{"id":22624,"date":"2022-05-23T12:00:00","date_gmt":"2022-05-23T17:00:00","guid":{"rendered":"https:\/\/plusblog.org\/?p=18455"},"modified":"2024-07-29T15:13:05","modified_gmt":"2024-07-29T20:13:05","slug":"do-symposium-write-up-current-developments-in-do-securities-litigation-with-jordan-eth","status":"publish","type":"post","link":"https:\/\/plusweb.org\/news\/do-symposium-write-up-current-developments-in-do-securities-litigation-with-jordan-eth\/","title":{"rendered":"D&O Symposium Write-Up: Current Developments in D&O Securities Litigation with Jordan Eth"},"content":{"rendered":"\r\n
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Jordan Eth<\/strong>, Morrison Foerster<\/em><\/p>\r\n\r\n\r\n\r\n

 <\/p>\r\n\r\n\r\n\r\n

Jordan is co-chair of Morrison & Foerster’s Securities Litigation, Enforcement, and White Collar Defense Group. He is one of the leading securities litigators in the United States, known for his success in handling complex, high-stakes cases. He has more than 30 years of experience representing public companies and their officers and directors in securities class actions, SEC investigations, derivative suits, M&A litigation, and internal investigations. Based on his and the Groups recent successes, The Daily Journal<\/em>\u00a0named Jordan to its 2021 list of Top 100 Lawyers in California. He has also received a California Lawyer Attorney of the Year Award for co-leading the successful defense of JDS Uniphase Corp. and its former executives in a securities class action jury trial seeking $20 billion in damages.<\/p>\r\n<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n

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Thank you to the PLUS organizers and my fellow panelists on the Current Developments in D&O Securities Litigation panel at the 2022 PLUS D&O Symposium. Special thanks to Jim Skarzynski who did a terrific job organizing and moderating our panel. It was great to be live and in person once again in New York City.<\/p>\r\n\r\n\r\n\r\n

Here are the key points from our panel:\u00a0<\/p>\r\n\r\n\r\n\r\n

The decline in the number of securities litigations in recent years<\/em><\/strong><\/p>\r\n\r\n\r\n\r\n

The panelists agreed that stock market performance, not surprisingly, has been a major reason for this trend.\u00a0 Given recent volatility and declines in the market, we all expect case counts to rise.\u00a0 \u00a0<\/p>\r\n\r\n\r\n\r\n

We also half-jokingly attributed the decline in cases to supply chain issues perhaps ships filled with securities complaints were stacked up waiting to unload?\u00a0 But with people working from home many of whom were distracted by Covid and courts shut down or not moving their dockets, these issues may, in fact, have contributed to the decline. \u00a0\u00a0Lifting of most Covid restrictions should also contribute to an increase in cases going forward.\u00a0<\/p>\r\n\r\n\r\n\r\n

In re Goldman Sachs <\/em>(Goldman Sachs Grp., Inc. v. Ark. Tchr. Ret. Sys.<\/em>, 141 S. Ct. 1951 (2021))<\/strong><\/p>\r\n\r\n\r\n\r\n

What are the implications of the Supreme Courts Goldman Sachs<\/em> ruling? \u00a0Well, for one, experts are now guaranteed full employment. \u00a0Years ago, defendants rarely challenged class certification let alone base a challenge on expert testimony.\u00a0 Now, it has become de rigueur for plaintiffs to offer an expert report.\u00a0 Defendants frequently counter with their own expert, and, of course, the experts usually get deposed.\u00a0 No doubt, this drives up the cost of litigation for everyone and can lead to delays in resolution.\u00a0 Goldman Sachs<\/em> itself is a great example:\u00a0 the case filed in 2010 is now on its third trip to the Second Circuit.\u00a0 The panel noted that, even with all these efforts, courts still almost always certify a class at least for now.<\/p>\r\n\r\n\r\n\r\n

In terms of the Courts precise holding, there really isn’t much to say.\u00a0 It stands for the simple proposition that in assessing whether alleged misstatements caused price impact, courts should consider all the evidence before them.\u00a0 Somewhat perplexingly, the Court said that placing the burden of proof on defendants to show no price impact should only affect the rare situation in which the evidence is in equipoise.\u00a0 That said, I’m not giving up on holding plaintiffs to their burden of proof on the merits.<\/p>\r\n\r\n\r\n\r\n

