Bill Alderman, a partner in the San Francisco office, concentrates his practice on business litigation and dispute resolution. He has broad experience in matters involving federal and state securities, corporate governance, technology, trade secrets, business torts and international disputes. Mr. Alderman is additionally recognized for the results he has obtained in insurance coverage, employee benefits, and federal and state antitrust disputes. He commits a substantial part of his time to pro bono representation and to representation of the firm.
Representing clients in class and derivative actions, Mr. Alderman’s approach is to minimize his clients’ overall cost through careful strategic planning, dispositive motions and aggressive negotiation. Only three of the many securities class actions he has defended have resulted in any settlement payment by his client or its carrier. Of his more than 75 motions to dismiss securities class, mass or derivative actions since 1996, more than 90 percent were granted in their entirety (most with prejudice), while others were granted in part or led to a successful motion for summary judgment.
The following are some of Mr. Alderman’s more notable securities class, derivative and individual actions.
- Deckers Outdoor Corp. Securities Litigation. (C.D. Cal., D. Del., Santa Barbara Superior, Cal. Ct. App. 2012-present). Mr. Alderman represents the company and its three top executives in defending two class actions and two derivative actions. All four actions were dismissed with prejudice on initial motions; an appeal in the derivative actions remains pending.
- Deutsche Bank National Trust Co. v. Novation Companies, Inc. (N.Y. Supreme, 2012-present). Mr. Alderman represents an RMBS sponsor in the defense of an action by the trustee on behalf of FHFA seeking repurchase of loans in the trust.
- Woori Bank v. RBS Securities (S.D.N.Y. 2012). Mr. Alderman represented a CDO issuer in defense of an action by an institutional buyer; obtained dismissal with prejudice.
- National Credit Union Administration Board v. RBS Securities, Inc. et al. (D. Kan. 2011-present). Mr. Alderman represents an MBS issuer in an action by the liquidation agent for a failed credit union/buyer.
- Cambridge Place Inv. Mgmt., Inc. v. Morgan Stanley, et al. (D. Mass, MA state court 2010-12). Mr. Alderman represented a sponsor of MBS offerings in two actions brought by an MBS investor; obtained dismisal on initial motion.
- In re 2007 NovaStar Financial, Inc. Sec. Litig. (W.D. Mo. 2007-08; 8th Cir. 2009). Mr. Alderman represented the company and three officers in defense of class actions alleging accounting errors in connection with subprime lending. Obtained dismissal with prejudice on initial motion; dismissal affirmed on appeal; related derivative actions settled without cost to client.
- New Jersey Carpenters Health Fund v. NovaStar Mortgage, Inc., et al. (S.D.N.Y., 2d Cir. 2009-present). Mr. Alderman represents a subprime mortgage lender and four of its officers in defense of a class action brought by buyers of interests in securitized mortgage pools against the lender, bond underwriters, and rating agencies. Obtained dismissal with leave to amend on initial motion and subsequent dismissal with prejudice; dismissal reversed on appeal.
- In re McKesson HBOC Securities Litigation; U.S. v. Hawkins; SEC v. Hawkins (N.D. Cal., S.F. Superior 1999-2005). Mr. Alderman represented the former CFO in defense of multiple civil, criminal and regulatory actions arising out of a US$9 billion one-day loss of market capitalization following restatement of earnings of an acquired company. He obtained an acquittal following a criminal trial, voluntary dismissal of an SEC action, and dismissal of various state and federal claims, with prejudice. Additional actions were settled without cost to client.
- In re Hewlett-Packard Company Consolidated Derivative Litigation (Santa Clara Superior 2006-08). Mr. Alderman represented the former general counsel in defense of derivative litigation relating to use of alleged pretexting to obtain confidential telephone records; settled without cost to client.
- In re: Gap Inc. Derivative Litigation (San Francisco Superior 2006-07). Mr. Alderman represented 34 present and former officers and directors in obtaining voluntary dismissal of derivative actions alleging stock option backdating.
- Gillam v. PG&E Corp. (N.D. Cal., 9th Cir. 2001-03). Mr. Alderman represented the parent of a major utility and its principal officers in obtaining dismissal, with prejudice, of a class action claiming multibillion-dollar overstatements of revenues and earnings in connection with California energy crisis. Dismissal of the case was affirmed on appeal.
