the second half of FY 2019 under way, it will be interesting to see if the SEC continues its enforcement momentum and whether the finance, insurance, and real estate industries continue to be a target of the SEC’s focus.

close all material conflicts of interest related to their mutual fund share-class selection practices, and that harm to investors as a result of this lack of candor could be widespread.

As part of the Initiative, in order to motivate advisers to come forward and self-report possible disclosure violations relating to share-class selection, the SEC Division of Enforcement would recommend that the SEC accept favorable settlement terms for these self-reporting advisers, including declining to impose civil penalties on them.  On March 11, 2019, arising from the results of the Initiative, the SEC filed settled actions against 79 investment advisers, almost one-third of which were public companies and subsidiaries.  While the average monetary settlement at $3 million was just a fraction of the average from the same period the year before, that disparity is no doubt due to the Initiative’s mandate to forgo civil damages from self-reporters.  Overall, the SEC’s monetary settlements in public company and subsidiary actions totaled $742 million in the first half of FY 2019.

With the second half of FY 2019 under way, it will be interesting to see if the SEC continues its enforcement momentum and whether the finance, insurance, and real estate industries continue to be a target of the SEC’s focus.

Berman Tabacco Appointed Lead Counsel In Healthcare Services Group Securities Class Action

On June 17, 2019, the Honorable Eduardo C. Robreno of the U.S. District Court for the Eastern District of Pennsylvania appointed Berman Tabacco as Lead Counsel for plaintiffs in the securities class action lawsuit against Healthcare Services Group, Inc. and its chief executive officer.  The action was brought on behalf of all persons who acquired the common stock of the Company during the Class Period of April 11, 2017 and March 4, 2019.  The Order further appointed as Lead Plaintiff Berman Tabacco’s client, a state public pension fund.

Healthcare Services Group, Inc. purports to be one of the largest providers of housekeeping and laundry services to hospitals and other healthcare service organizations.  The action currently alleges that during the Class Period, defendants issued materially false and misleading statements and failed to disclose “earnings management” practices that allowed the Company to consistently meet or beat earnings per share estimates that, in turn, caused the price of the company’s stock to be artificially inflated.  The firm’s investigation is ongoing and plaintiffs anticipate filing an amended complaint in the coming months.

“We look forward to vigorously prosecuting this action on our client’s behalf,” commented Boston Partner Patrick T. Egan.

The case is: Koch v. Healthcare Services Group, Inc., et al., No. 1:19-cv-01227-ER (E.D. Pa). The litigation team includes Nicole Lavallee from the firm’s San Francisco office, and Patrick T. Egan and Steven J. Buttacavoli from the Boston office.

Berman Tabacco Partner Kathleen Donovan-Maher Selected as 2019 Top Rated New England Lawyer

For the second consecutive year, Boston Managing Partner Kathleen Donovan-Maher has been selected as a Top Rated Lawyer in New England and was featured in a special section of The National Law Journal highlighting New England’s Top-Rated Lawyers.  This special section features attorneys who have achieved the AV® Preeminent™ rating from Martindale-Hubbell®. Martindale-Hubbell describes its Peer Review Ratings as having recognized lawyers for their professional excellence and high ethical standards for more than a century, long setting the standard for lawyer ratings.

Berman Tabacco And Its Attorneys Recognized As Litigation Leaders By The Legal 500

Berman Tabacco and several of its partners continue to be recognized as leaders in their areas of practice by some of the legal industry’s leading publications.

The Legal 500 recently ranked the firm as a leading firm in both Dispute Resolution-Securities Litigation: Plaintiff and Antitrust-Civil Litigation/Class Actions: Plaintiff in its 2019 U.S. edition, noting that the firm is known for its “soup-to-nuts excellence, from legal analysis [through] trial preparation and trial,” and that clients had noted that the firm makes a “very comprehensive effort, with no stone left unturned.”  Eight of the firm’s partners received the same designation from the publication. Joseph J. Tabacco, Jr., Christopher T. Heffelfinger, Todd A. Seaver, and Patrick T. Egan were recommended under the category Antitrust-Civil Litigation/Class Action: Plaintiff.  And Joseph J. Tabacco, Jr., Nicole Lavallee, Leslie R. Stern, Daniel E. Barenbaum, Patrick T. Egan, and Steven J. Buttacavoli were recommended under the category Dispute Resolution-Securities Litigation: Plaintiff.

This is the firms third consecutive year being recognized by The Legal 500.  San Francisco managing partner Nicole Lavallee commented, “We are honored to once again be recognized by The Legal 500 for the work we do on behalf of our clients—a recognition that is particularly gratifying where there is a straight line between our clients’ praise and the publication’s recommendations.”

Emulex Makes an Offer the Supreme Court Can Refuse – The Court Dismisses Tender Offer Merger Matter as “Improvidently Granted”

At the end of April, following briefing and oral argument, the Supreme Court abruptly reversed course and declined to answer the question Emulex Corporation presented to it regarding whether a negligent misstatement or omission made in connection with a tender offer supports a shareholder’s private right of action under the federal law that governs tender offers, Section 14(e) of the Securities Exchange Act of 1934 (Exchange Act). Embedded in Emulex’s appeal were actually two inquiries: a broad question of whether shareholders have a right to sue over allegedly deficient tender offer disclosures, and a narrow question of whether shareholders have to show fraudulent intent or mere negligence in class actions involving tender offer disclosures. The Court punted on both issues, dismissing the matter with a one-sentence order stating that the appeal was improvidently granted.

The immediate implication of the Supreme Court’s order is that it leaves in place the Ninth Circuit’s ruling that investors need only show that a company acted negligently, rather than intentionally, when alleging that shareholders were misled in a tender offer merger. And at least for now, investors maintain their right to bring these Section 14(e) suits.

Before delving into the long-term implications, some background. Emulex Corp. v. Varjabedian arises from a 2015 merger of two technology companies—Emulex Corporation and Avago Wireless Technology. In February 2015, Emulex and Avago jointly announced that they had agreed to merge by way of an accepted tender offer (a tender offer is a type of takeover bid in which the offeror (in this case, Avago) publicly offers to purchase a specified amount of stock from a target company (Emulex), usually at a price higher than market value). The merger agreement provided that Avago would pay $8.00 for every share of outstanding Emulex stock. This price was 26.4% higher than the value of Emulex stock the day before the merger was announced. In accordance with the agreement, the tender offer was initiated in April 2015. That same day, Emulex filed a Recommendation Statement with the Securities and Exchange Commission (SEC) listing nine reasons for approving the merger, including that shareholders would receive a premium on their stock, and attaching a fairness opinion from Emulex’s financial advisor, Goldman Sachs, that determined the $8.00 offer price was fair.

Questioning the deal’s purported fairness, Gary Varjabedian, an Emulex shareholder, filed a putative class action against Emulex, its board, and Avago in the U.S. District Court for the Central District of California for violating federal securities laws. The case alleged, among other things, that the Recommendation Statement omitted and/or misrepresented material information in violation of Section 14(e) of the Exchange Act because it omitted a premium analysis of similar transactions that revealed the Emulex premium was below average. The omitted information was alleged to be material to Emulex shareholders’ decision whether or not to tender their shares and/or whether to seek appraisal for their shares. The district court dismissed the matter finding that fraudulent intent (i.e., scienter) was required to prove a Section 14(e) violation, which had not been adequately alleged.

The shareholder appealed and the Ninth Circuit reversed the district court, finding that “because the text of the first clause of Section 14(e) is devoid of any suggestion that scienter is required, we conclude that the first clause of Section 14(e) requires a showing of only negligence, not scienter.” The Ninth Circuit distinguished its opinion from the Second, Third, Fifth, Sixth, and Eleventh Circuits that hold fraudulent intent is required to maintain a claim under Section 14(e).

With an established circuit split on whether Section 14(e) requires shareholders to show fraudulent intent or mere negligence, Emulex Corp. v. Varjabedian was well-suited to be taken up by the Supreme Court to resolve the differing interpretations of the pleading standard. Emulex presented that issue, but also inserted a more fundamental one in its appeal to the Supreme Court: do investors even have a private right of action to bring Section 14(e) claims? Shareholders attempted to swiftly do away with that question by highlighting the fact that Emulex conceded in the Ninth Circuit that there was a private right of action, thereby waiving the issue on appeal.

