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Securities and Derivative Litigation


Overview

Our Securities and Derivative Litigation Practice has long been trusted counsel to companies, boards, and individuals in high-stakes securities fraud litigation and related disclosure and corporate governance matters. Corporate counsel have ranked Carlton Fields in the top 15% of all law firms for securities and finance litigation in the BTI Litigation Outlook report for the past two years.
 

How We Can Help

Securities Fraud: We defend securities fraud class actions on behalf of public companies, as well as directors and officers, and other defendants, for claims under the Securities Act of 1933, the Securities Exchange Act of 1934, and state law. We have defended foreign issuers and smaller domestic companies, both of which are increasingly targeted by the plaintiffs’ bar. We also represent private companies and their officers and directors who find themselves the subject of securities fraud lawsuits and breach of fiduciary duty claims.

Shareholder Derivative Litigation: How a board responds to a demand letter from a shareholder makes a large impact on how any ensuing litigation unfolds against the company. We advise companies and their boards in navigating shareholder demands, starting with, as appropriate, setting up a special committee, and continuing through investigation, responding to the complaining shareholder, and managing litigation. We also represent individual officers and directors in derivative litigation. 

Representing Special Litigation Committees: We act as independent counsel to special litigation committees that have been tasked with the investigation and evaluation of shareholder demands. Our team, which includes several former federal prosecutors, is truly independent, and works to quickly and efficiently investigate the allegations and to advise the committee on whether proceeding with the suggested claims is in the company’s best interests.

Merger Objection and Post-Merger Litigation: Most public company mergers and acquisitions are accompanied by a merger objection lawsuit, in which a shareholder sues the target, the target’s directors and officers, the acquiring company, and any advisers on the deal, seeking to enjoin the business combination and demanding more disclosures and greater value. We can help defendants distinguish the nuisance suit from the suit that demands significant attention, and then counsel companies, directors, and other defendants through the minefield of merger litigation.

Regulatory Defense and Arbitration: We have defended broker-dealers and their associated persons in all manner of litigation, including securities arbitration proceedings before FINRA and the NYSE. Our SEC enforcement experience includes responding to subpoenas and Wells notices and litigation in SEC administrative fora. In addition to defending such matters, we routinely represent witnesses in SEC and FINRA investigations.

Corporate Governance Litigation: We represent companies, directors, officers, and other individuals in all manner of challenges to corporate governance and allegations of breaches of fiduciary duty. We have particular experience with allegations of accounting malfeasance, self-dealing, failure of oversight, and excessive compensation. We interfere at our clients’ request in change of control disputes and in proxy fights. Our firm attorneys are active with the ABA’s Business Law Section and the National Association of Corporate Secretaries and Governance Professionals.
 

The Carlton Fields Distinction

Up-Front Client Commitment: Our practice is dedicated to our clients’ success, and we commit to the following at the outset of every engagement:

  • We understand our client’s industry and will commit to understanding the company, its business goals, and its overarching objectives for our engagement as counsel.
  • We will conduct an early case assessment and discuss with our client alternative approaches to managing the risks, challenges, and budget for the engagement.
  • We will create a client team to serve the client’s needs at the inception of the engagement that will be committed to knowing the company and the matter intimately.
  • Even in the largest and most complex case, we provide a single point of contact so that there is a mechanism for immediate contact and response.
  • We have the insight and experience to counsel clients when to vigorously contest certain claims and when it is in the client’s best interest to pursue a negotiated settlement.
  • We will discuss and honor the client’s preferred means of communicating with us before, during, and after the engagement.
  • We will keep our client apprised every step of the way, seeking client involvement to the extent preferred.

Intelligent Matter Management: We endeavor whenever possible to obtain early resolution of these types of cases and investigations, which can be disruptive, costly, and unsettling to a company’s management, board, investors, and business partners. By deploying early case assessment, we can triage a new lawsuit and provide an array of options to fit our client’s risk tolerance and budget. Our in-house document collection and analysis tools, including the use of technology-assisted review (such as predictive coding) help to increase efficiencies, find the important documents sooner, and reduce costs. Our practice is at the cutting edge of emerging issues concerning the preservation, production, and discovery of electronic information.

Alternative Fee Arrangements: We welcome alternative fee arrangements (AFAs) in complex securities and corporate governance litigation. Our AFAs can include phased billing, capped fees and collars, blended rates, success and contingency fees, and other arrangements suitable for the matter. We have found these arrangements particularly effective for managing portfolios of similar cases. Additionally, our billing rates, including those of our New York and Washington, D.C., attorneys, are significantly lower than those of the traditional Northeast and West Coast securities litigation defense firms.

