Converium Holding AG, a Zurich-based international reinsurer acquired by SCOR in August 2007, has announced the preliminary settlement of the securities class action pending against the company in the Southern District of New York (S.D.N.Y.). The case, originally filed in October 2004, stems from allegations that executives at Converium artificially inflated the price of Converium’s stock by failing to disclose to the public certain deficiencies in the company’s loss reserves. The case in the S.D.N.Y. is limited to U.S. invesotrs. Converium has agreed to settle those claims, as well any claims by non-U.S. investors, for an aggregate amount of $114.5 million (74 million EUR). The claims by non-U.S. investors will be settled in a court proceeding in the Netherlands, apparently following in the footsteps of a similar settlement entered into by Royal Dutch Shell last year.
Parmalat S.p.A., a producer and distributor of dairy products and fruit-based beverages based in Milan, Italy, has announced the preliminary settlement of the securities class action pending against the company in the S.D. of New York. The case, originally filed in January 2004, stems from allegations that Parmalat and its bankers, lawyers, and auditors engaged in a massive and complex scheme to overstate Parmalat's assets and profits for more than a decade. Under the terms of the settlement, Parmalat will issue to class members 10.5 million shares of stock, valued at approximately $37 million at the current market price.
The 10b-5 Daily has frequently posted about the Parmalat case, especially on the issue of scheme liability. But it all started with a post in 2004 entitled "You're No Martha."
House Republican leaders John Boehner (R-OH) and Lamar Smith (R-TX) have asked the House Judiciary Committee to hold a hearing on the payment of kickbacks to lead plaintiffs in securities class actions. The press release and letter to the Chairman of the House Judiciary Committee can be found here. The WSJ Law Blog has a post on the topic and the ABA Journal has an article with related news links.
Establishing loss causation for the purpose of class certification or summary judgment is becoming a significant hurdle for plaintiffs. On the heels of the Flowserve and Omnicom decisions comes another defense victory.
In Fener v. Belo Corp., 2008 WL 876967 (N.D. Tex. April 2, 2008), the corrective disclosure made by the company attributed a decline in newspaper circulation to three separate sources. Only one of the sources, however, was related to the alleged fraudulent conduct. Based on Fifth Circuit precedent, the court held that it was the plaintiffs' burden to prove that it was more probable than not that this portion of the disclosure, and not the other unrelated negative statements, caused a significant amount of the stock price decline. The plaintiffs' expert failed to present empirical evidence sufficient to meet this burden. (The 10b-5 Daily previously posted about the initial motion to dismiss decision in the case.)
Holding: Class certification denied.
Quote of note: "[The] event study tends to establish that the market reacted to the bundle of August 5 news pieces with an August 6 stock price drop of 5.47%. Crucially, however, the study fails to target the corrective disclosure at issue."