Nonetheless, the private right of action issue intrigued the government and friends of the court who submitted amicus briefs in the matter. In addition to Emulex, the U.S Chamber of Commerce and the SEC argued that modern precedent frowns on courts inferring private rights of action in statutes that do not specify them and the Supreme Court should clarify that shareholders cannot sue over tender offer disclosures. The Solicitor General also argued that Section 14(e) does not create a private right of action, but noted that the proper pleading standard is negligence and not fraud.

The issue also dominated the April 15, 2019 oral argument. However, Justices Ginsburg, Kagan, Breyer, Sotomayor, Alito, and Roberts asked questions indicating concern that the private right of action issue had not been properly presented to the lower courts and therefore was not ripe for the Supreme Court’s consideration. Those questions proved prescient, as one week later the case was dismissed without a substantive opinion. Although the pleading standard in tender offer suits under Section 14(e) was properly before the Court, the Court may not have wanted to decide that narrow issue about negligence versus fraudulent intent without first deciding the broader topic of whether such suits could be brought by shareholders in the first place, which was not properly before the Court.

Emulex is headed back to the district court to consider the negligence standard under Section 14(e), and the company may not have another opportunity to raise its private right of action argument. Indeed, few defendant-companies in merger and acquisition shareholder suits raise the issue as most cases are resolved prior to filing motions to dismiss because companies simply make additional disclosures to resolve the issue. But the Emulex matter may embolden future defendants faced with Section 14(e) claims to litigate motions to dismiss and argue whether investors have a right to even bring the action. Eventually, the issue will wind its way through the district and appellate courts to find its way back to the Supreme Court.

In the meantime, when investors in the Ninth Circuit believe a tender offer merger has gone sideways, they only need to plead negligence to assert their claims under Section 14(e), while investors in most of the other parts of the country will need to allege fraudulent intent. This inconsistency may lead to some forum shopping favoring the West, but it should not have a huge impact on the majority of merger objection lawsuits filed in federal court because most suits (approximately 84% in 2018) allege proxy misrepresentations in violation of Section 14(a) rather than tender offer violations under Section 14(e).

Victims of Plain Green “Rent-a-Tribe” Lending Scheme Score Major Win in Second Circuit

BOSTON – In a long-awaited opinion, the U.S. Court of Appeals for the Second Circuit today ruled that borrowers who took out loans from the Native American-affiliated online lender Plain Green can proceed with their nationwide RICO class action in Vermont federal court. The Second Circuit affirmed a May 2016 ruling by District Judge Geoffrey W. Crawford and comes nearly two years after oral argument on Defendants’ appeals. Berman Tabacco and Gravel & Shea PC are Lead Counsel in the case, Gingras, et al. v. Rosette, et al., No. 5:15-cv-00101-gwc (D. Vt.).

In affirming borrowers claims, the Second Circuit rejected the Plain Green directors’ and officers’ argument that they are immune from suit based on Plain Green’s status as an arm of the Chippewa Cree Tribe of the Rocky Boy’s Indian Reservation. According to the Second Circuit, because “Plain Green is a payday lending entity cleverly designed to enable[] Defendants to skirt federal and state consumer protection laws under the cloak of tribal sovereign immunity,” the Tribe and its officers “are not free to operate outside of Indian lands without conforming their conduct in these areas to federal and state law.”

The Second Circuit also ruled that the “agreements here are both unenforceable and unconscionable” and Defendants could not rely on forced arbitration and purported choice of tribal law provisions in Plain Green’s loan documents to deny borrowers their right to pursue federal claims in federal courts. The Court affirmed Judge Crawford’s ruling that the arbitration provisions “effectively insulate Defendants from claims that they have violated federal and state law.” In so doing, the Second Circuit joined the Fourth and Seventh Circuits in refusing to enforce arbitration provisions that would have borrowers disclaim their rights under federal and state law, agreeing with the Fourth Circuit’s characterization of the arbitration component of Defendants’ scheme as a “farce.”

The Second Circuit case is captioned Gingras, et al. v. Think Finance, Inc., et al., No. 16-2019 (2d Cir. Apr. 24, 2019). The case is being prosecuted from Berman Tabacco’s Boston office by Kathleen Donovan-Maher, Steven Buttacavoli, and Steven Groopman, and Matthew Byrne of Gravel & Shea PC.

Berman Tabacco and Gravel & Shea PC also serve as Lead Counsel in similar tribal lending cases, Solomon v. American Web Loan, et al., No. 4:17-cv-00145-HCM-RJK (E.D. Va.), and Granger v. Great Plains Lending, et al., No. 1:18-cv-00112-WO-JLW (M.D.N.C.), and are representing the interests of Plain Green and Great Plains Lending borrowers in bankruptcy proceedings involving a key player in those schemes, Think Finance, In re: Think Finance, LLC, et al., No. 17-33964-hdh11 (Bankr. N.D. Tex.). Berman Tabacco continues to investigate other online lending schemes, including Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial, and Majestic Lake Financial.

Falsehoods: Supreme Court Ruling Expands Liability Under The Securities Law

On March 27, 2019, in a 6-2 ruling authored by Justice Breyer, the Supreme Court resolved a circuit split and closed a notable loophole in federal securities laws whereby a person who knowingly disseminates a false statement with the intent to deceive investors could escape liability if they did not personally author the statement.

The case, Lorenzo v. Securities and Exchange Commission, involved two types of liability that arise from Rule 10b-5 of the Securities Exchange Act of 1934. First, anyone who knowingly makes a false statement is liable under Rule 10b-5(b). As the Supreme Court held in 2011, only a person with “ultimate authority” over the content and dissemination of a statement is considered the “maker” of it. Second, anyone who engages in what is commonly referred to as “scheme liability” is liable under Rule 10b-5(a) and (c). Those subsections generally prohibit “employing any device, scheme, or artifice to defraud” and “engag[ing] in any act, practice, or course of business which operates…as a fraud or deceit.”

Most private securities class actions involve false statements under Rule 10b-5(b) because many circuit courts, including the Second, Eighth and Ninth Circuits have held that misstatements alone cannot support scheme liability under subsections (a) and (c) of the Rule.

The Lorenzo matter originated from a Securities and Exchange Commission (“SEC”) proceeding and explored the scope of misstatement liability under the subsections of Rule 10b-5. In 2009, Francis Lorenzo was the director of investment banking at a brokerage firm when he sent two emails to prospective investors. The content of those emails was written by Mr. Lorenzo’s boss and described potential investment in a company with “confirmed assets” of $10 million. Mr. Lorenzo knew at the time he sent the emails that the company had recently disclosed that its total assets were worth less than $400,000, but he went ahead and sent the emails anyway.

In 2015, the SEC found that Mr. Lorenzo had violated various securities laws, including Rule 10b-5, by sending false and misleading emails to investors with an intent to defraud. The fact that Mr. Lorenzo did not write the content of the emails before sending them did not change the SEC’s conclusion.

Mr. Lorenzo appealed the decision to the D.C. Circuit Court of Appeals challenging his liability under Rule 10b-5(b) because he was not the “maker” of the false statement. The D.C. Circuit agreed that Mr. Lorenzo was not liable under subsection (b) because he did not “make” the false statements as described by the Supreme Court’s 2011 decision Janus Capital Group Inc., et al. v. First Derivative Traders. In Mr. Lorenzo’s case, his boss was the “maker” of the statement because he drafted the content of the emails. Nonetheless, the D.C. Circuit held, Mr. Lorenzo could be liable for scheme liability because he knowingly sent emails to investors containing false and misleading information. When this ruling was issued, Justice Kavanaugh was a judge on the D.C. Circuit. He was the dissenting voice on the matter, calling the majority opinion “legal jujitsu.” With this opinion, the D.C. Circuit joined the Eleventh Circuit in finding that misstatements alone can support scheme liability.

