As previously discussed here, in 2015, the Delaware Court of Chancery issued a number of decisions calling for enhanced scrutiny of “disclosure-only” M&A settlements that involve no monetary benefits to a shareholder class. For example, the recent decision in In re Riverbed Technology, Inc. Stockholders Litigation expressly eliminated the “reasonable expectation” that a merger case can be settled by exchanging insignificant supplemental disclosures (and nothing more) for a broad release of claims. In In re Trulia, Inc. Stockholder Litigation, the Chancery Court demonstrated that its “increase[ed] vigilance” in this area is genuine, rejecting a disclosure-only M&A settlement and finding that the supplemental disclosures did not warrant the broad release of claims.
Michael C. Tu
Michael Tu leads the firm's Securities Litigation, Investigations and Enforcement practice in Southern California. His practice focuses on the defense of shareholder class action and derivative litigation under the federal and state securities laws, mergers and acquisitions lawsuits, regulatory investigations and proceedings, and complex business litigation disputes. He is:
- Recommended for his “range of expertise, including the defense of securities class actions and M&A litigation” and “for the fact that he ‘takes a macro approach and looks very far down the line’” with a "'good oratory style.'” (Chambers USA)
- “Praised” “for his litigation skills” defending securities matters “in both federal and state courts” and noted as “particularly strong in securities class actions with a cross-border element.” (The Legal 500)
- Rated by clients and peers as an “Excellent trial attorney with practical sense” who has “a high level of expertise in the securities litigation field,” “practices with the highest ethical standards,” and “has a remarkable ability both to see the big picture and to sweat the details, and brings excellent judgment to bear on both fronts.” (Martindale-Hubbell)
Michael is recognized as a leading trial lawyer who has successfully prosecuted and defended numerous trials to verdict in federal and state courts. He is among the few lawyers in the country who have defended a securities class action trial to verdict, which was recognized as one of the "Top Defense Verdicts" in California by the Daily Journal.
He counsels public and private companies regarding corporate governance and disclosure issues, and has represented numerous board committees and accounting firms in connection with investigatory and litigation matters. He also regularly advises multi-national corporations and executives based in Asia and Europe with respect to business disputes and securities matters.
Michael is a frequent speaker on securities and corporate governance topics such as public company disclosure obligations, mortgage backed securities and subprime litigation issues, auditor liability matters, cross-border issues and has moderated and spoken at numerous events on securities law and corporate governance developments. In addition, as a faculty member of the Stanford Senior Executive Leadership Program, Michael regularly teaches business executives and leaders on a number of subjects, including cross-border litigation, risk management and accounting liability issues.
He is a member of the Executive Committee of the Litigation Section of the Los Angeles County Bar Association, and Co-Chair of the Federal Courts Committee. He served as a Lawyer Representative for the Central District of California to the Ninth Circuit Judicial Conference from 2006-2009. He is an editor of the monthly Securities Reform Act Litigation Reporter. He is a preapproved panel counsel member of AIG's Directors & Officers (Securities Claims) Panel.
Michael serves as Vice Chair of Orrick’s Professional Development Committee, and is a member of the firm's Technology Committee.
On September 16, 2015, the Securities and Exchange Commission (“SEC”) adopted revisions to Rule 2a-7, the primary rule governing money market funds. The amendments implement provisions of the Dodd-Frank Act that require federal agencies to replace references to credit ratings in regulations with alternative standards of credit-worthiness, and are consistent with the SEC’s goal of reducing its reliance on credit ratings.
Last week, Vice Chancellor Glasscock released an important decision dismissing a case under Rule 23.1 that was brought by a DuPont shareholder who alleged that the board improperly refused a demand to sue DuPont’s officers and directors. The suing shareholder alleged that the individual defendants caused DuPont to incur sanctions in, and eventually lose, a patent-infringement case brought by Monsanto concerning DuPont’s unauthorized use of Monsanto’s patents.
The Delaware court held that the plaintiff had not adequately alleged that DuPont’s board of directors had been unreasonable or acted in bad faith in rejecting a demand to sue the directors and officers who were purportedly responsible for DuPont’s liability in the Monsanto patent litigation.
Securities and Exchange Commission leadership and staff members addressed the public on February 20-21 at the annual “SEC Speaks” conference in Washington, D.C. Common themes among the numerous presentations included the Commission’s increasing use of data analytics, the Commission’s focus on gatekeepers such as accountants and attorneys, and the Commission’s still incomplete rulemakings mandated by both the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.
