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Securities Litigation and Enforcement

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Overview

Our Clients

In the securities class action area, Katten attorneys represent issuers, underwriters, officers and directors in cases alleging violations of the Securities Act of 1933, the Securities Exchange Act of 1934 and other federal and state securities law statutes. We also represent target companies and their boards of directors in the "merger objection" strike suits that have plagued nearly every sizable M&A transaction in recent years. Our Securities Litigation and Enforcement team is regularly retained to represent clients in transactions where Katten did not serve as deal counsel—often where advice of deal counsel becomes an issue in the litigation.

Our Services

Katten is a nationally recognized leader in defending securities class actions, stockholder derivative cases, M&A litigation, proxy disclosure suits, and Securities and Exchange Commission (SEC) investigations and enforcement actions. With a deep bench of more than 40 securities litigators located in New York, Chicago, Los Angeles and Washington, DC, Katten attorneys have defended more than 200 major securities actions, including some of the largest and most significant cases in the field. To best serve our clients' needs, our Securities Litigation and Enforcement practice routinely works with and draws upon the resources of the firm's Financial Services, Public Companies, and White Collar, Investigations and Compliance practices.

Katten attorneys have long played a prominent role in creating securities law and curbing the growth of abusive strike suits. Members of our Securities Litigation and Enforcement team were involved in drafting the heightened pleading standards that Congress adopted in the Private Securities Litigation Reform Act of 1995, the statute that raised the standards necessary for shareholders to state a claim for securities fraud. In addition, we have litigated many of the seminal cases that are routinely cited in nearly every securities case, including Basic Inc. v. Levison and In re Silicon Graphics, as well as an array of front-page cases—from Madoff matters to In re Lehman Brothers Securities and ERISA Litigation. As a result of this track record, clients routinely look to Katten to handle their most complex cases.

We focus enormous effort on winning our cases at the pleading stage, so that our clients avoid the substantial burden, expense, and distraction of discovery and trial. Our group has won early dismissals for clients in over 75 percent of our cases across the country and held such dismissals on appeal.

In light of the heightened pleading standards applicable in class actions, some plaintiffs have elected to pursue their claims as stockholder derivative actions, alleging breach of fiduciary duty. Katten attorneys have substantial experience in litigating corporate governance and derivative actions in Delaware and other jurisdictions.

Stockholder suits often go hand in hand with regulatory investigations by the SEC, Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA), state attorneys general, and other federal and state authorities. Among our experienced securities litigators are more than a dozen former assistant US attorneys, SEC enforcement attorneys and US Department of Justice (DOJ) associate attorneys general. Our national team also includes former Big Four auditors and forensic accountants. We focus on demonstrating to regulators, in the first instance, that enforcement action is not warranted and, at later stages, in defeating claims resulting from regulatory inquiries.

In addition to defending regulatory cases and investigations, Katten guides companies and their boards of directors on matters of corporate governance and conducts internal investigations in connection with potential securities-related wrongdoing, including insider trading, executive compensation, public disclosure and accounting irregularities. We understand the unique interplay between internal investigations and related civil litigation and derivative suits, and we help clients anticipate and address the many complications that may arise in those circumstances.

