A publication called Law Dragon has published its list of “100 Lawyers You Need to Know in Securities Litigation.” The full list, which contains both plaintiffs’ and defense counsel, is available here.

In a 5-3 decision yesterday (opinion available here), the U.S. Supreme Court ruled against investors and in favor of certain customers and suppliers of publicly-held Charter Communications in Stoneridge Investment Partners v. Scientific-Atlanta Inc. and Motorola Inc.  The investors “sought to impose liability on entities who, acting both as customers and suppliers, agreed to arrangements that allowed the investors’ company to mislead its auditor and issue a misleading financial statement affecting the stock price.”  The Court, however, concluded that “the implied right of action does not reach the customer/supplier companies because the investors did not rely upon their statements or representations.”

As summarized here by the WSJ, the case centered on the theory of “’scheme liability,’ i.e., whether third parties — investment bankers, lawyers, accountants and vendors — can be held liable under the federal securities laws for fraud committed by companies with which they do business.”  The Court’s ruling appears to rein that theory in by requiring actual reliance on a third party’s allegedly deceptive conduct.

A quick video analysis of the Court’s decision by the WSJ’s Ashby Jones is available below.

Among his predictions for the big stories that the mutual fund industry will see in 2008, Columnist Chuck Jaffe of the Arizona Daily Star sees a potential wave of class action lawsuits against funds that have been burned by the sub-prime mortgage problem.  He explains:

There hasn’t been a good wave of lawsuits against funds for years, but with funds like Regions Morgan Keegan Intermediate Bond and High Income, there’s little doubt that the plaintiff’s bar has potential cases to talk about. Those funds were each hurt in their own way by investments made in sub-prime mortgages; in the case of the RMK funds, the fallout was disastrous, amounting to losses surpassing 45 percent. Even in cases like Fidelity Ultra Short — down about 5 percent this year — lawyers will say the fund should not have lost money stretching out of its comfort zone in an effort to get additional yield.

On June 13, 2007, Stanford Professor Joe Grundfest spoke at a breakfast event entitled “The Times They Are A-Changin” at The Yale Club of New York City (details available here).  Among his comments were several bold predictions based on a two year lull in securities class action filings between July 2005 and June 2007:

• “The class action securities fraud litigation business will continue to shrink and law firms need to respond by shifting resources.”
• “We’re going to have to find other things to do with our time and I think that’s something to be celebrated.”  Grundfest compared the trend to doctors finding a cure for disease, which is a positive development but leads to fewer patients.
• While the number of securities fraud filings had been averaging about 200 annually, that number will probably be closer to 100 to 120 from now on, Grundfest said. There are several reasons for the trend, including there simply being less fraud, he said.

Not so fast.  It now appears that beginning a week or so following those remarks, the number of securities class action filings surged and returned to roughly the ”pre-lull” levels that had been the norm from 1996-2005.  According to Stanford Law School/Cornerstone Research’s just-released 2007 Securities Fraud Class Action Filing Report, “one hundred companies were sued in the second half of the year, a litigation rate that reversed a trend of four consecutive six-month periods with well below average litigation activity.”  The Report found that a total of 166 companies were sued in all of 2007.

The Report concludes that the increase in litigation activity in 2007 is attributable to both the subprime crisis, which has led to numerous securities class actions, and stock market volatility. The Report adds that “stock market volatility and the number of filings are correlated. On average, a 10-point change in the quarterly average S&P 500 Implied Volatility Index (VIX) is associated with 12 additional litigations per quarter.”

A Manhattan appeals court (NY Appellate Division, First Judicial Dept.) ruled December 27, 2007 that billionaire Sam Wyly, a major Computer Associates shareholder, was not entitled to obtain the work product of three plaintiffs firms in connection with his claim that the firms settled the CA securities class action for too little.