On January 14, 2015, the U.S. House of Representatives passed a bill that loosens certain Dodd-Frank requirements and reduces the scope of the SEC’s regulatory authority over certain private equity firms, small businesses, and emerging companies. The bill is part of a larger fight between Democrats and Republicans over the scope of Dodd-Frank and government oversight over financial institutions generally.
In recent years, the DOJ and SEC have significantly increased their Foreign Corrupt Practices Act (FCPA) enforcement efforts, and in the process, have successfully advocated the theory that state-owned or state-controlled entities should qualify as instrumentalities of a foreign government under the FCPA. The FCPA defines a foreign official as “any officer or employee of a foreign government or any department, agency or instrumentality thereof.” In August 2014, the government’s broad definition of who constitutes a “foreign official” came into question for the first time when two individuals (Joel Esquenazi and Carlos Rodriguez) filed a petition for writ of certiorari with the Supreme Court to challenge their convictions under the FCPA and argued for the high court to limit the FCPA’s definition of the term. However, on October 6, 2014, the Supreme Court declined to consider the potential landmark case effectively upholding the government’s broad view of the term “foreign official.” Read More
A California federal jury sided against the U.S. Securities and Exchange Commission on Friday, June 6, finding the founder of storage device maker STEC Inc. not guilty on insider trading charges. This is the second insider trading loss in a week for the SEC, following a May 30 defeat in which a New York federal jury rejected insider trading allegations against three defendants, including hedge fund manager Nelson Obus.
In STEC, the SEC alleged that founder Manouchehr Moshayedi made a secret deal with a customer to conceal a drop in demand in advance of a secondary offering. According to the complaint, Moshayedi knew that one of STEC’s key customers, EMC Inc., would demand fewer of STEC’s most profitable products than analysts expected. The SEC alleged that he then made a secret deal that allowed EMC to take a larger share of inventory in exchange for a steep, undisclosed discount.
A recent decision dismissing an RMBS lawsuit in the Los Angeles County Superior Court highlights the critical importance of filing your claims in the correct court whenever there is a jurisdictional issue. By rejecting the plaintiff’s equitable tolling arguments and applying the appropriate statutory limitations periods, the decision is notable because it arguably conflicts with similar decisions by other state courts involving similar RMBS claims. We have previously written about the application of statutes of limitations to RMBS claims, which may be viewed here. Read More
On March 31, 2014, the Securities and Exchange Commission brought insider trading charges against Ching Hwa Chen, the husband of a corporate insider, alleging that he misappropriated financial information from his wife and then shorted her employer’s stock, netting $138,000 in ill gotten gains. SEC v. Chen, No. 5:14-cv-01467 (N.D. Cal). The SEC’s allegations (taken from its complaint) are as follows: Chen’s wife was the Senior Tax Director of Informatica, a data integration company. In late June 2012, Informatica learned it would miss its revenue guidance for the first time in 31 consecutive quarters. That miss caused the defendant’s wife to work more than usual as the company scrambled to close its books and prepare for a potential pre-release of its quarterly revenues. Over the next several days, the defendant overheard his wife’s phone calls addressing the revenue miss, including on a four-hour drive to Reno, Nevada where his wife fielded calls from the passenger seat as he drove. Early the next week, convinced that Informatica’s stock would lose value, Chen bet heavily against the company, shorting its stock, buying put options, and selling call options. In early July, after announcing the miss, Informatica’s stock price fell 27% from $43 to $31. Chen closed out all of his positions that same day. Read More
A decision is expected shortly in the highly publicized so-called confidential witness “scandal” involving the Robbins Geller Rudman & Dowd law firm. Judge Suzanne B. Conlon of the United States District Court, Northern District of Illinois, will decide whether to impose sanctions on the plaintiffs’ firm for its conduct regarding a confidential witness in the City of Livonia Employees’ Retirement System v. Boeing Company case, No. 1:09-cv-07143 (N.D. Ill.). The decision could have a lasting impact over the use of confidential witnesses in securities fraud complaints.
Judge Conlon will decide this matter following the Seventh Circuit’s remand in late March 2013 on the narrow issue of whether to impose Rule 11 sanctions for (1) providing multiple assurances to the court that the confidential source in their complaint was reliable even though none of the lawyers had spoken to the source or (2) failing to investigate after plaintiffs’ investigators expressed qualms about the confidential source. (Previous blog post here). In remanding the case, the Seventh Circuit ruled that making “representations in a filing that are not grounded in an inquiry reasonable under the circumstance or are unlikely to have evidentiary support after a reasonable opportunity for further investigation or discovery violate Rule 11.” City of Livonia Empls.’ Ret. Sys. v. Boeing Co., 711 F.3d 754, 762 (7th Cir. 2013). Read More