Hoping for a different outcome, Mr. Lorenzo appealed to the Supreme Court. But the Supreme Court affirmed, finding that by “sending emails he understood to contain material untruths” Mr. Lorenzo violated subsections (a) and (c) of Rule 10b-5. Justice Breyer further stated that to hold otherwise would mean that those who disseminate false statements with the intent to cheat investors might escape liability, which is not what Congress intended. The Court cautioned that, while subsections (a) and (c) capture a wide range of conduct, there could be borderline cases or situations where liability would be inappropriate, for instance if the person was someone like a mailroom clerk who was only tangentially involved in distributing the false statements. In the case of Mr. Lorenzo, however, Justice Breyer stated that “we see nothing borderline about this case” as he sent false and misleading information to prospective investors with the intent to defraud. Five other justices joined Breyer in the majority opinion, with Justices Thomas and Gorsuch dissenting. Justice Kavanaugh did not participate because of his involvement in the matter at the D.C. Circuit.

The Lorenzo opinion embraces the broad fraud prevention goals of Rule 10b-5, making clear that a person who knowingly disseminates a false statement with the intent to deceive investors can be held liable for scheme liability, even if they did not personally author the false statement. And the holding is not limited to SEC proceedings because the same legal theories will apply to 10b-5 claims in investors’ securities class actions.

Future fraudsters are now on notice – even if they do not “make” a false statement they may still be liable for scheme liability if they disseminate it.

San Francisco Partner Chris Heffelfinger’s Family Involvement with the Nepal Youth Foundation Receives Media Attention

For many years, Berman Tabacco partner Chris Heffelfinger and his family have strived to provide children in Nepal with education, housing and medical care through their work with the Nepal Youth Foundation. The Foundation and the Heffelfingers’ connection to the Foundation were recently spotlighted by ABC News.

The Nepal Youth Foundation is dedicated to addressing humanitarian issues acutely experienced by Nepali youth by providing them with vital healthcare, education and a safe home. The Foundation’s programs include granting scholarships to Nepali youth from kindergarten through college; building homes to shelter them from homelessness; establishing Nutritional Rehabilitation Homes that resolve severe malnutrition; and creating the Indentured Daughters Program to stop impoverished families from selling their daughters into bonded servitude. That program has been so successful that it quadrupled in size from the first year to the next, and since then more than 12,000 girls have been saved by the program. Olga Murray, a close friend of Chris’s parents, Totton (“Tot”) and Joanne Heffelfinger, founded the Nepal Youth Foundation in 1990. The Heffelfinger family has been involved with the Foundation from its inception, with Tot serving as a founding board member. It was through the Heffelfingers’ friendship with Olga and their deep commitment to the Foundation’s goals that they eventually welcomed a nine-year-old Nepali girl, Durga Thapa, into their home.

Durga was eight-years-old when Olga met her in a Kathmandu hospital. Durga had been badly burned in an accident as an infant. Due to the severity of her injuries, Durga needed extensive plastic surgery that local doctors were not trained to perform and that her family could not afford. After meeting Durga, Olga and the Nepal Youth Foundation brought her to the United States so that she could receive treatment. But Durga needed a home in the United States — a place where she could be supported through the numerous surgeries that would take place over the next decade.

The Heffelfingers provided Durga with that home, enveloping Durga into their lives and welcoming her as their seventh child. Tot and Joanne cared for Durga through all of her operations and supported her schooling, which eventually led to Durga attending college at Mount Holyoke. Durga now lives in Solano County, California with her husband and young son.

Chris has continued his family’s commitment to the Nepal Youth Foundation, serving as a member of its board since 2014 and recently participating in a trip to Nepal to see the Foundation’s work first-hand. “It has been a privilege for me to carry on the love and commitment to the Foundation inspired by my parents and by Olga, and I am fortunate to have met many of the dedicated staff members and beneficiaries of these programs and to have forged new friendships,” commented Chris. To read more about Durga’s return trip to Nepal, please visit https://www.nepalyouthfoundation.org/durga/. Information about the Foundation is available at https://www.nepalyouthfoundation.org.

Berman Tabacco Defeats Motions To Dismiss In Whistleblower Lawsuit

Berman Tabacco recently defeated a set of motions to dismiss a federal False Claims Act action against former pharmaceutical executives and sales managers stemming from their alleged off-label promotion of the orphan drug Juxtapid, a $300,000 drug used to treat an exceedingly rare cholesterol disorder. The company itself has already settled with the government and the whistleblowers and pleaded guilty to criminal charges for misbranding.

Following settlement with the company, the whistleblowers (or, Relators, as they are technically known) continued with their litigation against the senior executives and sales managers allegedly involved in directing the wide-ranging off-label marketing scheme. As alleged, Juxtapid was approved by the FDA to treat an extremely limited population, but the defendants orchestrated a scheme to aggressively promote Juxtapid beyond that population through an aggressive misinformation campaign directed at doctors and other improper sales and marketing tactics. As a result, Relators allege that the federal government was defrauded into paying millions of dollars through Medicare, Medicaid, and other federal prescription drug programs for drug coverage for patients who did not have the underlying disorder.

“We are very pleased with this ruling and look forward to continuing the fight,” commented Berman Tabacco associate Stephen Ryan, who argued the motion.

The case, U.S. ex rel. Clarke, et al. v. Aegerion Pharmaceuticals, Inc., et al., No. 13-cv-11785-IT (D. Mass), is being prosecuted from Berman Tabacco’s Boston office by Patrick Egan and Stephen Ryan.

Berman Tabacco’s Stephen Ryan, Jr. Cited in Reuters’ Article Covering the Motion to Dismiss Hearing in False Claims Act Case Against Former Aegerion Executives

Reuters quotes from Berman Tabacco attorney Stephen Ryan, Jr.’s argument at the March 20, 2019 hearing on defendants’ motion to dismiss the whistleblower lawsuit U.S. ex rel Clarke, et al. v. Aegerion Pharmaceuticals Inc, et al., No. 13-cv-11785 (D. Mass.). See Nate Raymond, Ex-Aegerion execs, employees seek to escape drug marketing case, Reuters (Mar. 21, 2019), https://www.reuters.com/article/health-aegerion-idUSL1N21809V. The Firm represents the whistleblowers alleging that defendants marketed the cholesterol drug Juxtapid for off-label purposes and submitted false claims to government agencies such as Medicare and Medicaid in connection with sales of this drug.

Berman Tabacco Selected as Finalist for Benchmark Litigation’s California Plaintiff Firm of the Year

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, is hosting its 2019 West-Coast Awards Dinner on March 14th at the Saint Regis in San Francisco. Berman Tabacco is honored to have been selected as one of four finalists in the California Plaintiff Firm of the Year category. The award stems from Benchmark Litigation’s inaugural edition of Benchmark California, a California-focused magazine.

In Benchmark California, the firm was selected as a Tier 1 firm—the highest ranking—in the Plaintiff Work practice area, with Joseph J. Tabacco, Jr., Nicole Lavallee and Todd A. Seaver designated as Litigation Stars. This is illustrative of similar rankings on other lists within Benchmark’s National and California rankings, both for the firm and certain of its attorneys. In regional rankings, the firm was recognized as a leading firm in the San Francisco region, with Joseph J. Tabacco, Jr. designated as both a California Litigation Star and a San Francisco Litigation Star, in the Antitrust, Intellectual Property and Securities practice areas.

“We are honored that our firm and its attorneys are repeatedly recognized by Benchmark,” said San Francisco Partner Daniel Barenbaum. “Our singular focus is on achieving results for our clients, and we are pleased that such a renowned publication has recognized those efforts.”

San Francisco Magazine Names its Top Women Attorneys in Northern California

The December issue of San Francisco Magazine features its annual list of Top Women Attorneys of Northern California based on Super Lawyers’ rankings. Berman Tabacco is proud to announce that three attorneys from the San Francisco office have been included on the list.

San Francisco Managing Partner Nicole Lavallee has been selected as a member of the Top Women Attorneys list in the Securities Litigation category for the second consecutive year (2017-2018). Of Counsel Sarah K. McGrath (President-Elect of the Federal Bar Association, Northern District of California Chapter) was selected as a Rising Star in the Antitrust category for the fifth time (2013-2015, 2017-2018) and Associate A. Chowing Poppler was selected as a Rising Star for Consumer Law (2017-2018).