There are a few interesting nuggets in the case.\u00a0 The Court specifically declined to take a position on whether Rule 10b-5 permits price maintenance cases at all.\u00a0 Panelist John Browne of Bernstein Litowitz Berger & Grossmann LLP acknowledged that the majority of securities cases right now are price-maintenance theory cases; that is, cases in which plaintiffs allege that the stock would have declined (or declined more) if the truth had come out at the time of the statement.\u00a0 Some clever defense attorneys will undoubtedly argue that the implied right of action under Rule 10b-5 should not be stretched to include cases in which the stock price did not react to the alleged misstatement. \u00a0But this is for another program, perhaps years down the road.\u00a0<\/p>\r\n\r\n\r\n\r\n

More immediately though, this case also says something useful about loss causation.\u00a0 The Court noted that when there is a mismatch between the front-end alleged misstatement and the back-end alleged corrective disclosure, it is less likely that the disclosure actually corrected the earlier statement.\u00a0 While this may provide defendants an additional argument against loss causation or damages, defendants should think through the procedural posture in which they raise this issue.\u00a0 Plaintiffs motion for class certification may not be the right time.<\/p>\r\n\r\n\r\n\r\n

Section 11 cases<\/em><\/strong><\/p>\r\n\r\n\r\n\r\n

We also discussed two recent Section 11 cases:\u00a0 In re Pivotal Securities Litigation<\/em> and Pirani v. Slack Techs., Inc., <\/em>13 F.4th 940 (9th Cir. 2021).\u00a0 In Pivotal<\/em>, the Supreme Court granted cert to resolve the issue of whether the PSLRA discovery stay applies to state courts.\u00a0 Notably, plaintiff in that case agreed not to conduct discovery before defendants’ motion to dismiss (known as a demurrer) was decided and argued that their agreement mooted the issue. \u00a0The Supreme Court nevertheless accepted the case.\u00a0 Given the prevalence of federal forum-selection clauses that require Section 11 litigation to take place in federal court, this issue may not affect many defendants.\u00a0 But, where there is no forum-selection clause, defendants can now more confidently oppose pre-motion to dismiss discovery and litigate all the way to the Supreme Court, if necessary.<\/p>\r\n\r\n\r\n\r\n

Pirani v. Slack <\/em>concerned a direct listing, which occurs when a company goes public by issuing both registered and unregistered shares. \u00a0The issue before the Ninth Circuit was whether Section 11 required plaintiffs to trace their shares to the registered offering.\u00a0 Despite the general strictness of the tracing requirement, the Ninth Circuit ruled that strict tracing was not required here because the unregistered shares could not have been issued without the registration statement.\u00a0 We don’t expect this to be the last word on this issue although the Ninth Circuit recently denied Slacks petition for a rehearing en banc.\u00a0 Other Circuits will undoubtedly weigh in on this issue, too. \u00a0Depending on the outcome of these rulings, direct listing (and other innovations) may cause Section 11 exposure to diminish in importance.<\/p>\r\n\r\n\r\n\r\n

Remote settlement processes<\/em><\/strong><\/p>\r\n\r\n\r\n\r\n

We also discussed the rise and future of remote mediations.\u00a0 We agreed that remote mediations are here to stay.\u00a0 For one, they can present cost and time savings: \u00a0if the parties are nowhere near settling, there’s no need for counsel to fly around the country. \u00a0Same thing if the parties are close to settling. \u00a0But, in most cases, the parties don’t know where they stand ahead of time.\u00a0 And there is certainly less pressure, and less concentrated effort, in a remote setting, perhaps causing cases to take longer to resolve.\u00a0<\/p>\r\n\r\n\r\n\r\n

Remote mediations have other drawbacks.\u00a0 During an in-person mediation, insurers and their insureds often address case-specific issues and iron out (or at least surface) any disagreements. They also develop or renew professional relationships. \u00a0Zoom presents far less opportunity for impromptu discussion and small talk.\u00a0 This is especially harmful to less experienced counsel who are trying to establish relationships of their own.\u00a0<\/p>\r\n\r\n\r\n\r\n

For these reasons, we hope that in-person mediations at least for the most part return in the near future.<\/p>\r\n\r\n\r\n\r\n

 <\/p>\r\n","protected":false},"excerpt":{"rendered":"

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