- In re NovaStar Financial Sec. Litig. (W.D. Mo., Missouri and Maryland State Courts 2004-08). Mr. Alderman represented the company and various officers and directors in the defense of class and derivative actions brought by open market purchasers. All matters settled without cost to clients.
- In re Levi Strauss Sec. Litig. (N.D. Cal. 2004-08). Mr. Alderman represented the CEO, CFO and controller in defense of a class action on behalf of purchasers of more than US$1 billion in corporate bonds; case settled without cost to clients.
- Landau v. Bechtle (S.F. Superior 2004-2006). Mr. Alderman represented the directors of Charles Schwab Corporation in obtaining the voluntary dismissal of derivative actions relating to alleged market timing and late trading in mutual funds managed by a company subsidiary.
- In re Callidus Software Sec. Litig. (N.D. Cal. 2004-2006). Mr. Alderman represented the company, officers and directors in obtaining dismissal of class action alleging misleading projections.
- Operating Engineers v. IMPAC Medical Systems (N.D. Cal. 2004-05). Mr. Alderman represented the company and principal officers in obtaining voluntary dismissal of class action.
- Khader v. Affymetrix Corp. (N.D. Cal. 2003-04). Mr. Alderman represented issuer, directors and officers in obtaining dismissal of class action claiming misleading projections.
- In re Onyx Software Corp. Securities Litigation. (W.D. Wash. 2001-03). Mr. Alderman represented the company, directors and officers in the defense of class and derivative actions claiming improper revenue recognition in connection with restatement. Obtained dismissal of 10b-5 claim balance settled without payment by clients.
- In re Metricom Sec. Litig. (N.D. Cal., 9th Cir. 2001-2006). Mr. Alderman represented underwriters in obtaining dismissal, with prejudice, of class and individual actions for IPO and open-market purchasers; dismissal affirmed on appeal.
- In re Clarent Corp. Sec. Litig.; Ahlstrom v. Clarent (N.D. Cal., D. Minn. 2002-05). Mr. Alderman represented former CFO in defense of class and mass actions claiming improper revenue recognition in connection with restated financial statements. Obtained dismissal of 10b-5 claim; balance settled without payment by client.
- Herman v. Salomon Smith Barney (S.D. Cal. 2002-03). Mr. Alderman represented broker-dealer in obtaining dismissal, with prejudice, of a class action challenging alleged practices in sale of municipal bonds.
- Olson v. Salomon Smith Barney (N.D. Cal. 2002). Mr. Alderman obtained voluntary dismissal of class action challenging alleged practices in sale of municipal bonds.
- Behrens v. Cygnus Inc. (N.D. Cal. 2002). Mr. Alderman obtained voluntary dismissal on behalf of company, officers, and directors of class action claiming non-disclosure of material information.
- Autodesk Securities Litigation (N.D. Cal. 2000). Mr. Alderman represented the underwriter/analyst in obtaining dismissal of a class action involving open market trading.
- Lippitt v. Raymond James Financial (S.F. Superior, N.D. Cal., 9th Cir. 2001-04). Mr. Alderman represented broker-dealer in class action claiming that marketing of callable CDs is an unfair business practice. Following the denial of a motion to remand, Mr. Alderman obtained voluntary dismissal. The case settled after prior denial of remand was reversed on appeal.
- FPA Securities Litigation (S.D. Cal., 9th Cir. 1999-2005). In Madden v. Deloitte & Touche and Amin v. S.G. Cowen, Mr. Alderman represented the financial advisor in obtaining a dismissal, with prejudice, of mass actions arising out of acquisition of managed care medical corporations. Dismissal of the case was affirmed on appeal.
- Bergen Capital Trust I Securities Litigation (C.D. Cal. 1999-2002). Mr. Alderman represented the managing underwriters in defense of a class action involving a $300 million debt offering and open market trading, which was settled without payment by clients.
- Myers v. Merrill Lynch (N.D. Cal., 9th Cir. 1998-2001). Mr. Alderman represented the investment banking firm in defense of class action claiming that “penalty bids” imposed by underwriters to discourage flipping by IPO purchasers violate California unfair competition law and other laws. Mr. Alderman obtained dismissal, with prejudice, on his initial motion which was affirmed on appeal.