Todd A. Seaver Included in Who’s Who Legal Thought Leaders: Competition 2019 (Plaintiffs)

Who’s Who Legal (WWL), a publication of U.K.-based Global Competition Review and Law Business Research, recognized San Francisco Partner Todd Seaver in its inaugural edition of WWL Thought Leaders: Competition in the Plaintiffs category.  Todd has previously been recognized by Global Competition Review in its Who’s Who Legal: Competition guides in 2017 and 2018.  According to WWL, only a fraction of individuals considered for inclusion in the 2018 WWL guides were designated as Thought Leaders.

Sarah Khorasanee McGrath Elected 2019 President-Elect of Northern California Federal Bar Association

The Northern District of California Chapter of the Federal Bar Association (FBA) has elected its 2019 Officers. Berman Tabacco is pleased to announce that its own Sarah Khorasanee McGrath has been selected as President-Elect. Sarah has a long history with the FBA and has previously held the following positions: Treasurer (2018), Vice President (2016-2017), Co-Chair of the Young Lawyers Division (2013-2015).

The FBA, founded in 1920, holds itself out as being dedicated to the advancement of the science of jurisprudence and to promoting the welfare, interests, education, and professional development of all attorneys involved in federal law. Among other things, the organization advocates making changes to and improving the federal legal system via a network of close to 100 chapters. The Northern District of California Chapter claims itself to be one of the most active chapters in the country, committed to “serving the needs of federal practitioners, Judges, and courts, as well as the Northern District of California community as a whole.”

U.S. News & World Report and Best Lawyers Ranks Berman Tabacco in its Ninth Edition of “Best Law Firms”

U.S. News & World Report and Best Lawyers® have released their Best Law Firm rankings for 2019. They have ranked Berman Tabacco as a 2019 Tier 1 Best Law Firm for Litigation-Antitrust in San Francisco and Tier 3 Best Law Firm for Litigation – Antitrust nationwide. The Best Law Firm rankings are based on a combination of client feedback, information provided on law firm surveys, and Best Lawyers® peer review.

To be eligible for consideration as a Best Law Firm, a firm must have at least one attorney ranked in the current edition of Best Lawyers®.  Berman Tabacco has two ranked attorneys: Joseph J. Tabacco, Jr. was recognized in the areas of Litigation (Securities) and Litigation (Antitrust), and Christopher T. Heffelfinger was recognized in the area Litigation (Antitrust). Best Lawyers® holds itself out as one of the oldest and most respected peer-review publications, with the 2019 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 7.8 million peer evaluations, and recognizing more than 60,000 attorneys in 145 practice areas.

Best Lawyers-Best Law Firms 2019

Supreme Court Denies Certiorari in PHC Shareholder Litigation, Allowing the Class’s Victory in the First Circuit Appellate Court to Stand

On November 13, 2018, the United States Supreme Court denied the petition for certiorari filed by the CEO of PHC, Inc., Bruce A. Shear. Mr. Shear sought to appeal a decision from the United States Court of Appeals for the First Circuit, which, earlier this year, affirmed a judgment ordering him to disgorge over $3 million to PHC’s shareholders. In affirming the judgment, the First Circuit found that the shareholder class had demonstrated at trial that the CEO “dominated PHC and had pervasive control over its affairs,” and that he used this control to negotiate an unfair cash payment for himself as part of a merger agreement. Accordingly, the appellate court found that disgorgement of the CEO’s “inflated portion [of the payment] gained through his breach of fiduciary duty” was “suitably tailored to redress [his] inequitable conduct.”

The appellate court noted that the questions presented in the appeal were “intricate, entangled and in some instances novel,” and complimented counsel for their “unusually good arguments.”

Read more about this victory for investors here.

The case is: In re PHC, Inc. Shareholder Litigation (MAZ Partners, LP v. Bruce A. Shear, et al.), No. 1:11-cv-11049-PBS (D. Mass.). Berman Tabacco is co-counsel on behalf of the class.  Norman Berman and Nathaniel Orenstein lead this case for the firm.

Benchmark Litigation 2019 Ranks Berman Tabacco As A “Top Ten Plaintiffs” Firm in the U.S. For Third Consecutive Year

Benchmark Litigation, a publication of U.K.-based Euromoney Institutional Investor plc, has published its 2019 Edition profiling U.S. law firms. Berman Tabacco was ranked as a Top Ten Plaintiffs firm for the third consecutive year for its work “on behalf of individuals and institutions who have suffered financial harm due to violations of securities or antitrust laws.” The firm also ranked in the top category of Highly Recommended 2019 – the eighth time the firm has received the Highly Recommended ranking from Benchmark Litigation. A firm client remarked to Benchmark Litigation that “[a]mong plaintiffs’ securities firms, Berman Tabacco is top-flight.”

In addition to the firm’s rankings, three of the firm’s partners were recognized by Benchmark Litigation, Joseph J. Tabacco, Jr. was ranked as a Benchmark California Star – 2019 and Local Litigation Star; Norman Berman was ranked in Securities; and Patrick Egan was ranked as a Local Litigation Star.

“We are honored to be repeatedly recognized by Benchmark,” said Nicole Lavallee, San Francisco managing partner. “Our focus always remains on obtaining the best results for our clients, and it is gratifying to be acknowledged by such an esteemed peer publication for client satisfaction and results achieved.”

 

Benchmark Litigation - Highly Recommended Firm 2019

Berman Tabacco’s Trial Court Win Against UnitedHealth Affirmed by Delaware Supreme Court

Berman Tabacco is pleased by the Delaware Supreme Court’s affirmance of its Chancery Court trial win in which UnitedHealth Group Inc. was ordered to turn over books and records to the firm’s client Amalgamated Bank and other UnitedHealth shareholders.

The books and records action relates to UnitedHealth’s alleged practice of knowingly submitting false attestations to the federal government to obtain hundreds of millions of dollars of overpayments from the Centers for Medicare & Medicaid Services. Berman Tabacco’s focus is on whether UnitedHealth’s officers and directors can be held accountable for these practices.

On October 26, 2018, the Delaware Supreme Court affirmed a trial court judgment ordering UnitedHealth to produce records pursuant to Section 220 of the Delaware General Corporations Code in order to allow plaintiffs to evaluate whether UnitedHealth’s board of directors breached their fiduciary duties by failing to monitor the company’s policies and procedures related to Medicare billing. The failure allegedly resulted in the submission of invalid claims to Medicare in violation of the federal False Claims Act.

The case is: In re UnitedHealth Section 220 Litigation, C.A. No. 0681-TMR (Del. Ch.).  Berman Tabacco is Co-Lead Counsel representing Amalgamated Bank. Boston partner Nathaniel L. Orenstein is leading the charge on the case.

Berman Tabacco Appointed Lead Counsel in Aegean Marine Petroleum Network Securities Class Action

On October 30, 2018, the Honorable Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York appointed Berman Tabacco as Lead Counsel for plaintiffs in the securities class action lawsuit against Aegean Marine Petroleum Network, Inc. and two of its executive officers. The action was brought on behalf of all persons who acquired the common stock of the Company during the period April 28, 2016 and June 4, 2018. The Order further appointed as Lead Plaintiff Berman Tabacco’s client, a state public pension fund.

The case alleges that (i) Aegean improperly accounted for approximately $200 million of accounts receivable as of December 31, 2017; (ii) Aegean failed to maintain effective internal controls over financial reporting; and (iii) as a result of the foregoing, defendants’ statements about the Company’s business, operations, prospects and compliance policies were false and misleading and/or lacked a reasonable basis. The case further alleges that because of defendants’ false statements and omissions, Aegean’s stock traded at artificially inflated prices during the class period.

The case is: In re Aegean Marine Petroleum Network, Inc. Securities Litigation, No. 18-cv-04993-NRB (S.D.N.Y.). The litigation team includes Nicole Lavallee and A. Chowning Poppler from the firm’s San Francisco office, and Steven J. Buttacavoli from the Boston office.

Berman Tabacco Partner Nicole Lavallee to Participate in NCLC Class Action Panel

Nicole Lavallee, the Managing Partner of the San Francisco Office, will be a panelist at the National Consumer Law Center’s (NCLC) 19th annual Class Action Symposium being held in Denver, Colorado on October 27-28, 2018.  On Sunday, October 28th, Nicole will be a member of the panel entitled: The Significance of Upcoming Rule 23 Amendments and Proposed rule 30(b)(6) Changes.

