blog.issproxy.com/2006/12/ -
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Published on: 12/1/2006
Last Visited: 7/25/2007
"There has been a sea change in interest among European investors filing claims and claiming money that is rightfully theirs," Mark S. Willis, a partner with Cohen, Milstein, Hausfeld & Toll, a law firm that represents investors, said during a SCAS Web cast in September.
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Willis said the interest by European institutions has increased after those investors realized that serving as a lead plaintiff may be necessary to ensure they are treated fairly in U.S. settlements involving European companies.A lead plaintiff plays a key role in defining the class, determining the settlement distribution ratio, negotiating any governance improvements, and deciding whether a proposed accord is sufficient, Willis said.In addition to Parmalat and Shell, a number of major European firms have faced U.S. class-action cases.In 2004, a record 29 foreign issuers were hit with securities class actions in U.S. courts, according to a report by PricewaterhouseCoopers.
Willis recalled the example of the $120 million Deutsche Telekom settlement, where the class was defined narrowly to include only those shareholders who bought their shares on American exchanges.Those investors, who accounted for 24 percent of the firm's equity, ended up sharing the entire settlement, which was a "fairly inequitable result," Willis said.The excluded European investors had to file a multitude of separate claims in Germany."Had a European been a lead plaintiff in that case, that likely would have not happened," Willis said, adding that concern about getting shortchanged has been "a major motivating force" for European institutions.
European investors were also excluded in the Elan, DaimlerChrysler, and Lernout & Hauspie settlements, Willis recalled.In the Lernout settlement, the class included only those investors who purchased shares on Nasdaq or other U.S. markets.The larger group of investors who bought their shares through Easdaq (Nasdaq's former European technology market) since have filed a separate class action in the United States, Willis said.
As the Parmalat case illustrates, American courts "have been quite willing to appoint Europeans either as co-lead plaintiffs or sole lead plaintiffs in U.S. class actions," as long as the Europeans can show that a U.S. court has jurisdiction over their claims, Willis said.If a European investor didn't buy its shares in the U.S., the court considers whether the alleged fraud had a substantial impact on the U.S. market or was carried out in some substantial way in the United States.In the Parmalat case, the judge found there was a sufficient connection because the company used U.S. bankers and attorneys to perpetrate the alleged fraud, Willis said.
U.S. courts have rejected some lawsuits by foreign investors on jurisdictional grounds.In January, a federal judge in Delaware dismissed a lawsuit by foreign DaimlerChrysler investors who weren't included in the $300 million settlement obtained by U.S. investors.In 2005, a federal judge in New York dismissed a lawsuit by Bayer investors after noting that just 8 percent of the German company's shares are traded in the United States.
Willis cautioned that European institutions should be careful about the cases they participate in and avoid those that might damage their reputations."There are many cases that they can get involved in where they can really step forward to protect their own interest and make a statement about corporate fraud," Willis said.
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