USING THE LAW TO PROTECT
YOUR FUND’S ASSETS:
The Role of Institutional
Investors in U.S. Shareholder
Litigation
Prepared for:
The Tel Aviv Institutional Investor Conference
May 24, 2010
Benjamin Kaufman, Esq.
Partner
Todd Kammerman, Esq.
Associate
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© Milberg 2010
Protection of Future Income
Litigation to Prevent or Recover
Institutional Investor Losses through:
•Securities Litigation;
•Derivative Litigation; and
•Transactional Litigation
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Securities Fraud Class Action
Cases in the United States
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“This Court has long recognized that meritorious private
actions to enforce federal antifraud securities laws are an
essential supplement to criminal prosecutions and civil
enforcement actions brought, respectively, by the
Department of Justice and the Securities and Exchange
Commission (SEC).”
-- Justice Ruth Bader Ginsburg in the opinion of the Supreme Court in Tellabs, Inc.
v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007), which was litigated by
Milberg LLP
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Traditional Securities Class Action
Litigation
Historically, as fiduciaries, institutional
investors have actively sought to
recover fund losses due to fraud
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Institutional Investors Role



Private and public funds dominate the market
and have vested interest in:

Maintaining integrity of financial markets

Assuring corporate accountability

Maximizing returns
Increasingly stepping forward to seek recoveries
for losses due to securities fraud
Fulfill fiduciary duties to take action when
necessary

Serve as Lead Plaintiff and/or Class Representative
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U.S. Securities Class Actions with
Union/Public Pension Fund As Lead
Plaintiff
100
90
80
70
60
50
40
30
20
10
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sources: PricewaterhouseCoopers 2008 Securities Litigation Study (April 2009) and PricewaterhouseCoopers
2009 Securities Litigation Study (April 2010)
Final 2009 data was not available; the full-year projections were based upon filings through June 30, 2009.
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U.S. Securities Class Actions with Any
Institutional Investor As Lead Plaintiff
100
90
80
70
60
50
40
30
20
10
0
2005
2006
2007
2008
2009
Sources: PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010)
Final 2009 data was not available; the full-year projections were based upon filings through June 30, 2009.
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Institutional Investors Account for
Vast Majority of Settlements




91 total settlements valued at $3.1 billion in 2009
57% of cases settled in 2009 had an institutional
investor as lead plaintiff
However, the value of the cases led by an
institutional investor that settled in 2009 accounted
for 85% of the value of total 2009 settlements
Nine of the top ten settlements in 2009 had
institutional investors as the lead plaintiff
Sources: PricewaterhouseCoopers 2009 Securities Litigation Study (April 2010)
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Recent Jury Verdict: In re Vivendi
Universal, S.A.

Recent trial ended with a jury verdict finding Vivendi
liable on all counts



Retirement System for the General Employees of the
City of Miami was a lead plaintiff
Class includes foreign institutional and individual
investors
Investors estimated to recover up to $9.3 billion
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Transactional and Derivative Litigation –
Protecting Assets From Future Losses

Comverse Derivative Litigation


Southwest Airlines


Improved reporting procedures
Anheuser Busch Litigation


$62 million in cash + significant corporate governance reforms
(subject to court approval at June 21, 2010 hearing)
Settled for additional disclosures in proxy statement concerning
merger with InBev, protections for certain AB employees and an
increase in the merger consideration
Madoff Litigation

Brought on behalf of feeder funds that invested with Madoff

Alleges that the funds’ managers failed to conduct adequate
due diligence

Alleges that the funds’ auditors failed to conduct proper
audits
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Foreign Fund Trends
and Statistics
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A Foothold in 2000-2010

Two of Top 10 securities class action settlements of all time
have been against foreign corporations