Berman Tabacco Works With Harry Markopolos On SEC Comment Letter

Berman Tabacco recently worked with Harry Markopolos in preparing a response to the proposed changes to the Securities and Exchange Commission’s (“SEC’s”) whistleblower program. Mr. Markopolos is widely recognized and respected throughout the financial community and is especially revered within the whistleblower community for his work on exposing the Bernie Madoff Ponzi scheme.

In 2010, the SEC enacted a whistleblower program to incentivize people to report securities fraud. The program was created in the wake of the 2008 financial crisis and Mr. Markopolos’s well-documented efforts to force the government to investigate Madoff. Under the program, the SEC is authorized to make monetary awards to whistleblowers who voluntarily provide original information that leads to successful enforcement actions resulting in monetary sanctions over $1,000,000. Currently, a successful whistleblower stands to receive an award of between 10 and 30 percent of the monetary sanctions collected.

On June 28, 2018, the SEC proposed amendments to its whistleblower rules (“Proposed Rules”) and requested comments from the public. Some of the proposed changes would have a significant impact on the SEC’s whistleblower program. In one of the most controversial proposed changes, the SEC would have discretion to cap whistleblower awards on recoveries exceeding $100 million. Another controversial change is the limitation of the definition of “independent analysis” to insight that would not have been reasonably apparent to the SEC based on publicly available information.

Mr. Markopolos’s response points out some of the flaws of the Proposed Rules. First, Mr. Markopolos vehemently disagrees with the SEC’s proposal to grant itself the discretion to limit whistleblower awards, stating that “I strongly disagree with the proposed discretionary cap on awards exceeding $100 million. Although well-intentioned, this provision would be a gift to the major investment banks and other large public companies, as it would deter high-ranking officers at those entities from turning whistleblower.”

In his response, Mr. Markopolos also notes how it would be nearly impossible to apply the SEC’s proposed interpretation of “independent analysis.” Specifically, Mr. Markopolos states that “[u]nder the Proposed Interpretive Guidance, however, my team [on the Madoff case] could not have been certain of recovering a whistleblower award because of the ‘20/20 Hindsight’ nature of the guidance.” Mr. Markopolos reasons that:

Under the proposed rule, it would be far too easy for the commission, in hindsight, to claim that it could have or would have learned of a fraud on its own. Instituting a sensible objective standard would both protect the SEC Whistleblower Program from paying out unearned awards, while also protecting the whistleblower from having a misguided SEC employee say, ‘we would have caught that on our next exam anyway, so why pay the whistleblower?’

Mr. Markopolos’s response has received a positive reception in the press, including in The Wall Street Journal and the National Law Journal.

Berman Tabacco was happy to support Mr. Mr. Markopolos in preparing his comment letter. “We are proud to have assisted Mr. Markopolos with his comment letter and presume his words will have a significant impact on the SEC’s final rule-making decisions,” commented partner Bryan Wood. We look forward to the SEC’s final decision, which we expect to be announced in 2019.

New California Law Mandates More Women on Corporate Boards

On Sunday, September 30, 2018, California Governor Jerry Brown signed a bill into law that requires public companies “whose principal executive officers” are based in California to have at least one woman on its board by the end of 2019. This number would rise by 2021, depending on the size of the board. Critics have been outspoken against the measure, urging against mandatory requirements or quotas. Even Governor Brown acknowledged “serious legal concerns” about the law and legal challenges are expected. The law is part of an ongoing and increasingly vocal debate concerning diversity on corporate boards.

The California Law

The law requires any public company with shares listed on a major U.S. stock exchange that has its principal executive offices in California to have at least one woman on its board by December 31, 2019. By year-end 2021, such companies with five directors are required to have two women on the board, and companies with six or more directors are required to have three women on the board. The bill would authorize the California Secretary of State to fine companies $100,000 for failing to comply and up to $300,000 for subsequent violations.

Democratic state senator Hannah-Beth Jackson of Santa Barbara, who co-sponsored the bill, commented, “Gender diversity brings a variety of perspectives to the table that can help foster new and innovative ideas. It’s not only the right thing to do, it’s good for a company’s bottom line.” (Five years ago, Jackson authored a non-binding resolution calling on public companies to increase gender diversity. Since then, about 20% of the companies headquartered in California added women to their boards, according to the research firm board Governance Research. Massachusetts and Illinois have passed similar non-binding resolutions.)

Reports show that of the 445 publicly traded companies located in California, a quarter lack a single woman in their boardroom, while another 37.5% have only one woman director. Smaller companies have fewer female directors. Out of 50 companies with the lowest revenues, 48% have no female directors, according to Board Governance Research LLC.

A 2016 U.S. Government Accountability Office report found that, in 2014, women comprised about 16% of board seats in the S&P 1500, up from 8% in 1997. At that pace, the GAO estimated that it could take more than four decades for women’s representation on boards to be on par with that of men’s.

The bill’s co-sponsors, Governor Brown and other supporters hope the law will accelerate the pace of change. In reaction to the enactment, Senator Jackson tweeted: “Yet another glass ceiling is shattered, and women will finally have a seat at the table in corporate board rooms. Corporations will be more profitable. This is a giant step forward for women, our businesses and our economy.”

Critics of the Law

Critics have been vocal, including the California Chamber of Commerce. Opponents argue that the law violates federal and state constitutions by requiring companies to discriminate against people based on their gender. Further, critics argue that the law takes voting rights away from shareholders. Another criticism of the law is that it conflicts with the principle that internal affairs of corporations should be governed by the state where the corporations are incorporated as the law applies to corporations headquartered in California but incorporated elsewhere. Further, critics argue that by prioritizing women, the law could have the unintended consequence of being detrimental to ethnic minorities looking to increase representations on boards. Critics also oppose a one-size-fits-all, government-mandated approach.

In a statement following the enactment of the new law, Governor Brown acknowledged that “serious legal concerns have been raised” that “may prove fatal to [the law’s] ultimate implementation.” Nevertheless, Governor Brown argued that enacting the law was sending the right message to corporate America.

Part of a Larger Debate

The newly enacted law and opposition highlight an ongoing debate regarding whether diversity on boards leads to improved corporate governance and performance. Proponents of the bill cited studies and reports which find that companies with gender-diverse management teams are more profitable and better functioning. In his 2018 Annual Letter to CEOs, BlackRock Chairman and CEO Larry Fink wrote: “boards with a diverse mix of genders, ethnicities, career experience, and ways of thinking have, as a result, a more diverse and aware mindset. They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long-term growth.”

Others, however, argue that peer-reviewed studies suggest that companies do not perform any better or worse when they have women on the board. As one researcher concluded, “board gender diversity either has a very weak relationship with board performance or no relationship at all.”

Board diversity is on the rise, albeit slowly. Shareholders have limited rights, but one core right is the ability to elect board members for most public companies. In general, while management proposes the slate of directors, shareholders vote on the slate. Institutional shareholders have withheld votes when the proposed candidates do not reflect the expertise, qualities and perspectives investors are looking for in board members. This has led to more diverse boards, admittedly at a slower pace than some would like. We expect that vocal, committed shareholders will continue to make their collective voices heard by pushing for boards that best address the needs of their companies. For now, however, attention will turn from the statehouse to the courthouse to monitor if legal challenges will prevent the actual implementation of the law.

Berman Tabacco Files Lawsuit Against Columbia Gas of Massachusetts and NiSource, Inc.

BOSTON, September 19, 2018 – The Boston office of the law firm Berman Tabacco has filed a lawsuit against Bay State Gas Company (doing business as) Columbia Gas of Massachusetts and NiSource, Inc. (collectively “Columbia Gas”) for their alleged failure to properly maintain natural gas pipelines servicing parts of the Merrimack Valley area of Massachusetts. As alleged, due to this failure, Andover, North Andover and Lawrence suffered a series of natural gas explosions on September 13, 2018. Current reports state that these explosions were caused by a sudden spike in pressure within the gas pipelines, causing them to rupture and fill homes and businesses with large amounts of natural gas that ultimately ignited.

Berman Tabacco Partner Bryan Wood was personally impacted by the natural gas explosions, as he and his family were forced to evacuate his home after his home was affected by pressurized natural gas. “Columbia Gas’s negligence was traumatic for me and my family,” said Mr. Wood. “I am grateful that I am in a position to work with my friends and neighbors to hold these companies responsible.”