Insurance Company Relationships: We are approved securities litigation counsel for directors and officers liability insurance policies issued by several major national insurers. We have an established track record of working cooperatively with these insurers in the defense of securities claims. We also represent insurance companies as monitoring counsel and coordinating counsel in all manner of securities, derivative, and corporate governance litigation, from inception through mediation and settlement or court resolution.

The Right Experience: Our practice group includes former federal prosecutors and former SEC staff. Our attorneys have substantial trial experience both in enforcement actions and in class actions, and can try the most complex matters when appropriate for the matter. Our litigators handle matters at the federal and state trial and appellate levels, in SEC administrative fora, and in FINRA and NYSE arbitrations.

The Right Resources: The Securities and Derivative Litigation Practice draws on the firm’s extensive resources in corporate, securities, tax, government investigations and white collar defense, appellate and trial support, and other transactional and litigation disciplines. Through our offices in New York, Los Angeles, Connecticut, Atlanta, Washington, D.C., and throughout Florida, and our long-standing relationships with numerous local and regional firms throughout the country, we stand ready to litigate, and have litigated, matters throughout the United States.
 

Experience

We have substantial experience representing public and private companies and their directors and officers in securities and corporate governance litigation. Recent or current matters include:

  • Represented the special committee of a public company in an investigation into conflicts of interest, regulatory compliance, and other matters.
  • Defeated class certification in a $1.5 billion post-merger securities litigation.
  • Represented large regional bank in defense of threatened action by shareholder to challenge proposed merger. Secured resolution without action filed.
  • Represented a health care medical device company (as nominal defendant) and defendant officers and directors in defense of shareholder derivative action alleging that current and former members of the company’s management and board of directors failed to exercise oversight of the company and engaged in self-dealing. After conducting an investigation, we negotiated and obtained a settlement for the company and its officers and directors.
  • Obtained dismissal of shareholder derivative suit against public health care technology company for failure to make demand.
  • Defended public insurance company that received a shareholder demand letter related to executive compensation, settling without litigation.
  • Defended a public company against a $20 million earnout claim following the client's acquisition of a smaller public company based on a prior acquisition by the target company.
  • Represented the special litigation committee of the board of directors of a Fortune 500 company in an investigation of allegations in a shareholder derivative action concerning the company's earnings projections. Based on our presentation to plaintiff's counsel at the conclusion of the investigation, the plaintiff voluntarily dismissed the action.
  • Represented former Kmart officer in a class action securities fraud lawsuit alleging that senior executives misled investors by artificially and falsely inflating prices for Kmart publicly traded securities. Our firm argued that the plaintiffs failed to plead loss causation, and the court ultimately based its decision to dismiss the complaint as to all defendants on such grounds. Also represented former Kmart officer in action alleging breach of contract, unjust enrichment, and fraudulent transfer claims commenced by the Kmart Creditor Trust.
  • Represented former executive of Sunbeam Corp. in a securities fraud litigation brought on behalf of class action plaintiffs, and a derivative action brought on behalf of Sunbeam.
  • Monitored merger objection litigation for national insurance company, and participated in successful mediation of all claims well below policy limits.
  • Represented six former officers of publicly traded company in various matters related to Chapter 7 bankruptcy, including breach of fiduciary duty claims, federal securities fraud claims, wage claims, and common law claims.
  • Represented a variable annuity issuer in action alleging violations of Exchange Act Section 10(b)/Rule 10b-5, as well as state statutory and common law claims. Voluntarily dismissed after (i) removed case to federal court; (ii) filed motion to dismiss all counts; and (iii) federal court granted concurrently filed motion to transfer venue.
  • Represented a private placement issuer in action claiming losses attributable to Bernie Madoff “feeder fund” investments. Motion to dismiss with prejudice granted on all counts.
  • Represented regional bank in responding to a threatened shareholder lawsuit to enjoin merger with Nasdaq-traded bank based on alleged breaches of fiduciary duty, inadequate consideration, and inaccurate disclosures. Merger was completed without lawsuit being filed.
  • Represented a government retirement plan service provider in putative class action brought by municipality asserting state law claims relating to service provider’s receipt of allegedly improper “revenue sharing” fees from mutual fund investment advisers and/or distributors. Federal district court dismissed all claims under SLUSA, finding that SLUSA’s “state entity” exception did not apply.
  • Represented a wholesale broker-dealer and principal underwriter in FINRA arbitration alleging fraud and due diligence failures in connection with post-financial crisis losses incurred in underlying hedge fund investments selected by high net worth investor within a private placement variable annuity. All claims dismissed by arbitration panel following conclusion of plaintiff’s case-in-chief. Panel’s dismissal subsequently confirmed in federal district court.
  • Represented a witness in SIGTARP and Department of Justice’s first high-profile investigation and criminal prosecution of securities fraud in relation to the public-private investment program involving residential mortgage-backed securities.
  • Served as outside general counsel to a publicly traded company, and its senior executive officers, board of directors and committees, on corporate governance, disclosure obligations under the federal securities laws, threatened and actual litigation, securities filings, and general corporate matters. Worked closely with a special committee of the board during the company’s acquisition, as well as during the majority shareholder’s sale of the company.
  • Defended a derivative lawsuit and parallel shareholder class action claims regarding transactions among related insurance companies. Derivative claims settled favorably after denial of class certification.
  • Represented the buyer and its affiliates in connection with consolidated putative class actions arising from a merger and acquisition transaction. All of the actions were resolved shortly after filing and received final approval from the court. Upon completion of the settlement, we also prosecuted a shareholder appraisal action to a successful resolution.
  • Represented a publicly traded bank holding company in a U.S. attorney’s office investigation, SEC investigation, and parallel shareholder class action. Client was not charged in investigations, and the class action was settled.
  • Represented a publicly traded bank holding company in a federal securities class action and parallel SEC investigation involving, among other things, accounting for loan losses. SEC matter terminated with no enforcement action, and class action settled.
  • Represented private equity firm and its affiliates in connection with consolidated putative class actions arising from a merger and acquisition transaction. All of the actions were resolved shortly after filing and received final approval from the court.
  • Represented global manufacturing and technology company in connection with a putative class action arising from a merger and acquisition transaction, resolving the action shortly after filing.
  • Represented the special committee of the board of directors of a publicly traded company in a shareholder class action challenging fairness of a going-private transaction and disclosure in the proxy. Settled without payment by our clients.
  • Represented a special litigation committee in an internal investigation arising out of a demand letter from a former high-ranking executive of a subsidiary company who was terminated and became a “whistleblower” alleging accounting improprieties, improper billing to the U.S. government from this subsidiary (false claims), and other alleged fraudulent conduct at a publicly traded information technology company. After conducting an internal investigation and making a presentation to counsel for the whistleblower and to the government, the government declined to intervene.
  • Represented bank in state law class action alleging excessive fees in connection with mutual fund investments. Class claims dismissed with prejudice pursuant to SLUSA, and case terminated.
  • Represented former corporate officer in litigation, including securities fraud claims, related to Chapter 7 bankruptcy proceeding.
  • Represented the special litigation committee of the board of a Fortune 1000 company in investigating and responding to shareholder derivative demands and derivative litigation alleging conflicts of interest and breach of the duty of care.
  • Represented publicly traded insurance company and its directors in responding to derivative demand letters alleging excessive compensation.
  • Advised a publicly traded company and its board of directors on going private or “going dark,” and advised company on class action shareholder suit alleging breach of fiduciary duty upon announcement of the proposed transaction, which suit was discontinued.
  • Represented a publicly traded company in merger objection litigation in which purported shareholders challenged merger terms and alleged inadequate disclosures. Defeated motion to enjoin the transaction.
  • Defended former CEO of Fortune 100 company in securities litigation, derivative lawsuits, and a regulatory enforcement action, which ended, respectively, with summary judgment, dismissal, and a favorable settlement.