- In re Fritz Companies Securities Litigation (N.D. Cal., 9th Cir., S.F. Superior, California Court of Appeal and Supreme Court 1996-2003). Mr. Alderman represented the company and its directors in defense of class actions involving open market trading. Federal and state actions were dismissed with prejudice on initial motion. He also obtained a judgment from the California Supreme Court reinstating the dismissal of another state case on behalf of holders.
- In re Triteal Corp. Securities Litigation (S.D. Cal. 1997-99). Mr. Alderman represented the lead underwriters in the defense of class actions involving secondary offering and open market trading. The case settled without payment by clients.
- Chan v. Orthologic Corp. (D. Ariz. 1997-98). Mr. Alderman represented the lead underwriters in defense of a class action involving open market trading and obtained dismissal with prejudice on the initial motion.
- Steckman v. Hart Brewing, 143 F.3d 1293 (S.D. Cal., 9th Cir., San Diego Superior 1996-98). Mr. Alderman represented the lead underwriters in defense of a class action arising out of a US$50 million IPO and open market trading. He obtained dismissal, with prejudice, of the federal action on the initial motion and voluntary dismissal of state court actions. The dismissal was affirmed on appeal.
- In re KENETECH Securities Litigation (N.D. Cal. 1995-99). Mr. Alderman represented lead underwriters in defense of class actions arising out of a US$100 million IPO of common stock, US$100 million offering of preferred depositary shares and open market trading. He obtained dismissal of Section 11 claims by open market purchasers and summary judgment on remaining claims.
- In re Software Toolworks, Inc. Securities Litigation, 50 F.3d 615 (9th Cir. 1994), cert. denied, 516 U.S. 907 (1995). Mr. Alderman represented the Securities Industry Association as amicus curiae in support of the affirmance of summary judgment for underwriters on due diligence defense.
- In re Worlds of Wonder Securities Litigation, 814 F. Supp. 850 (N.D. Cal. 1993), aff’d in part, rev’d in part, 35 F.2d 1407 (9th Cir. 1994), cert. denied, 516 U.S. 868 (1995). Mr. Alderman represented the lead underwriters in defense of class actions alleging federal securities claims and common law claims arising out of a US$120 million IPO. He represented the sole underwriter in defense of a similar class action arising out of an US$80 million public offering of convertible debentures. In both cases, he defended against open market trading claims. Summary judgment for the underwriters was affirmed on appeal.
The following cases illustrate some of Mr. Alderman’s other areas of expertise in securities matters.
- Unfair Competition Litigation. Mr. Alderman has won more than 20 recent class and private attorney general actions under Section 17200 of the California Business & Professions Code on behalf of such clients as Citigroup, Salomon Smith Barney, Morgan Stanley and Verizon.
- Private Finance Litigation. In Z Auction v. Salomon Smith Barney (Los Angeles County Superior Court 1999-2001), Mr. Alderman represented the investment banker in defense of a US$1 billion claim for damages arising out of a private financing engagement and obtained dismissal of entire case with prejudice on demurrer.
- Merger and Acquisition Litigation. In Medtronic v. Dieck (Arbitration 1998-99), Mr. Alderman represented 10 former shareholders of an acquired company in defending a demand by the acquirer for rescission of US$72 million merger. He obtained summary judgment and an award of attorney’s fees from an arbitration panel.
- Customer Litigation. In Estate of Joslyn v. Estate of Cash (NASD arbitration 1999 - 2001). Mr. Alderman represented a broker-dealer in defense and favorable settlement of a claim that the customer suffered US$16 million in damages from unsuitable investments.
- Fiduciary Litigation. In Rutledge v. Smith Barney (D. Haw. 1998-99), Mr. Alderman represented the financial advisor in obtaining a dismissal with prejudice of ERISA and common law claims based on services to union trust funds.
- Intra-company Disputes. Mr. Alderman has represented numerous companies and/or shareholders in resolving disputes between majority and minority shareholders.
- Partnership Disputes. Mr. Alderman has represented numerous partnerships and their constituencies in disputes over partnership or general partner action.
- Tender Offer Litigation. Mr. Alderman has represented both offerors and offerees in federal and state litigation relating to corporate or partnership tender offers.