Nortel (two cases brought in 2001 and 2004): $2.2 billion

Royal Ahold N.V. (2003): $1.1 billion

Cross-border transactions

Globalization of the securities marketplace

Outreach by U.S.-based securities class action firms

Education and marketing efforts of U.S.-based securities
litigators

Growing relationships between U.S. class actions firms and
international institutional investors
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Non-U.S. Institutional Investor LeadPlaintiff Applicants Trend
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
Non-U.S. Movants as a Percentage of Newly Filed Cases
Source: ISS Research (Dec 2008)
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Growing Geographic Distribution

234 instances of international institutional investors moving
for lead plaintiff status (1996 through 2007)

134 different cases

25 different countries


31 different law firms represented the international institutional
investors
Top 5 Countries:


Germany, Canada, Israel, Italy and United Kingdom
Included public pension funds, asset managers, mutual
funds, union pension plans, and hedge funds
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Non-U.S. Institutional Investor Lead
Plaintiff Applicants by Country:
1996 - 2007
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Country
Germany
Canada
Israel
Italy
United Kingdom
Austria
Sweden
British Virgin Islands
Netherlands
Belgium
France
Luxembourg
Mexico
Denmark
Ireland
Switzerland
Bahamas
Bahrain
Bermuda
Cayman Islands
Czech Republic
Finland
Greece
Isle of Man
Netherlands Antilles
Total
No. of Movants
56
42
25
15
14
13
12
7
7
6
6
6
5
4
4
3
1
1
1
1
1
1
1
1
1
234
Percentage of Total
23.9%
17.9%
10.7%
6.4%
6.0%
5.6%
5.1%
3.0%
3.0%
2.6%
2.6%
2.6%
2.1%
1.7%
1.7%
1.3%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
100.0%
Source: ISS Research (Dec 2008)
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Foreign Participation Contributions in
U.S. Securities Class Actions

Maximize shareholders’ returns






Nortel Networks cases
Help achieve important corporate governance
changes
Increase credibility of cases
Steer class definition to include Eurobond purchasers
and/or shares purchased on foreign exchanges
Increased participation by non-U.S. investors in U.S.based securities class actions may drive legal reforms
in their own countries
Structure settlements to include international
institutional investors
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Attractiveness of U.S. Lawsuits

Ability to sue on behalf of other similarly situated persons is
largely unique to the United States

Availability of contingency fee arrangements

Absence of “loser pays” fee-shifting rules

Confidentiality Order

Scheduling Orders, which move the litigation

Right to expansive discovery after Motion to Dismiss phase

Well-developed system for certifying class actions

Potential for a large jury verdict
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Lead Plaintiff Incentives

Submit claim forms in a timely fashion




30-70% of institutional investors fail to file claim forms
in cases where they have losses
Extraordinary percentage in light of $6.9 billion in
securities class action settlements finalized in 2007
Unaware of lawsuits until after the LP deadline
Increased attention to the filing process may lead to
more active involvement by international institutional
investors
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Opting-Out of Class Actions



Depends on the particulars of a plaintiff’s claims and
the strengths of those claims connected to the
plaintiff’s purchases

Typically reserved for plaintiffs with substantial losses and financial and
structural wherewithal to pursue its own claims

The ability of defendants to pay damages
Advantages of opting-out

The ability to select the venue in which to file

The power to select counsel

The ability to direct settlement unimpeded by the court or class issues

Possibility of obtaining a recovery many times larger than what would
have been obtained in a class recovery

No need to seek class certification
Risks

Opt-out plaintiff runs the risk of non-recovery- opting out forever bars
that plaintiff in participating in the class settlement or judgment
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The Milberg Difference
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Milberg LLP: Setting the Standard



Expertise

Lead Counsel in 29 of the Top 100 Settlements

Co-lead counsel in more of the 100 largest settlements than
any other plaintiff law firm