​In addition, we are handling a number of cases in which shareholders and other plaintiffs have alleged claims of fraud, corporate mismanagement, waste, self-dealing, breach of fiduciary duties, conflicts of interest, and other issues.
 

All Insights

What to Do If the SEC Comes Knocking on Your Door

What to Do If the SEC Comes Knocking on Your Door

July 3, 2019

Justin and Michael discuss what may happen when you are served with a subpoena from the SEC, or get approached by the Department of Justice, and what steps you should take in response. In the second half of the discussion, Justin and Michael focus on some issues in the crypto space.

Challenging New York’s “Best Interest” Standard: A Comparison to COCUS

Challenging New York’s “Best Interest” Standard: A Comparison to COCUS

December 18, 2018

Recent challenges filed by trade associations representing insurance agents in the state of New York seek to overturn the amendment of Regulation 187, which will impose a “best interest” standard on life insurance agents in the offering and sale of annuities and life insurance in New York.

Court Upholds California Department of Insurance’s Expansive Interpretation of Claims Practices Statute

Court Upholds California Department of Insurance’s Expansive Interpretation of Claims Practices Statute

December 18, 2018

A California appellate court recently reversed the trial court’s decision to enjoin the California Insurance Commissioner from enforcing certain regulations regarding unfair claim settlement practices.

