When an investor or consumer decides to sue a business, the case may have merits as a class action, but not every case does. After the lawsuit has been filed, the court will consider the case and determine whether it meets the requirements of a class action. If the issues common to members of the class outweigh the issues specific to each member, then a class action can be certified as such.
Officers and shareholders in any corporation have a fiduciary duty to act in the best interest of shareholders by increasing the value of the company. "Failure to diligently pursue the profit making goals of the corporation may constitute a breach of fiduciary duty and expose the officers and directors to personal liability for the breach."1 The New Castle County Superior Court in Delaware held that monetizing intellectual property ("IP") in order to maximize shareholder value may be a fiduciary requirement for corporate officers.
Optimer Pharmaceuticals Inc. ("Optimer"), which Cubist Pharmaceuticals ("Cubist") purchased in 2013, is being investigated for a possible violation of the Foreign Corrupt Practices Act ("FCPA"). The investigation revolves around an alleged share grant payment made to a former executive and another questionable payment made to a research laboratory. In its recent filings with the Securities and Exchange Commission ("SEC"), Cubist said that it is unsure at this point whether Cubist, Optimer, and/or former or current employees will be sued. Additionally, Cubist notified shareholders that there was the possibility that civil or criminal charges might be brought.1
Under the qui tam provisions in the federal False Claims Act (FCA), employees, corporations, and private or public interest organizations may sue a company that defrauds the federal government. The legal action is brought on behalf of the government and the whistleblower, and an individual who brings a qui tam claim may stand to receive a sizable reward.
The Securities and Exchange Commission ("SEC") recently approved new regulations that will greatly affect money market funds and those who invest in them. The new regulations require money market funds to have a floating net asset value ("NAV") instead of the traditional $1 fixed NAV. The SEC believes that this will alert investors that money market investments do have risk and will prevent runs on funds, such as those that occurred during the 2008 financial crisis. The SEC also passed new regulation regarding redemption of assets. "The rules will allow money market fund boards to erect limitations, in the forms of fees and temporary redemption gates, on the ability of investors to pull out money of the funds at a time of market distress."1 While the SEC is trying to make the money market more transparent for investors, large institutional funds claim that a floating NAV and the new redemption fees will cause some investors to put their assets elsewhere and cause lower returns for those investors that remain in money market funds.
North China Pharmaceuticals Group ("NCPG") and HeBei Welcome Pharmaceuticals ("HeBei") (collectively, the "Companies") believe that the Second Circuit Appellate Court should overturn a district court ruling that found them guilty of violating the Sherman Act by creating a price-fixing cartel related to their Vitamin C products. The Companies argue that they had to coordinate in order to avoid violating Chinese law and since they were following those regulations, they could not act in accordance with the Sherman Act. According to the Companies, the U.S. courts should not interfere with another nation's regulations. This "sovereign compulsion" defense has been successful in past antitrust cases, but U.S. courts are not required to consider it. NCPG and HeBei have gotten support from the Chinese Ministry of Commerce, which claims that it forced the Companies to fix the prices of their Vitamin C products. The plaintiff class composed of direct and indirect purchasers disagreed, and argued that no agency required NCPG and HeBei to fix their prices. They conceded that the Chinese government set minimum prices in the wake of concern from the World Trade Organization, but there was no punishment in the event that the Companies did not change their prices. Additionally, this minimum price did not require the Companies to meet and fix their Vitamin C prices. This case highlights the complexity of legal issues that multi-national companies face. It also exhibits the difficulty for court systems in an international economy, as they have to consider their own country's laws, as well as the sovereignty of other countries in establishing their own regulations. As multi-national companies continue to increase imports from and exports to the United States, it will be helpful for them to understand that any commercial activity involving the U.S. can bring them under jurisdiction of antitrust laws. A foreign multi-national company may be sued for antitrust violations in a U.S. court if it does business in the United States or if its business affects commerce in the United States, even if it has no U.S. offices or employees.If you have any questions regarding this subject or this posting, please contact James E. Miller (firstname.lastname@example.org) or Michael Ols (email@example.com). We can also be reached toll-free at (866) 540-5505. Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.
Four years ago, when the Dodd-Frank Act was signed into law, a program was started to protect whistleblowers from retaliation if they report securities violations. Whistleblowers can also receive monetary awards for providing information to the Securities and Exchange Commission. However, a recent ruling by a federal appeals court draws into question whether tipsters from overseas are afforded the same protections afforded to whistleblowers in the U.S.
Employers who fail to give proper notification of a mass layoff could be subject to penalties, including payment of wages the laid-off employees would have received after the required notification of the layoff. Individual workers whose employment has been inappropriately terminated in a mass layoff may bring a lawsuit against the employer on behalf of other workers who are similarly situated. This sort of class action can result not only in compensation for employees' lost wages, but also civil penalties against the employer.
If there is a complaint against a broker or a brokerage firm, that information is normally made public through BrokerCheck, a service provided by the Financial Industry Regulatory Authority ("FINRA"). However, brokerage firms often include expungement of information from the public record as a bargaining point when settling disputes with investors. The Securities Exchange Commission ("SEC") does not want expungement to be a point of discussion when bargaining for a settlement because it can negatively affect public investors' access to information.1 The new SEC Rule 2081 no longer allows expunging a broker's wrongdoing from the record. The Commission, which established Rule 2081 from a proposal by the Financial Industry Regulatory Authority (FINRA) believes that the rule will benefit all investors and regulators. The issue regarding expungement came to the forefront when the Public Investors Arbitration Bar Association produced a study showing that expungement requests were granted in 97% of settled cases.2 This occurred because brokerage firms wanting to protect their image would bargain with complaining investors, offering them more money in exchange for expungement from the public record of the complaint against the firm. The investors would normally accept more money in exchange for expungement because their personal financial gain was, typically, more important to them than public record of their complaint. Allowing wholesale expungement of complaint information, however, hurts future investors that are looking for a brokerage firm that is trustworthy and has a positive history with clients. Arbitrators presiding over settlements were previously not concerned about expungement as a part of an agreement. Because brokerage firms would usually never make explicit to arbitrators that expungement was a condition of the settlement, arbitrators would often ignore it. The SEC and FINRA have ensured that arbitrators now inquire as to whether expungement is part of a settlement.3 While substantially curtailed, expungement is still allowed in a limited number of cases, namely those where "the expunged information is unfounded and has no meaningful regulatory or investor protection value."4Some believe that the new rule is not ideal, and that it may have negative consequences. For example, Robert Banks Jr., a plaintiff's attorney, argues that the new rule will not curb the number of expungement requests or how many are eventually accepted.5 Other counter-arguments include the likelihood of higher costs for all parties involved - because settlements will be more difficult to reach - and the argument that investors will receive smaller settlements overall since brokerage firms can no longer bargain for expungement of information by offering more money.6The SEC and FINRA believe that Rule 2081 will force expungement to be decided only on the investors' dispute and will stop its use as a bargaining chip to avoid the merits of the investors' complaint. Rule 2081 is brand new and no one knows how it will work just yet, but the SEC is hopeful that the investing public will be better served by increased information.
An interesting report from the global consulting firm NERA traces the number and kind of consumer class action settlements in the last four years. The settlements, ranging from 2010 through 2013, related to anti-trust claims (price fixing, for instance), consumer fraud, product liability and false advertising, among other issues. Examined in the report are 479 class action suits, nearly 85 percent of which involved a monetary payment to plaintiffs.