- Regulatory Investigations. Mr. Alderman has represented clients in numerous public and non-public investigations and informal inquiries by the SEC, NASD, NYSE, AMEX, PCX and FINRA: In 2004 and 2005, he represented clients in producing documents and/or testimony to the SEC in nine separate matters, without any having resulted in enforcement action.
- Advisory Litigation. In Nicolino v. Automated Security (Holdings) plc (Contra Costa Superior Court; Court of Appeal 1997-98), Mr. Alderman represented the financial advisor in obtaining the dismissal of a claim for alleged breach of acquisition agreement. Dismissal of the case was affirmed on appeal.
- Internal Investigations. Mr. Alderman has conducted internal investigations and represented special committees or audit committees for clients such as Salomon Smith Barney, Gap Inc., Restoration Hardware, Walt Disney Co., Onyx Software, Calypte Biomedical, Harper Group and Wells Fargo Bank.
Though investors might have assumed that the entire Securities and Exchange Commission was their advocate to begin with, on February 12th the agency announced that it had hired Rick Fleming to be its very first Investor Advocate in the recently created Office of the Investor Advocate (“OIA”).
In hiring Fleming, the SEC is implementing Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which amended the Securities Exchange Act of 1934 by creating, among other things, an Investor Advisory Committee, the OIA, and an ombudsman to be appointed by the Investor Advocate. Fleming comes to the SEC from his most recent job as Deputy General Counsel at the North American Securities Administrators Association where he advocated for state securities regulators in matters before Congress and the SEC. Fleming previously spent several years in Kansas state government, including some fifteen years in the state’s Office of the Securities Commissioner. Read More
Ever had one of those days where you think you’re acting with good faith, diligence, and care, and yet you still get sued by the FDIC? The directors and officers of the now defunct Buckhead Community Bank in Georgia find themselves in the government’s crosshairs and, unlike their D-and-O counterparts at public companies, a federal court in Georgia thinks it’s not so clear that they’ll be able to claim the protections of the business judgment rule to avoid the FDIC’s claim that they caused the bank to lose millions of dollars.
The background in this case reads like so many others in similar suits around the country. According to the FDIC, the bank implemented an “aggressive growth strategy” beginning in 2005 that resulted in a 240 percent increase in the bank’s loan portfolio through 2007, primarily from gains in the bank’s “high-risk real estate and construction loans.” The bank’s adversely classified assets grew from twelve percent to more than 200 percent of its tier-1 capital, and by December 2009 the bank had landed in FDIC receivership. The FDIC later sued the bank’s directors and officers in federal court alleging that they were negligent for repeated violations of the bank’s loan policy, underwriting requirements, banking regulations, and “prudent and sound banking practices.” Read More
A pair of investment firms recently filed suit against Twitter in the Southern District of New York, alleging that Twitter had fraudulently refused to allow them to sell its private stock in advance of its much-anticipated IPO. If that sentence looks somewhat bizarre, it is because the allegations themselves are bizarre, at best.
In short, the plaintiff investment firms allege that a managing partner of GSV Asset Management, who was a Twitter shareholder, engaged them to market a fund that would purchase and hold nearly $300 million in private Twitter shares from the Company’s early-stage shareholders. Plaintiffs then embarked on an “international roadshow” to line up investors in the fund. Plaintiffs allege that, on the roadshow, “there was substantial interest in purchasing [the private] Twitter shares at $19 per share.” Read More
Recently we discussed whether directors of public companies face potential liability for not preventing cyber attacks. As we discussed, the answer is generally no, because absent allegations to show a director had a “conscious disregard” for her responsibilities, directors do not breach their fiduciary duties by failing to properly manage and oversee the company.