Defendants Not Liable for Insurance Agent’s Ponzi Scheme

Defendants Not Liable for Insurance Agent’s Ponzi Scheme

December 18, 2018

A California appellate court recently affirmed the dismissal of claims against multiple insurers made by victims of a Ponzi scheme that was orchestrated by an independent insurance agent.

Life Insurer’s Early Dispositive Motion Achieves Narrowed Fraud Claim in COI Suit

Life Insurer’s Early Dispositive Motion Achieves Narrowed Fraud Claim in COI Suit

December 18, 2018

A recent decision by a federal district court in Maryland further illustrates the elusive nature of early dismissal of claims in far-reaching suits challenging the cost of insurance rate increases – even when some success is achieved via the rejection of underlying theories of liability.

SEC Regulation Best Interest: Charting a Course for Securities and Annuity Sales

SEC Regulation Best Interest: Charting a Course for Securities and Annuity Sales

September 5, 2018

In June, we circulated our fifth article on the continuing saga regarding the standard of conduct for sales of securities and annuities — and the efforts of federal and state regulators to impose new conditions on the existing standards. Our earlier articles focused on the potential for regulatory and litigation issues arising under the Department of Labor’s fiduciary rule adopted in 2016, which was struck down by the Fifth Circuit Court of Appeals.

Two New FINRA Rules for the Protection of Senior Investors

Two New FINRA Rules for the Protection of Senior Investors

July 10, 2018

The protection of senior investors continues to be a priority for FINRA, from both an examination and enforcement perspective. In fact, FINRA detailed how seniors are one of its major areas of concern in the last three editions of its Annual Regulatory and Examination Priorities Letter.

Supreme Court Set to Rule on Constitutionality of SEC’s ALJs

Supreme Court Set to Rule on Constitutionality of SEC’s ALJs

June 25, 2018

In April, the U.S. Supreme Court heard oral argument in Lucia v. SEC to resolve the federal circuit court split on whether the SEC’s administrative law judges (ALJs) are "inferior officers" of the United States who must be appointed in accordance with the Appointments Clause of the U.S. Constitution, and not mere employees whose hiring is not required to meet constitutional standards.

To Preempt or Not to Preempt - Courts Issue Competing SLUSA Rulings

To Preempt or Not to Preempt - Courts Issue Competing SLUSA Rulings

June 25, 2018

During two weeks in April, two different courts — the Second Circuit and the New Jersey Superior Court — considered nearly identical allegations regarding variable products and reached diametrically opposed conclusions about the extent to which the claims were barred by the Securities Litigation Uniform Standard Act (SLUSA).

SEC Regulation Best Interest: Charting a Course for Securities and Annuity Sales, Avoiding Collision and Potential Regulatory and Litigation Issues

SEC Regulation Best Interest: Charting a Course for Securities and Annuity Sales, Avoiding Collision and Potential Regulatory and Litigation Issues

June 12, 2018

During the past two years, we have written about potential litigation arising under the Department of Labor’s, first proposed, then adopted fiduciary rule. This article is the first of several we will write on the potential impact of these events on the recommendation and sale of securities generally, with particular emphasis on insurance company annuities.

Almost There!  South Carolina on Course to Become First State to Adopt NAIC Insurance Data Security Model Law

Almost There! South Carolina on Course to Become First State to Adopt NAIC Insurance Data Security Model Law

May 2, 2018

South Carolina’s law is substantially similar to the NAIC Model, and would take effect January 1, 2019.

SEC Proposes New Standards of Conduct for Broker-Dealers and Investment Advisers

SEC Proposes New Standards of Conduct for Broker-Dealers and Investment Advisers

April 19, 2018

On April 18, the SEC voted four to one to propose new standards of conduct for broker-dealers (BDs) and investment advisers (IAs).

Another Bout in the NAIC Best Interest Standard Title Fight

Another Bout in the NAIC Best Interest Standard Title Fight

March 31, 2018

In response to the National Association of Insurance Commissioners’ (NAIC) Annuity Suitability Working Group’s (Suitability WG) proposed revisions to the "Suitability and Best Interest Standard of Conduct in Annuity Transactions Model Regulation" (Model), 23 comment letters were submitted by regulators, consumer groups, industry groups, and companies (the Contenders).

Enforcement of DOL’s New Best Interest Contract Exemption’s Anti-Arbitration Condition is Enjoined

Enforcement of DOL’s New Best Interest Contract Exemption’s Anti-Arbitration Condition is Enjoined

March 31, 2018

A number of lawsuits have been brought challenging aspects of the United States Department of Labor’s "fiduciary rule," which expanded the definition of "fiduciary" of an employee benefit plan or individual retirement account as a result of giving investment advice for compensation to retirement investors.