As reported, there were at least 60 explosions in the three cities affected by the disaster. One death and several injuries have been reported and 12 homes were fully destroyed. In addition, more than 8,000 people were forced to flee their homes because of the dangers posed by the ruptured gas lines. A local fire chief described the scene as “Armageddon.”

If you have any information relevant to this lawsuit, or if you were affected by this disaster and would like to know your legal rights, please contact attorney Mark Delaney (mdelaney@bermantabacco.com). In addition to email, you can call Berman Tabacco at 617-542-8300 or fill out form below and someone will contact you:

 
 
 
 
 
 
 
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For further details, please visit Columbia Gas Litigation.

Berman Tabacco Partner Kathleen Donovan-Maher Selected as 2018 Top Rated New England Lawyer

Boston Managing Partner Kathleen Donovan-Maher has been selected as a 2018 Top Rated Lawyer in New England and was featured in a special section of The National Law Journal highlighting New England’s Top-Rated Lawyers. This special section features attorneys who have achieved the AV® Preeminent™ rating from Martindale-Hubbell®. Martindale-Hubbell describes its Peer Review Ratings as having recognized lawyers for their professional excellence and high ethical standards for more than a century, long setting the standard for lawyer ratings.

Two Berman Tabacco Partners Named to 2019 Best Lawyers List

Berman Tabacco is pleased to announce that two of its San Francisco partners have been included in the 2019 Edition of The Best Lawyers in America. Joseph J. Tabacco, Jr. has been recognized in the areas of Litigation (Securities) and Litigation (Antitrust), and Christopher T. Heffelfinger has been recognized in the area Litigation (Antitrust). “We are extremely proud that Joe and Chris have been recognized once again by Best Lawyers,” stated Nicole Lavallee, Managing Partner of Berman Tabacco’s San Francisco Office. Best Lawyers© holds itself out as one of the oldest and most respected peer-review publications, with the 2019 edition showcasing the top 5% of practicing attorneys in the U.S., based upon more than 7.8 million peer evaluations, and recognizing more than 60,000 attorneys in 145 practice areas.

Berman Tabacco Appointed Liaison Counsel and Member of Executive Committee In Facebook Derivative Litigation

Berman Tabacco has been appointed liaison counsel and a member of plaintiffs’ Executive Committee in In re Facebook, Inc. Shareholder Derivative Privacy Litigation, No. 4:18-CV-01792-HSG, pending before the Honorable Haywood S. Gilliam, Jr. in the United States District Court for the Northern District of California (N.D. Cal.). This is a derivative action brought by Facebook shareholders against certain officers and directors of Facebook, Inc.’s board of directors. Shareholders allege that the officers and directors breached their fiduciary duties and made misrepresentations and omissions related to Facebook’s failure to protect sensitive data for at least 50 million users in violation of state and federal law. More specifically, the complaint claims that the information was shared with Cambridge Analytica, among others, which allegedly weaponized the data to target political advertising and manipulate voters in the lead-up to the 2016 U.S. Presidential Election. In this age of social media, shareholders allege that the officers and directors put profits above privacy, resulting in far-reaching consequences for Facebook and our Republic.

“We look forward to seeking justice and corporate reform on behalf of Facebook shareholders in this important lawsuit” said Daniel E. Barenbaum, a partner in Berman Tabacco’s San Francisco office. The litigation team includes Joseph J. Tabacco, Jr., Daniel E. Barenbaum, and A. Chowning Poppler from the firm’s San Francisco office.

Northern California Super Lawyers Recognizes Berman Tabacco Attorneys

Eight lawyers from Berman Tabacco‘s San Francisco office have been recognized by the Northern California Super Lawyers Magazine, published by Thomson Reuters.  Super Lawyers is “a rating service of outstanding lawyers … who have attained a high degree of peer recognition and professional achievement.”  Super Lawyers recognizes the top 5% of attorneys in each state, as well as the top 2.5% Rising Star attorneys, chosen by their peers and through independent research.

Lawyers from our San Francisco office who have been designated 2018 Northern California Super Lawyers are Joseph J. Tabacco, Jr., Christopher T. Heffelfinger, Nicole C. Lavallee, and Todd A. Seaver.  In addition, A. Chowning Poppler, Carl N. Hammarskjold, Victor S. Elias, and Sarah Khorasanee McGrath have been designated 2018 Northern California Rising Stars.

Supreme Court Securities Law Wrap Up

Each July, we look back on the Supreme Court’s recently-closed term for decisions of importance to institutional investors. This term, the Court issued four such decisions of note: limiting the time for bringing securities class actions; affirming investor access to state courts; pulling the rug out from under the U.S. Securities and Exchange Commission’s (“SEC” or “Commission”) Administrative Law Judge system; and refining the definition of a “corporate whistleblower.”

But first, we must address the elephant leaving the room: Justice Anthony Kennedy. After 30 years on the Court, Justice Kennedy announced his retirement. Whoever the Senate ultimately confirms to replace him (whether President Trump’s nominee for his seat, Judge Brett Kavanaugh, or someone else) has the potential to shift an already-divided Court substantially and substantively to the right. Just how far is anyone’s guess, though the change is less likely to upend investor actions and business litigation. While Justice Kennedy served as the crucial fifth vote in many significant decisions, when it came to those types of cases, he was a loyal member of the Court’s more conservative voting bloc, joining the majorities in Comcast, Iqbal, and ANZ Securities, just to name a few. In a future newsletter, we will be providing an analysis of Judge Kavanaugh. In the meantime, let us look back at the Court’s Spring Term:

China Agritech, Inc. v. Resh – More Limitations On Class Action Tolling

For the second year in a row, the Court addressed the issue of when pending class actions toll limitations periods. And, just like last year, the Court limited the tolling principles, cautioning investors to act sooner rather than later when pursuing litigation.

In China Agritech, a unanimous Court held that American Pipe’s equitable tolling doctrine does not apply to a putative class member who, after a judge denies class certification, brings a subsequent class action after the expiration of the applicable limitations periods. While the Court acknowledged that the long-held principles of American Pipe would toll the statute of limitations for individual claims during the pendency of a class action, it found that those same interests in “efficiency and economy of litigations” were not present when a follow-on or tag-along class action is filed.

The fact pattern in China Agritech was somewhat novel. Investors timely sued the company in two successive putative class actions alleging various securities-law violations. Class certification was denied in both actions. Then, a third action was filed by shareholder Michael Resh—based on the same facts and circumstances as the first two cases—but filed after the expiration of the limitations period. Resh argued that his time to file was tolled by the pendency of the first and second action.

The Supreme Court unanimously disagreed. In an opinion drafted by Justice Ginsburg, the Court concluded that “American Pipe does not permit a plaintiff who waits out the statute of limitations to piggyback on an earlier, timely filed class action.” Instead, the Court noted that federal rules and legislations favored “early assertion” and management of class claims. The Court noted that procedural rules governing class actions “evinces a preference for preclusion of untimely successive class actions by instructing that class certification should be resolved early on.” Moreover, the Court noted that the Private Securities Litigation Reform Act (“PSLRA”), which governs securities class actions, like Resh’s, “evinces a similar preference . . . for grouping class-representative filings at the outset of the litigation.” Importantly, Resh was a class member in both the first and second actions but did not step forward until after the limitations period had expired. The Court was critical of the delay, finding “little reason to allow plaintiffs who pass up opportunities to participate in the first (and second) round of class litigation to enter the fray several years after class proceedings first commenced.”

The successive class actions in China Agritech do not occur regularly, yet there are important lessons for institutional investors. First, China Agritech, like ANZ last term, underscores the need for institutional investors with significant exposure to weigh their decisions to bring or join securities litigation earlier, rather than later. Second, the Court places increasing pressure on representative plaintiffs and lead counsel to address any deficiencies in a class representative’s ability to represent a class at the outset of litigation, as the ability to substitute additional representatives later in the case may be more difficult. In fact, the Court expressed its hope that the decision “will propel putative class representatives to file suit well within the limitation period and seek certification promptly.” While sitting on the sidelines has long been a benefit of securities litigation, these recent decisions continually warn investors that their claims could be at risk.

