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November 2014 Archives

135 brokers expected to share in Wells Fargo settlement

To settle a class action lawsuit against Wells Fargo, a deal has been proposed to divide $5.6 million among about 135 brokers. The suit was brought by two brokers who formerly worked at Wells Fargo Advisors LLC, and the case may be of interest to individuals and companies with complex employment agreements involving bonuses and other benefits.

Supreme Court Grappling with False Opinion Issue in Omnicare Case

The Supreme Court granted certiorari to hear a case involving allegations that Omnicare, Inc. ("Omnicare") offered false opinions to investors (Ind. State Dist. Council v. Omnicare, Inc., 719 F.3d 498 (2013)). Under Section 11 of the Securities and Exchange Act, the Sixth Circuit Court of Appeals held that issuers of shares can be held responsible for providing stockholders with opinions that turned out to be wrong. Section 11 specifically states that issuers are liable if correspondence with shareholders "contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading."1 The Sixth Circuit decision provides an objective measure in determining fault. The Court found that the issuer of shares can be held liable under Section 11 of the Securities and Exchange Act regardless of whether the issuer knew the statement was false at the time it made the claim.2

Fannie Mae Agrees To Settlement With Shareholders

The Federal National Mortgage Association ("Fannie Mae") has agreed to pay two classes of its shareholders $170 million to settle a class action suit regarding its role in causing massive losses for its investors. The plaintiffs allege that Fannie Mae, a government-sponsored corporation that securitizes mortgages into mortgage-backed securities ("MBS") in order to increase the number of lenders in the mortgage market, did not indicate the extent of its "exposure to subprime loans" as the 2008 financial crisis hit the United States.1 Specifically, the complaint "alleged that the defendants made false and misleading statements concerning the company's internal controls and its exposure to subprime and other risky mortgage loan products."2 The settlement agreement was reached in the United States District Court for the Southern District of New York, with a class of common shareholders set to receive $123.76 million and a class of preferred shareholders to get $46.24 million.

Healthcare provider settles qui tam claim for $25 million

The federal False Claims Act allows individuals, called relators, to bring lawsuits -- qui tam claims -- on behalf of the government, and the relators may collect a portion of any amount of money the government recovers. Since the mid-1980s, the United States government has recovered more than $15 billion through qui tam claims, and that figure continues to rise.

Complaint filed against Takata, Honda over defective airbags

Honda Motor Co. and Takata Corp. are the targets of a recently filed lawsuit alleging the manufacturers prioritized profits over customer safety. The suit, which seeks class-action status, claims that Takata built cheap airbags to cut costs and that Honda bought the airbags to cut manufacturing expenses. Consequently, the airbags are "killing and maiming drivers and passengers involved in otherwise minor and survivable accidents."