Experience
Section 10(b) Litigation
  • Defense of Edwards Lifesciences (whose tissue replacement heart valves are implanted in more than 300,000 patients per year) and certain of its directors and officers in a putative Section 10(b) class action filed in the US District Court for the Central District of California. The lawsuit alleged that the company made false and misleading statements concerning the prospects, projected sales and demand for its innovative transcatheter heart valves (THV). Plaintiffs claimed that Edwards’ market capitalization fell by more than $1 billion when it revealed that its THV sales were progressing slower than expected. In an effort to gather information to support their claims, plaintiffs contacted numerous current and former employees of the company as well as a large number of hospital customers of Edwards. Katten undertook a concentrated effort to ensure that no such contacts were misleading, including by filing an ex parte motion for a protective order with the court. After failing to obtain information to support their theories, plaintiffs dismissed the case without receiving any consideration.
  • Defense of Angie’s List, Inc. and certain of its officers and directors against two putative Section 10(b) securities class action lawsuits and two related state court derivative lawsuits alleging that defendants made misleading statements and omitted material information regarding the company’s business model and financial prospects. Following their consolidation, Katten obtained a complete dismissal of the class action lawsuits, which plaintiffs did not appeal. The plaintiff in one of the derivative actions thereafter filed an amended complaint but voluntarily dismissed it upon receiving Katten’s motion to dismiss that complaint for failure to state a claim. The plaintiff in the remaining derivative action then voluntarily dismissed it without any motion practice whatsoever, giving defendants a complete victory.
  • Defense of Amarin Corporation and certain of its officers and directors against a putative Section 10(b) securities class action lawsuit arising out of the company’s ultimately unsuccessful application to the FDA to approve its lipid-active drug Vascepa for treatment of individuals with elevated cholesterol levels based solely on the results of a short-term study conducted pursuant to a Special Protocol Agreement (SPA) with the FDA, rather than based on a longer-term outcomes study. After the FDA withdrew the SPA following inconclusive results in outcomes studies for different lipid-active drugs produced by other companies, and Amarin’s stock price declined as a result, plaintiffs alleged that the FDA had previously told Amarin that two of those other studies would “provide important information” about lipid-active drugs but that Amarin had improperly failed to disclose the substance of that communication to the market. The court granted the company’s motions to dismiss both an initial and an amended complaint, finding that plaintiffs had failed to allege any facts sufficient to establish a duty on Amarin’s part to disclose the content of its alleged communication with the FDA; that victory was upheld on appeal.
Section 11 Litigation
  • Defense of five of the largest securities underwriters in the world in connection with shareholder allegations that Skilled Healthcare, a provider of long-term health care and assisted living services, violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20 of the Securities Exchange Act of 1934 when a former employee improperly dated certain account records such that the company's allowance for doubtful accounts was substantially understated. (Following an internal investigation, the company uncovered the dating issue and re-stated its financial results.) Plaintiff also brought Securities Act claims against the underwriters for statements in connection with the company's initial public offering. After Katten attorneys presented the arguments we intended to make on behalf of the underwriters in a motion to dismiss, plaintiff agreed to dismiss its claims against them. Skilled Healthcare subsequently resolved the case, and the settlement included full releases for our clients without any payment by them.
  • Defense of Maxpoint Interactive, Inc. and its board of directors in a class action alleging claims under Sections 11 and 12 of the Securities Act. After MaxPoint’s stock price declined more than 60% following its initial public offering, plaintiffs alleged that the company had failed properly to disclose that its newest customers were smaller and less stable than its previous customers and therefore less likely to spend as much money as the earlier customers and more likely to rescind or cancel purchases. The court granted defendants’ motion to dismiss, holding that plaintiffs failed to identify any material information the company had a duty to disclose in connection with its public offering.
Shareholder Derivative Litigation
  • Representation of Mirage Resorts Inc.’s then-chairman Steve Wynn against a breach of fiduciary duty lawsuit filed by Mirage shareholders alleging that a clause in the company’s sale agreement to MGM Grand, Inc., giving Mr. Wynn a right of first refusal to purchase certain artworks previously displayed in Mirage’s Bellagio Resort & Casino, provided him an improper personal benefit at shareholders’ expense. The court denied plaintiffs’ demand for a constructive trust on the artwork and, after Mr. Wynn agreed to waive his right of first refusal on certain artworks, dismissed the suit altogether.
Merger and Corporate Control Litigation