Cyan, Inc. v. Beaver County Employees’ Retirement Fund – State Courts Are Still Open For Business

In March, the Supreme Court issued a decision affirming the right of investors to bring so-called “offering claims”—claims based on misstatements in offering materials—in state or federal court.

In Cyan, the Court unanimously held that the Securities Litigation Uniform Standards Act (“SLUSA”) does not strip state courts of jurisdiction to decide class actions alleging only the Securities Act of 1933 (“Securities Act”) violations—which typically involve misrepresentations in offering documents, such as prospectuses. In addition, SLUSA does not authorize removing such suits from state to federal court. Justice Kagan, writing for the Court, stated that SLUSA “says nothing, and so it does nothing, to deprive state courts of jurisdiction over class actions based on federal law.”

This decision provides much-needed clarity and ends long-standing debates about whether class actions asserting Securities Act claims may be maintained in state court. As we previously reported, during oral argument the Justices seemed flummoxed by the statutory language of SLUSA, referring to it as “gibberish,” as well as the varying interpretations of that language argued by the parties and the U.S. Solicitor General.

This weighty decision affirms California precedent (though it is in no way limited to California courts or law) that these matters may be brought in either state or federal court. And, if filed in state court, the matter may not be removed to federal court. While underwriters and newly-public companies may feel more comfortable defending themselves in a federal venue, they will now need to familiarize themselves with the local flavor of state court systems. As for plaintiffs, the Court has preserved and strengthened their ability to select the appropriate forum for this securities litigation.

Lucia v. SEC – Back To The Drawing Board For ALJ Cases

On June 21, 2018, the Supreme Court issued a decision striking a blow to the SEC’s Administrative Law Judges (“ALJs”) internal-adjudication program. The Lucia Court held that the SEC ALJs are not mere employees, but rather are “Officers of the United States” who are subject to the Appointments clause of the United States Constitution. Because the ALJ that heard the Lucia matter was not appointed, the Court remanded the decision. However, the Court’s limited instructions leave many unanswered questions about the impact and scope of the decision for the SEC and other agencies.

The case began when the Commission instituted an administrative proceeding against financial advisor Raymond Lucia and his investment company, Lucia Capital Group, under the Investment Advisers Act of 1940. The Commission alleged that Lucia and his company had promulgated misleading information about his “Buckets of Money” investment strategy. An ALJ found for the Commission, prompting Lucia to appeal, arguing that the ALJ had not been constitutionally appointed and, therefore, lacked authority to adjudicate the case. The D.C Circuit Court ruled against Lucia, but the Supreme Court took the appeal and ruled in his favor.

Writing for the majority in a 6-3 decision, Justice Kagan concluded that, due to the “significant discretion” wielded by the SEC’s ALJs, they qualify as “Officers” under the Appointments Clause and, therefore, could only have been appointed to their positions by either “The President of the United States,” “Courts of Law,” or “Heads of Department.” The decision relied almost entirely on prior precedent defining “Officer” under the Appointments Clause—in particular, the Court’s decision in Freytag v. Commissioner, which found that “special trial judges” (“STJs”) of the U.S. Tax Court were “Officers” under the Appointments Clause.

Noting that the SEC’s ALJs are “near carbon-copies” of STJs, the Court found the Freytag Court’s reasoning to be dispositive in Lucia. First, the Court observed that ALJs receive a career appointment and, therefore, hold a “continuing position established by law.” Second, ALJs exercise “significant authority” tantamount to that of a federal trial judge: receiving evidence, examining witnesses, conducting trials, ruling on the admissibility of evidence, and enforcing compliance with discovery orders. The Court further noted that, beyond the powers of STJs—who must have a “regular Tax Court judge” adopt their findings—an ALJ’s decision becomes final if the Commission opts against reviewing it. Based on these factors, the Court concluded that ALJs are Appointments Cause “Officers.”

The Court then went on to instruct that on remand, any subsequent hearing of Lucia’s case must be conducted by a different ALJ, even if the ALJ that originally heard his case subsequently received a proper appointment. According to Kagan, no judge could be “expected to adjudicate [a] matter as though he had not adjudicated it before.”

Ramifications of the Lucia decision on the Commission were immediate. The Commission suspended all ALJ proceedings pending an internal review of how best to comply with the Supreme Court’s decision. While the Commission ratified all ALJ appointments prior to the Lucia decision, the Court did not rule on whether such ratification cured the constitutional issues.

Beyond the impact at the SEC, questions remain as to how the decision will impact other federal agencies that regularly employ ALJs to resolve disputes within their sphere of regulatory jurisdiction. Without sufficient guidance from the Lucia Court, it seems inevitable that more litigation will ensue as appellate courts contend with the wider implications of this decision.

In the meantime, for investors concerned about vigorous enforcement of the securities laws, the procedural issues triggered by this decision could delay the SEC’s efforts to seek justice for aggrieved investors.

Digital Realty Trust, Inc v. Somers – Securities-Fraud Whistleblowers Should Run, Not Walk, To the SEC

On February 21, 2018, the Supreme Court unanimously decided that the anti-retaliation provision of the Dodd-Frank Wall Street Reform Act does not extend to employees who report securities-law violations solely to their employer and not to the SEC. The Court determined that, for Dodd-Frank’s anti-retaliation protections to apply, whistleblower employees must report suspected securities law violations directly to the SEC prior to suffering any retaliatory conduct. In no uncertain terms, this decision reinforces the need for potential securities-law whistleblowers to retain competent counsel to protect their rights.

For an in-depth analysis on the case, please refer to our previous article on Digital Realty Trust.

*****

Overall, this last term was an interesting one for investors. As always, we will be back in the fall with our preview of next year’s slate of cases and issues and, of course, an analysis of Justice Kennedy’s potential successor, Judge Brett Kavanaugh.

For now, the Justices can enjoy the summer and, perhaps, Justice Sotomayer will take in a few more Yankees’ games.

Berman Tabacco Secures Appellate Victory

Earlier this month, Berman Tabacco secured an appellate victory, upholding a trial win that required a CEO to disgorge $3 million in ill-gotten gains.

On July 2, 2018, the First Circuit Court of Appeals affirmed the Massachusetts District Court’s ruling that Bruce Shear, the Chief Executive Officer and President of PHC, Inc. (“PHC”), disgorge $3 million of his “ill-gotten gains” to a class of former PHC shareholders. The First Circuit ruled that the trial court appropriately found that a shareholder can control a company without being a majority shareholder and disgorgement is an appropriate equitable remedy—even after a jury concluded that there is no economic loss to plaintiffs.

In bringing this case, Berman Tabacco teamed up with another law firm to represent plaintiff MAZ Partners LP in a securities class action arising out of state statutory and common law claims for breach of fiduciary duty, alleging that Shear used his position as PHC’s controlling shareholder to obtain benefits for himself at the expense of PHC’s other shareholders. The case stems from Acadia Healthcare, Inc.’s 2011 acquisition of PHC.

After a two-week trial, the jury returned a special verdict finding that Shear was PHC’s controlling shareholder and that he breached his fiduciary duty to PHC’s minority shareholders, but that the breach of fiduciary duty did not cause damage to the class. Subsequently, after post-trial briefing, the trial court ordered disgorgement so as to deprive Shear of “the fruits of his wrongdoing.”

The First Circuit opinion is significant in that it affirmed the principal that a non-majority shareholder can be a controlling shareholder under Massachusetts law. The First Circuit also opined that the Massachusetts courts would likely follow Delaware law in finding that shareholders cannot ratify a self-interested transaction “because of the coercion inherent in the relationship between a controlling shareholder and the remaining shareholders.” Finally, the Court established that even where a plaintiff is not damaged, “equitable disgorgement can be ordered as a remedy for a breach of fiduciary duty.

The ruling is a victory for investors enforcing their rights and a positive development in Massachusetts fiduciary law. Boston partners Norman Berman and Nathaniel Orenstein worked on this case for the firm.

Berman Tabacco And Its Attorneys Again Recognized As Litigation Leaders By Chambers And The Legal 500

Berman Tabacco and several of its partners have again been recognized as leaders in their areas of practice by some of the legal industry’s leading publications.