The court held that unlike a tradtional attorney-client relationship, in which the single voice of a client governs matters such as settlement terms, “the relationship between appointed counsel and an absent member in a class action differs fundamentally….”  The court added that:

In sum, while petitioner herein, as an absent class member in the federal action, was entitled to some of the benefits of the attorney-client relationship, such as the right to privileged communications with class counsel and the prohibition against attempts by defendants’ counsel to communicate with him, he had no right to direct the course of the litigation, testify at trial, participate in discovery, or dismiss class counsel. Moreover, petitioner was free to hire his own counsel to appear in the class action if he wished to employ a traditional attorney-client relationship, although his input into the litigation would still have been curtailed, or to opt out of the class action altogether if he was unsatisfied with his limited role.

The full opinion is available here.

The trial in the JDS Uniphase securities litigation (previously discussed here) has reportedly entered its final week.  As discussed in this Mercury News blog post, the trial—the rarest of occurrences in securities class actions–is reaching its conclusion and a jury verdict is expected sometime after Thanksgiving. 

The article notes that JDS’ latest Form 10-Q discloses (see page 6) that

Plaintiffs have stated in recent court filings that they intend to seek a verdict of more than $20 billion in alleged damages. Plaintiffs’ expert witness on damages has generally testified to that effect in the pending jury trial. While there are many potential outcomes of the pending trial, in the event of a final, non-appealable and enforceable judgment against the Company that is in an amount commensurate with the Plaintiffs’ maximum theory of damages, it would not have sufficient assets to pay such a judgment.

An actual trial–the rarest of occurrences in the securities class action world (see this post at Securities Litigation Watch for the latest, albeit dated, tally of such trials)–kicked off Tuesday in federal court in California. The Connecticut Retirement Plans and Trust Funds is lead plaintiff in the case against JDS Uniphase Corp. and four of its executives. As discussed in this Reuters article, the lawsuit alleges that defendants “lost $18 billion for investors by painting a rosy picture of the company’s finances when its stock was about to collapse.”

Labaton Sucharow’s Barbara Hart, lead counsel for the Connecticut Retirement Plans and Trust Funds, reportedly began her opening statement yesterday. JDS Uniphase, which is represented by Morrison & Foerster, is scheduled to present its opening statement today.

Just a few months after it reportedly encouraged fellow pension funds at the NAPF conference to participate and “not neglect opportunities to recoup losses” in US securities class actions, the UK’s Avon Pension Fund has been selected as lead plaintiff in the GlaxoSmithKline litigation. According to this article in Legal Week, the court selected Avon as lead plaintiff over numerous other applicants, including a German subsidiary of Barclays Bank.

An article in the Times noted that the German shareholder group headed up by the Barclays’ subsidiary “had the largest exposure to GSK shares but was passed over for the role of lead plaintiff because of continuing uncertainty over whether German courts can enforce a US class-action ruling.”

According to this article from Thomson Financial, a shareholder class action against Australian gaming machine manufacturer Aristocrat Leisure Ltd. is due to “start” in the Federal Court in Sydney on Thursday. As this case was filed back in November 2003, we assume this means that a trial in this case is about to get underway.

The article adds that the shareholders are seeking 200 million Australian dollars in damages (approximately US $225 million), “claiming Aristocrat misled them by misstating its 2001 profit and failing to keep them informed, in late 2002 and early 2003, before announcing earnings downgrades that eventually wiped 2 billion dollars off the company’s market value.”

This article by Kara Scannell of the WSJ reports that the SEC plans to hold a roundtable in the first quarter of 2008 to discuss issues and recent proposals related to securities litigation reform.  According to the article,

the thrust of the SEC roundtable, so far, will address [concerns] including who bears the cost of paying for attorneys fees in these lawsuits, the role insurance plays in indemnifying companies or individuals, the percentage of investors who file claims and collect portions of settlements, and how the economics of a settlement change when the defendant is a third-party. The professors also recommend studying whether securities class action deter behavior, the impact of the PSLRA, and how the SEC’s Fair Funds program, granted under Sarbanes Oxley, can be coordinated with settlements from private lawsuits.