  • Defense of Kensey Nash Corp. and its directors in a lawsuit alleging that they breached their fiduciary duties in agreeing to sell the company to Koninklijke DSM N.V. (DSM). Three different sets of plaintiffs filed suit in the Delaware Court of Chancery and sought expedition of the proceedings including discovery such that they could attempt to enjoin the transaction. Katten attorneys opposed plaintiffs' effort to expedite the proceedings before Vice Chancellor Parsons and, despite the liberal standard applicable to motions to expedite, the court denied plaintiffs' motion for expedition, thereby preventing the plaintiffs from attempting to enjoin the transaction.
  • Defense of Angie’s List, Inc. and its directors against consolidated lawsuits in the US District Court for the District of Indiana alleging that defendants violated Section 14(a) of the Securities Exchange Act by supposedly omitting material information from the proxy statement the company filed in connection with its merger with HomeAdvisor, Inc. Prior to the shareholder vote on the proposed merger, Katten attorneys successfully negotiated a limited disclosure-based settlement of all plaintiffs’ allegations without the requirement of any discovery.
Financial Industry Representation
  • Representation of one of the largest financial services companies in the world in the defense of putative class claims relating to payment for order flow, the duty of best execution and alleged preferencing of high-frequency trading (HFT) firms in a private order-execution venue. The suit alleged that, by paying for order flow, our client induced a retail broker-dealer to route its orders to our client, which then routed some of the orders to its “dark pool,” where they were exposed to alleged predatory trading by HFT firms. The case is significant in that it is one of only a few nationwide in which private plaintiffs have sought to recover from a public or private exchange – instead of, or in addition to, their brokers – based upon alleged improper order-handling and order-execution practices. The court granted our client’s motion to dismiss, finding that plaintiffs’ claims were precluded by the Securities Litigation Uniform Standards Act.
  • Defense of Access International Advisors Ltd. and affiliated companies against a complaint in the US District Court for the Southern District of New York alleging that defendants aided and abetted Bernard Madoff’s notorious Ponzi scheme by funneling billions of dollars from primarily European investors to Madoff via two hedge funds the defendants managed: Luxalpha SICAV and Groupement Financier Ltd. Katten successfully obtained dismissal (affirmed by the US Court of Appeals for the Second Circuit Court) on the ground that the complaint failed to adequately show that defendants – as opposed to Madoff himself – were the proximate cause of plaintiff’s injuries.
Foreign Company Representation
  • Representation of GW Pharmaceuticals PLC (UK) and certain of its officers in a putative Section 10(b) securities class action lawsuit filed in the US District Court for the Southern District of New York after the company publicly disclosed that it had experienced difficulties accounting for the accrued costs of certain clinical trials. Following telephonic meetings and a live presentation to counsel for the putative class in which Katten presented evidence concerning GW’s internal controls, plaintiffs voluntarily dismissed the case without consideration before defendants were required to incur the cost of filing a motion to dismiss.
  • Representation of Camtek, Ltd. (Israel) and its directors and officers in a securities class action covering a class period in which the plaintiff alleged Camtek inflated its projected and reported revenues by recognizing revenue for products still under evaluation and by factoring receivables and utilizing letters of credit. Plaintiff also challenged certain of Camtek's transactions with its primary stockholder. The court granted Camtek's initial motion to dismiss on the grounds that the court lacked subject matter jurisdiction over a purported securities case brought by a foreign citizen against a foreign company. Katten made this argument that the court lacked subject matter jurisdiction before the issue came to prominence by the US Supreme Court's grant of certiorari and subsequent decision on the issue in Morrison v. National Australia Bank, Ltd. Camtek's motion to dismiss the second amended complaint was granted based on plaintiff's failure to allege falsity, scienter and loss causation. The court gave plaintiff leave to file a third amended complaint, which plaintiff did. Camtek filed a motion to dismiss the third amended complaint, which was granted. Katten's argument in connection with the third motion to dismiss had to address SEC Division of Corporation Finance comment letters that had become public and that plaintiff learned of between the second and third amended complaints. Those comment letters made specific reference to Camtek's inventory disclosures that plaintiff had asserted Camtek was manipulating to hide by recognizing revenue for products still under evaluation. The court granted the third motion to dismiss with prejudice and entered judgment for Camtek, which plaintiff did not appeal.