That well-established rule was again affirmed last week by the Delaware Court of Chancery in In re China Automotive Systems Inc. Derivative Litigation, a case that concerned an accounting restatement by a Chinese automotive parts company. Plaintiffs there alleged that the company’s directors breached their fiduciary duties by failing to manage and oversee the company’s accounting practices and the company’s auditors, who improperly accounted for certain convertible notes from 2009 to 2012. When the error was uncovered, the company restated its financials for two years and its stock price dropped by 15%. Read More
In a decision rendered from the United States District Court for the Northern District of Illinois, Eastern Division, Judge Ronald Guzmán granted summary judgment on the SEC’s insider trading claims as to three defendants but allowed claims as to one defendant to proceed to trial. The SEC’s claims against all of the defendants focused on suspiciously-timed sales and other circumstantial evidence, but failed to identify specific tippers who provided defendants with inside information. The case highlights the SEC’s aggressive strategy in pursuing insider trading claims without direct evidence of tipping. The court’s decision also underscores the importance of pursuing motions during discovery in order to preserve arguments, or obtain sanctions establishing evidentiary points, in order to later use discovery misconduct to bolster otherwise thin bases for liability.
Defendant Yonghui Zhang worked full time for a company called Global Education & Technology Group, Ltd. (“GEDU”). GEDU was founded by Zhang’s younger brother and sister-in-law, and provides educational programs and services in China including consultation concerning higher education opportunities in the United States. Zhang purchased 7,900 GEDU American Depository Shares on the NASDAQ for almost $40,000 on the last trading day before GEDU announced its acquisition by Pearson plc. Zhang had never purchased GEDU stock for himself, spent more than three times his annual salary to purchase the securities, and made a profit of close to $50,000. Zhang moved for summary judgment, relying on his testimony that he had no knowledge of the Pearson acquisition and pointing to the SEC’s failure to identify a specific “tipper” who told him about the acquisition.
The Court denied his motion. Zhang’s office was on the same floor as his brother and sister-in-law’s offices, and Zhang had numerous communications with them and with GEDU senior management aware of the Pearson acquisition. Zhang argued that the SEC did not point to any particular records of communications or opportunities to communicate, but the SEC had sought those types of details and Zhang failed to provide them in discovery. Read More
Rule 10b5-1, enacted in August 2000, codified the SEC’s position that trading while in possession of material non-public information is sufficient to establish liability for insider trading. The rule also provided an affirmative defense for individuals who could prove that the purchase or sale of stock was made pursuant to a pre-existing written plan executed before the individual became aware of the material non-public information. These so-called 10b5-1 plans have long been considered to be an efficient way to trade company stock without raising suspicion of insider trading or another improper motive.
However, recent news stories have reignited concerns that corporate insiders may be abusing 10b5-1 trading plans to trade on material non-public information. An April Wall Street Journal article reported that not only has the use of 10b5-1 plans by non-executive directors nearly doubled between 2006 and 2011, but a significant percentage of the plans were being used to unload all or a large percentage of the directors’ holdings in a short period of time. An earlier November 2012 Wall Street Journal article analyzing thousands of trades made by corporate executives found evidence that company insiders did statistically much better than expected in realizing trading profits. Together, these articles suggest that the lack of transparency and regulation of 10b5-1 trading plans has allowed them to be misused as vehicles to effectuate opportunistic trades.
Hackers aren’t the only ones after company information. Earlier this week, Wills Fortune 500, a unit of Wills Group Holdings, a global insurance broker providing insurance and risk management services, made available its own report tracking the response by Fortune 500 companies to the SEC’s October 2011 guidelines for cybersecurity disclosures. The report’s key findings include that, as of April 2013, 85% of Fortune 500 companies were following the SEC guidelines and providing some level of disclosure of cyber exposures. However, close to 40% of the companies failed to provide details on the size of their exposure, stating only that the risk would have an impact on the company without further discussing the extent of the impact. As such, the report concluded that the question whether company disclosures rise to the level mandated by the SEC is debatable, given the paucity of information regarding the probability of incidents and their quantitative and qualitative magnitude.
In light of the findings of the Willis Fortune 500 report, it’s not surprising that SEC Chairman Mary Jo White had previously asked the Commission to evaluate compliance with current guidelines for cybersecurity disclosures, assemble a report on the general practice and compliance with the existing guidelines, and make recommendations for further guidance.
Plaintiffs’ counsel beware: to avoid Rule 11 sanctions you might actually have to talk to “confidential witnesses” yourself and corroborate their statements before citing them in a securities fraud complaint.