FINRA Requires Order Taker Registration

FINRA Requires Order Taker Registration

March 31, 2018

In late 2017, FINRA pronounced in Regulatory Notice 17-30 that, "Beginning on October 1, 2018, unregistered persons cannot accept an order from a customer under any circumstances.

Implementation Delay and Q&As for Fund Liquidity Rule

Implementation Delay and Q&As for Fund Liquidity Rule

March 31, 2018

On February 21, the SEC approved a six-month extension for mutual funds to comply with the classification (bucketing) requirements and related elements of its new liquidity rule.

Investment Adviser Fee Table on the Table

Investment Adviser Fee Table on the Table

March 31, 2018

On February 7, the Massachusetts Securities Division asked for public comment on a fee table requirement for Massachusetts-registered investment advisers.

NAIC Disclosure Developments

NAIC Disclosure Developments

March 31, 2018

Annuity Illustration Standard Changes: On March 2, the Annuity Disclosure (A) Working Group of the National Association of Insurance Commissioners agreed to recommend the adoption of a revision to the NAIC’s Annuity Disclosure Model Regulation illustration standards.

SEC Issues Cybersecurity Disclosure Guidance

SEC Issues Cybersecurity Disclosure Guidance

March 31, 2018

On February 21, the SEC published interpretive "Guidance" to help public operating companies prepare disclosures about cybersecurity risks and incidents.

SEC Sidelines Funds Focused on Cryptocurrencies

SEC Sidelines Funds Focused on Cryptocurrencies

March 31, 2018

In a January 18 letter to two of the fund industry’s leading advocacy groups, the staff of the SEC’s Division of Investment Management advised fund sponsors not to initiate registration of funds that intend to invest substantially in cryptocurrency and related products until the staff’s questions, which the letter identified, are satisfactorily addressed.

State Suitability, Fiduciary Duty and Disclosure Initiatives Roundup

State Suitability, Fiduciary Duty and Disclosure Initiatives Roundup

March 31, 2018

States are stampeding to impose additional duties on those who provide financial advice or make recommendations to consumers.

Cyan Makes SLUSA Removal Proponents Feel Blue: Supreme Court Holds That Securities Act of 1933 Class Actions Can Stay in State Court

Cyan Makes SLUSA Removal Proponents Feel Blue: Supreme Court Holds That Securities Act of 1933 Class Actions Can Stay in State Court

March 22, 2018

Cyan sets – and limits – the legacy of SLUSA as affixing the federal substantive standard to class actions for securities wrongdoing against issuers and their officers and directors.

The US Supreme Court Just Opened the Gates to Filing Crypto Class Actions in State Courts

The US Supreme Court Just Opened the Gates to Filing Crypto Class Actions in State Courts

March 22, 2018

The U.S. Supreme Court decision in Cyan v. Beaver County Employees Retirement Fund could have a major impact on how and where we see class action securities claims brought against issuers of new cryptocurrencies.

US Supreme Court  Ruling Tightens the Reins on Dodd-Frank Whistleblower Retaliation Claims

US Supreme Court Ruling Tightens the Reins on Dodd-Frank Whistleblower Retaliation Claims

February 22, 2018

The U.S. Supreme Court dealt a blow to prospective whistleblowers in Digital Realty Trust Inc. v. Somers (February 21, 2018), making it more difficult to bring a retaliation claim under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Delicate FINRA Balancing Act: To Self-Report or Not?

Delicate FINRA Balancing Act: To Self-Report or Not?

December 29, 2017

FINRA Rule 4530(a) requires member firms to promptly report certain enumerated events. Rule 4530(b) is less specific, with supplemental guidance advising that a firm should report when it concludes or reasonably should have concluded that conduct or events will result in "widespread or potential widespread impact to the member,

The Ghosts of Christmas Past, Present, and Future Haunt Insurers’ Use of Big Data and Algorithmic Tools

The Ghosts of Christmas Past, Present, and Future Haunt Insurers’ Use of Big Data and Algorithmic Tools

December 29, 2017

Watching as legislators, regulators, and policymakers’ consider what changes, if any, are necessary for insurers’ use of big data and algorithmic tools, is like being visited by the Ghosts of Christmas Past, Present, and Future.

The NAIC Says Aloha

The NAIC Says Aloha

December 29, 2017

The National Association of Insurance Commissioners held its Fall National Meeting December 2-4 in Hawaii, saying aloha to 2017 and aloha to 2018.

Key Contacts

Other Team Members

Gary L. Sasso

Gary L. Sasso

President and Chief Executive Officer

Featured Insights

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.