  • Representation of Ormat Technologies, Inc. (Israel) and certain of its directors and officers in shareholder class action litigation in federal court in Nevada and stockholder derivative litigation in federal and state court in Nevada. Each of those matters concerned allegations that Ormat used an incorrect method to account for its exploration and development costs that resulted in a financial restatement and that Ormat misled its shareholders concerning the progress of a geothermal power plant at North Brawley in Imperial County, California. Over the objections of four different sets of plaintiffs' counsel, Katten attorneys successfully obtained stays of both the state and federal derivative cases so that the company could focus its defense on the securities class action. Katten attorneys also successfully moved for dismissal of plaintiffs' amended complaint in the securities class action. The court dismissed plaintiffs' claims relating to Ormat's progress with respect to the North Brawley power plant and only allowed plaintiffs' accounting restatement claims to continue. This dismissal cut the proposed class period in half; reduced possible damages by nearly two-thirds; eliminated the need for discovery covering the five-year exploration, development and construction process; and further reduced the scope of discovery from an expected 50 witnesses to 10. Katten attorneys then filed an opposition to plaintiffs' motion to certify even the more-limited class based on an interpretation of the Supreme Court's decision in Erica P. John Fund, Inc. v. Halliburton Co., and dispositive admissions obtained during the deposition of plaintiffs' expert on market efficiency. The case thereafter settled well within insurance policy limits.
Other Recent Matters of Note
  • Defense of a nationwide operator of physical therapy clinics against a putative Section 10(b) securities class action alleging that the company’s accounting restatement resulted from a knowing mischaracterization of non-controlling interests in its clinics held by the clinics’ managing therapists. The US District Court for the Southern District of New York dismissed the allegations with prejudice, finding that plaintiffs had alleged no facts from which fraudulent intent could be inferred.
  • Defense of a pharmaceutical company and certain of its officers and directors in a putative securities class action lawsuit filed in the US District Court for the District of New Jersey. Plaintiff alleged that defendants violated Section 10(b) and Section 11 by making optimistic statements about approval of its lead drug candidate by the European Medicines Agency based on a Phase 2 study without disclosing allegedly critical statements the EMA made during the process. The court granted defendants’ motion to dismiss, finding as a matter of law that biopharmaceutical companies have no duty to disclose negative interim feedback by regulators.
  • Defense of a pharmaceutical company and certain of its officers against a putative securities class action lawsuit filed in the US District Court for the District of New Jersey. Plaintiff alleged that defendants misrepresented the likelihood that the FDA would approve the client’s leading drug candidate and thereby caused its stock price to be artificially inflated, but dropped the suit voluntarily following discussions with Katten attorneys.
  • Representation of an individual in connection with a California lawsuit alleging breaches of fiduciary duty and related claims against every former officer and director of an Internet company and two cybersecurity companies for allegedly looting the company or otherwise enriching themselves at the expense of the stockholders. After our client won two demurrers (motions to dismiss) in a row, plaintiff settled on very favorable terms rather than attempt to further amend his complaint to try to state a viable claim against the client.
  • Representation of an international developer and manufacturer of nutritional ingredients and medical foods, and its officers and directors, in a securities class action brought under Sections 11, 12(a)(2) and 15 of the Securities Act and Sections 10(b) and 20 of the Securities Exchange Act in the US District Court for the District of New Jersey. Plaintiffs alleged that Katten’s clients failed to disclose that sales of one of its products would be greatly affected by changes in the Chinese regulations of infant formula manufacturers. After defendants succeeded in getting most of the claims dismissed on the pleadings, plaintiff settled the remaining claims for substantially less than defendants’ insurance policy limits.
  • Defense of multiple options market makers in a putative securities class action alleging violations of Section 10(b) of the Securities Exchange Act in connection with a dividend recapture strategy executed on the PHLX options exchange. The US District Court for the Eastern District of Pennsylvania dismissed the case, finding plaintiff had made no showing of illegal conduct.
Professionals
Firm News
Articles
November 12, 2015
Ninth Circuit's Misapplication of Derivative Injury Analysis May Encourage Direct Claims Against Hedge Funds
October 12, 2015
SLUSA in the Age of Madoff
October 2008
Advisories
October 23, 2008
Newsletters
Events
November 9, 2017
Life Sciences Investment Conference: Current Trends in Securities Litigation Against Life Sciences and Venture Capital Companies
June 12-13, 2017
Legaltech West | San Francisco, California
March 8–10, 2017
October 27, 2016
2016 Financial Services Symposium: The Securities Litigation Uniform Standards Act: A Still-Developing Tool for Defending Class and Mass Actions
October 27, 2016
October 20, 2016
September 28–29, 2016
July 12, 2016
Clal Insurance 2016 Securities Litigation Seminar: Developments in Cyber Law and Potential Liability for Data Breaches
November 19, 2015
October 6, 2015
September 25, 2015
April 30, 2015
October 23–24, 2014
October 16, 2014
June 11, 2013
October 17, 2011
September 12–14, 2011
June 6, 2011
ACE Professional Risk | Lafayette Hill
May 18, 2011
March 2, 2011
January 20, 2011
December 8–9, 2010
General Counsel Forum | New York, New York
September 21, 2010
October 20–21, 2008
October 2–3, 2008
October 15–16, 2007
September 11–12, 2006
August 17–18, 2006
July 25, 2006
Securities Litigation and Enforcement