Top 10 plaintiff’s law firm based on total settlements in 2008

Leadership in landmark cases (e.g., Tellabs, Inc. v. Makor)
Resources

Financial and human resources to oppose defense firms

Top-tier attorneys supported by in-house experts

Forensic accountants and investigators

Litigation technical support
Results

40 years of unparalleled recoveries on behalf of investors
Sources: RiskMetrics SCAS 100 for 2009 and SCAS 50 for 2008
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Recent and Notable Milberg LLP
Securities Class Action Results
Date
Case
Recovery ($)
$9,300,000,000
(est)
January 29, 2010
In re Vivendi Universal, S.A. Securities Litig., No. 1:02-cv-05571-RJH-HBP
August 9, 2009
In re Initial Public Offerings Sec. Litig., No. 21 MC 92 (SAS) (S.D.N.Y.)
$586,000,000
January 14, 2009
Carlson v. Xerox Corp. et. al., No. 3:00-CV-1621 (D. Conn.)
$750,000,000
January 6, 2009
In re Chiron Corp. Sec. Litig., No. C 04-4293 (N.D. Cal.)
August 8, 2008
In re Biovail Sec. Litig., No. 03-CV-8917 (S.D.N.Y.)
December 19,
2007
In re Tyco Int’l, Ltd. Multidistrict Litigation, No. 02-1335 (D.N.H.)
September 6,
2007
In re CMS Energy Sec. Litig., No. 02-72004 (E.D. Mich.)
$200,000,000
July 18, 2007
In re American Express Fin. Advisors Sec. Litig., No. 04-1773 (D.N.J.)
$100,000,000
June 8, 2007
In re Martha Stewart Living Omnimedia, Inc., Sec. Litig., No. 02-6273 (S.D.N.Y.)
January 29, 2007
In re Nortel Networks Corp. Sec. Litig. (Nortel I), No. 01-CV-1855 (S.D.N.Y.)
January 8, 2007
In re Sears, Roebuck & Co. Sec. Litig., No. 02-7527 (N.D. Ill.)
$215,000,000
September 7,
2005
In re CVS Corp. Securities Litigation, No. 01-11464 (D. Mass.)
$110,000,000
June 14, 2005
In re Deutsche Telekom AG Securities Litigation, No. 00-9475 (S.D.N.Y.)
$120,000,000
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$30,000,000
$138,000,000
$3,200,000,000
$30,000,000
$1,142,000,000
© Milberg 2010
Milberg LLP Practice Areas

Institutional Investor Services

Class Action Litigation

Portfolio Monitoring

Securities Fraud

Quarterly Reporting

Consumer Fraud

Case Evaluation

ERISA

Insurance

Antitrust


Corporate Governance and
Shareholder Rights Advice
Litigation


Bankruptcy

Pro Bono Litigation

False Claims – Qui Tam


Mass Torts
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Human Rights and Labor
Practices
Derivative