The Legal 500 recently ranked the firm as a leading firm in securities litigation in its 2018 U.S. edition, stating that the firm has “top-notch lawyers with the experience necessary to achieve positive outcomes; they prioritize the client and remain diligent throughout lengthy cases.” Seven of the firm’s partners received the same designation from the publication: Joseph J. Tabacco, Jr., Nicole Lavallee, Leslie Stern, Todd A. Seaver, Daniel Barenbaum, Patrick Egan, and Steven Buttacavoli (specifically noting comments from clients that the attorneys are “extremely responsive, smart and wise” and noted for “developing solid and convincing arguments”).

The firm was also recognized recently by Chambers USA 2018 as a leading securities litigation firm. Chambers further recognized Joseph J. Tabacco, Jr.—for the 12th consecutive year—as among the top U.S. securities litigators.

Berman Tabacco Appointed Co-Lead Counsel In Apple Processor Litigation

Berman Tabacco was recently appointed as co-lead counsel for a proposed nationwide class of purchasers of Apple devices, such as iPhones, iPads, and Apple TVs. The case alleges that certain of Apple’s devices are defective because their central processing units are subject to two vulnerabilities—called Spectre and Meltdown—that permit hackers to extract personal information from the devices. The case further alleges that Apple’s efforts to fix the defects have caused significant slowdowns in the performance of the devices. The lawsuit asserts product defect, breach of warranty, and consumer protection claims. “We look forward to litigating this case on behalf of millions of consumers across the country who were affected by the alleged defects in Apple’s processors” said Todd A. Seaver, a partner in Berman Tabacco’s San Francisco office. The case is: In re Apple Processor Litigation, No. 18-cv-00147-EJD (N.D. Cal.). The litigation team includes Todd A. Seaver and Matthew D. Pearson from the firm’s San Francisco office.

Berman Tabacco Appointed Co-Lead Counsel in Aqua Metals Securities Class Action

On May 23, 2018, the Honorable Haywood S. Gilliam, Jr. of the U.S. District Court for the Northern District of California issued an order appointing Berman Tabacco as Co-Lead Counsel for plaintiffs in the securities class action lawsuit against Aqua Metals, Inc. The action was brought on behalf of all persons who acquired the common stock of Aqua Metals, Inc. during the period between May 19, 2016 and November 9, 2017. The Order further appointed as Lead Plaintiff Berman Tabacco’s client, Plymouth County Retirement Association, as well as an individual investor and his private investment company.

During the class period, Aqua Metals touted that it had developed a technology called AquaRefining, which had the potential to revolutionize lead recycling and make lead-acid batteries the only truly sustainable battery technology. However, the suit alleges, the Company misled investors about the status of its implementation and operations of its AquaRefining technology.

The case is: In re Aqua Metals, Inc. Securities Litigation, No. 4:17-cv-07142-HSG (N.D. Cal.). The litigation team includes Nicole Lavallee, Kristin Moody, and Chowning Poppler from the firm’s San Francisco office, and Leslie Stern from the Boston office.

Berman Tabacco Launches New Look…With A Focus On Justice Delivered

As the home page opens on Berman Tabacco’s new website, the message could not be more clear: Berman Tabacco delivers justice to those aggrieved.

“The website is not simply a catalog of information,” said name partner Norman Berman. “It is the narrative of who we are and what we sincerely believe. It tells the stories of who we have helped, and how.”

“Our cases are often brought on behalf of those who have carefully built their nest egg,” said name partner Joe Tabacco. “When we expose fraud and hold the wrongdoers accountable, we also recover for the victims.”

Behind this new look is the same firm that has been delivering justice for over 35 years. The firm was named a “Top 10 Plaintiffs’ Firm” in 2017 and 2018 by Benchmark Litigation, and has been ranked in its top tier of “Highly Recommended” for 7 years. The firm was also recognized by Chambers USA as a leading securities litigation firm in 2017. The Legal 500 also recently ranked the firm as “recommended” in securities litigation in its 2017 U.S. edition.

Additionally, Berman Tabacco is in the top 10 of firms on ISS Securities Class Action Services’ (ISS SCAS) list of the top 100 largest securities class actions in its published report, Top 100 U.S. Class Action Settlements of All Time (as of 12/31/2017). And, according to ISS SCAS’ Top 50 for 2015 report, the firm was one of only six firms that recovered more than half-a-billion dollars for investors in 2015.

“With our new look and new name, we are invigorated,” said Boston partner Bryan Wood, who heads Berman Tabacco’s Whistleblower Group. “This is an exciting time for our firm and our lawyers.”

Berman Tabacco Welcomes New Associates

Dove-tailing with our fresh look, Berman Tabacco is pleased to welcome three new associates to the firm. In April, Colleen Cleary and Carl Hammarskjold joined as associates in the San Francisco office, while Nicole Maruzzi joined as an associate in the Boston office.

Colleen Cleary

Colleen focuses on representing consumers and businesses in complex multidistrict antitrust class actions. She is currently a member of the litigation team for several of our market manipulation cases, bringing her zeal to prosecuting claims of collusion between major banks to manipulate financial benchmark rates, including the Yen Libor, the Euroyen Tibor, Euribor, Swiss franc LIBOR and the Canadian Dollar Offered Rate.

Prior to joining the firm, Colleen worked as a class action litigator in the Bay Area representing consumers harmed by anticompetitive conduct and defrauded investors in a securities class action. While at the University of San Francisco School of Law, Colleen worked at the Federal Trade Commission investigating anticompetitive civil mergers in the health care industry, and the Department of Justice’s Antitrust Division assisting in the prosecution of criminal price-fixing conspiracies.

Carl Hammarskjold

Carl is another addition to our antitrust team, helping advance our cases against companies that are alleged to conspire to fix and raise prices. Currently, Carl is a member of the litigation teams on the firm’s market manipulation cases including: Australian Dollar, Canadian Offered Dollar Rate, Euribor, Mexican Bonds, Swiss franc, and Yen-LIBOR/Euroyen TIBOR.

Carl is rated an AV® Preeminent™ by Martindale-Hubbell® and was selected by Super Lawyers as a Northern California Rising Star in 2016 and 2017. Before joining Berman Tabacco, Carl practiced at a San Francisco-based plaintiffs’ firm specializing in antitrust class actions and other complex, multidistrict litigation in federal court. He was also a business litigator at a large, national law firm. During law school at the University of San Francisco School of Law, Carl served as an extern for the Honorable William H. Alsup at the U.S. District Court for the Northern District of California.

Nicole Maruzzi

Nicole focuses her practice on complex securities and consumer litigation. Currently, Nicole is a member of the team bringing a “books and records” action against UnitedHealth Group, Inc., seeking to compel the inspection of records to evaluate whether UnitedHealth’s board of directors breached their fiduciary duties by failing to monitor the company’s policies and procedures with regard to Medicare billing. That failure is alleged to have resulted in the submission of invalid claims to Medicare in violation of the federal False Claims Act.

Prior to joining the firm, Nicole represented clients in civil rights and employment discrimination litigation. Nicole’s prior practice provided a myriad of courtroom opportunities, strengthening her skills as a litigator. Prior to that, Nicole worked as a law clerk at a mid-sized law firm representing doctors in medical malpractice litigation while also obtaining her law degree from Suffolk University Law School.

“We are very excited to have Colleen, Carl and Nicole join the firm,” commented Boston Managing Partner Kathleen M. Donovan-Maher. “They each bring a unique skillset and devotion to justice.We are proud to have them on our team.”

“These are great attorneys who will help us expand both our securities, consumer and antitrust practices,” added San Francisco Managing Partner Nicole Lavallee.

Berman Tabacco Prominently Represented on The Top 100 U.S. Class Action Settlements of All Time

Securities Class Action Services (SCAS) recently published its annual report, SCAS-Top-100-Settlements-of-All-Time-2017-12-31. Berman Tabacco is among those firms with the most cases on the list of largest securities class actions settlements since the passage of the Private Securities Litigation Reform Act of 1995 (PSLRA). With a total combined recovery of over $2.32 billion, the report highlights seven of the firm’s cases:

  1. Xerox Corp. ($750 million);
  2. IndyMac MBS ($346 million);
  3. Bristol-Myers Squibb ($300 million);
  4. Bear Stearns ($294.9 million);
  5. El Paso Corp. ($285 million);
  6. BP p.l.c. ($175 million); and
  7. Fannie Mae ($170 million).