Recognition

BTI Litigation Outlook 2018

Securities and Finance Litigation Honor Roll
U.S. News Best Lawyers "Best Law Firms" – Litigation – Securities (Chicago)
Litigation – Securities (Chicago), 2012–2018
U.S. News Best Lawyers "Best Law Firms" – Litigation – Securities (Los Angeles)
Litigation – Securities (Los Angeles), 2012–2018
Legal 500 US – Securities Litigation: Defense
Securities Litigation: Defense, 2015–2018
Law360 Securities 100 – top 100 law firms with the largest securities practice groups
Top 100 Law Firms With the Largest Securities Practice Groups, 2012
National Law Journal, Elite Trial Lawyers 2015
U.S. News Best Lawyers "Best Law Firms" – Securities Regulation (National)
Securities Regulation (National), 2017–2018
U.S. News Best Lawyers "Best Law Firms" – Securities Regulation (Chicago)
Securities Regulation (Chicago), 2017–2018
U.S. News Best Lawyers "Best Law Firms" – Litigation – Securities (National)
Litigation – Securities (National), 2012–2018
Chambers USA – Securities: Litigation (Nationwide)
Securities: Litigation (Nationwide), 2011–2013
U.S. News Best Lawyers "Best Law Firms" – Litigation – Securities (New York)
Litigation – Securities (New York), 2012–2018
Legal 500 US – Litigation – Securities: Shareholder Litigation
Litigation – Securities: Shareholder Litigation, 2013–2015
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Recognition

BTI Litigation Outlook 2018

Securities and Finance Litigation Honor Roll
Litigation – Securities (Chicago), 2012–2018
Litigation – Securities (Los Angeles), 2012–2018
Securities Litigation: Defense, 2015–2018
Top 100 Law Firms With the Largest Securities Practice Groups, 2012
Securities Regulation (National), 2017–2018
Securities Regulation (Chicago), 2017–2018
Litigation – Securities (National), 2012–2018
Securities: Litigation (Nationwide), 2011–2013
Litigation – Securities (New York), 2012–2018
Litigation – Securities: Shareholder Litigation, 2013–2015

OUR CLIENTS SAY...

"[Long] been a leading light in securities litigation . . ."

The Legal 500 United States 2015
(Securities: Shareholder Litigation)

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Our Clients Say: "[Long] been a leading light in securities litigation..."

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