Madoff

Transactional

Governance and Fees
© Milberg 2010
Thank You
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© Milberg 2010
Benjamin Y. Kaufman, Esq.
E bkaufman@milberg.com
T 212.631.8641
F 212.273.4378
Admitted:
Education:
States of New York and New Jersey
B.A., Yeshiva University, 1985
J.D., Benjamin N. Cardozo School of Law of Yeshiva
University, 1988 Beklin Fellow, Belkin Scholar
M.B.A., Stern School of Business of New York University,
1999
Mr. Kaufman focuses on class actions on behalf of defrauded investors and consumers. Mr.
Kaufman’s successful securities litigations include In re Deutsche Telekom AG Securities Litig., No.
00-9475 (S.D.N.Y.), a complex international securities litigation requiring evidentiary discovery in
both the United States and Europe, which settled for $120 million. Mr. Kaufman was also part of the
team that recovered $46 million for investors in In re Asia Pulp & Paper Securities Litigation, No. 01CV-7351 (S.D.N.Y.) and $43.1 million, with contributions of $20 million, $14.85 million and $8.25
million from Motorola, the individual defendants, and defendant underwriters respectively, in
Freeland v. Iridium World Commc’ns, Ltd.
Mr. Kaufman’s outstanding representative results in derivative and transactional litigations
include: In re Trump Hotels Shareholder Derivative Litigation (Trump personally contributed some of
his holdings; the company increased the number of directors on its board, and certain future
transactions had to be reviewed by a special committee.)
He recently argued the appeal in In re Comverse Technology, Inc. Derivative Litig., 56 AD3d 49
(2008) which led to the seminal New York Appellate Division opinion which clarified the standards of
demand futility, and held that a board of directors loses the protection of the business judgment rule
where there is evidence of self-dealing and poor judgment by the directors; and In re Topps
Company, Inc. Shareholder Litig. which resulted in a 2007 decision which vindicated the rights of
shareholders under the rules of comity and doctrine of forum non conveniens and to pursue claims in
the most relevant forum notwithstanding the fact that jurisdiction might exist as well in the state of
incorporation.
Mr. Kaufman is also at the forefront of consumer litigations with a recently-filed litigation brought on
behalf of paid e-mail subscribers against web hosting and e-mail service providers in Golf Clubs Away
LLC v. Hostway Corporation, et al., Case No. 09-29596 (Fl. Cir. Ct., Broward County).
In addition, Mr. Kaufman represents many of the firm's corporate clients in complex commercial
litigation matters and arbitrations, including Puckett v. Sony Music Entertainment, No. 108802/98
(New York Cty. 2002) (a complex copyright royalty class action) and in arbitrations on behalf of
oppressed minority shareholders in both public and privately held corporations. Prior to joining
Milberg in August of 1998, Mr. Kaufman was a Court Attorney for the New York State Supreme Court,
New York County (1988-1990) and Principal Law Clerk to Justice Herman Cahn of the Commercial
Division of the New York State Supreme Court, New York County (1990-1998).
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Todd Kammerman, Esq.
E tkammerman@milberg.com Admitted:
T 646.733.5692
Education:
F 212.273.4339
States of New York and New Jersey
B.A., Brandeis University, 1999 cum laude with honors
J.D., Benjamin N. Cardozo School of Law of Yeshiva
University, 2002 Alexander Fellow
Mr. Kammerman focuses his practice on litigation involving defrauded investors and
consumers. Mr. Kammerman’s successful litigations include In re CMS Energy Securities
Litigation, No. 02-72004 (E.D. Mich.) ($200 million recovery); In re Royal Dutch/Shell
Transport ERISA Litigation, No. 04-1398 (D.N.J.) ($90 million recovery); Scheiner v. i2
Technologies, et al., No. 01-418 (N.D. Tex.) ($87.8 million recovery); and In re Collins &
Aikman Corporation Securities Litigation, No. 03-71173 (E.D. Mich.) ($10.8 million
recovery).
Mr. Kammerman played a pivotal role in the In re Comverse Technology, Inc. Derivative
Litigation ($62 million recovery), particularly in drafting the appellate briefs which led to the
seminal New York Appellate Division opinion, reported at 56 A.D.3d 49 (2008), clarifying the
standards of demand futility, and holding that a board of directors loses the protection of
the business judgment rule where there is evidence of self-dealing and poor judgment by
the directors. He was also a member of the team that litigated the appeal in Tellabs, Inc. v.
Makor Issues & Rights, Ltd. before the United States Supreme Court, in which the Supreme
Court issued an opinion defining the pleading standard for scienter in all federal securities
fraud cases, and is reported at 551 U.S. 308 (2007).
While at Cardozo, he was named an Alexander Fellow, through which he worked as a judicial
intern in the chambers of the Honorable Joseph A. Greenaway, Jr., U.S.D.J. in Newark, New
Jersey. Mr. Kammerman is a member of the bars of the States of New York and New Jersey
and is admitted to practice before the United States District Courts for the District of New
Jersey, Southern District of New York, Eastern District of Michigan and the Eastern District
of New York and the United States Courts of Appeals for the Third and Eleventh Circuits.
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