That is one major takeaway from the Seventh Circuit’s March 26, 2013 opinion in City of Livonia Employees’ Retirement System v. The Boeing Company, et al. In that case, Judge Posner singled out plaintiffs’ counsel for making “confident assurances in their complaints about a confidential source . . . even though none of the lawyers had spoken to the source and their investigator had acknowledged that she couldn’t verify what (according to her) he had told her.” Slip op. at 16. Citing multiple cases in which the same firm, Robbins Geller Rudman & Dowd LLP, had “engaged in similar misconduct” and noting that “recidivism is relevant in assessing sanctions,” Judge Posner remanded to the district court for further proceedings on Rule 11 sanctions.
The appeal came from the district court’s grant of a renewed motion to dismiss in Boeing’s favor after discovery into the CW’s statement revealed significant inconsistencies with the complaint’s allegations. The allegations, briefly, were that Boeing made false statements about the progress of Boeing’s flagship aircraft, the Dreamliner. In April and May 2009, with the Dreamliner’s maiden test flight (or “First Flight”) scheduled for June 30, 2009, the Dreamliner failed several “stress tests” that raised doubts about the First Flight’s timing. Boeing remained optimistic about the scheduled First Flight, though, and made disclosures to that effect in May and June. But one week before the anticipated First Flight, the Company disclosed that it had failed the tests and that the First Flight had been canceled, delaying final delivery of the plane to customers. Following the disclosure, Boeing’s stock price fell 10% over two days of trading.
The NASDAQ Stock Market recently submitted a proposed rule change that would require all companies listed on the NASDAQ to maintain an internal audit function. The function would “provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control.” In addition, the company’s audit committee would be required to meet periodically with the internal auditors and oversee the internal audit function. If implemented, the rule would require companies listed prior to June 30, 2013 to establish the internal audit function by December 31, 2013. Companies listed after June 30, 2013 would have to establish the function prior to listing.
The purpose of the proposed rule is to ensure that listed companies have a mechanism to regularly review and assess their internal controls and ensure management and audit committees receive information about risk management. The NASDAQ also believes the internal audit function will assist companies in complying with Rules 13a-15 and 15d-15, which require management to evaluate a company’s internal controls on a quarterly basis.
Despite the rule’s requirement of an internal audit function, the proposed language permits companies “to outsource this function to a third party service provider other than its independent auditor.” So, while the rule permits the internal audit work to be done by an outside third party, the company cannot engage the same auditing firm as both its internal and external auditor. In other words, the company needs both an independent outside auditor that cannot act as the inside auditor and an inside auditor that can be an outside auditor as long as it’s not the independent outside auditor.
Although most companies listed on the NASDAQ already have an internal audit function, the proposed rule would bring the NASDAQ into alignment with the New York Stock Exchange, which already requires its listed companies to have an internal audit function. See NYSE Listed Company Manual Section 303A.07(c).
The deadline for comments on the proposed rule is March 29, 2013.
What happens between a mature multinational insurance corporation and its regulator is nobody’s business, or so says the United States Court of Appeals for the D.C. Circuit, which issued an opinion in SEC v. AIG on February 1, telling the press that it couldn’t have reports prepared by an AIG consultant under a consent decree with the SEC.
In 2004—years before AIG would rise to infamy in the financial collapse—the SEC charged AIG with securities violations, and the result was a consent decree requiring, among other things, that AIG hire a consultant to review AIG’s transaction policies and procedures and to prepare reports. The court supervising the decree later allowed disclosure of the consultant’s reports twice: to the Office of Thrift Supervision and the House of Representatives. Sue Reisinger, a reporter for Corporate Counsel and American Lawyer, wanted to know what the consultant found at the government bailout recipient. Not being a regulator or constitutionally-created legislative body, Ms. Reisinger turned to the courts for access. The district court found that the consultant’s reports were “judicial records” to which Reisinger had a common law right of access. The court of appeals disagreed.
Whether something is a judicial record depends on the role it plays in the adjudicatory process. The court of appeals noted that the consultant’s reports were not relied upon by the district court in any way, and thus never found their way into the fabric of the court’s record or decision-making process. Though merely filing the reports with the court would not have been sufficient to transform them into the type of judicial records Reisinger sought, the court of appeals held that filing was “very much a prerequisite.” Thus, while the terms of the decree requiring a consultant were surely important to the district court, the court was agnostic as to the eventual content of the reports. In other words, Reisinger had the substantive cart before the procedural horse, and whatever those reports eventually contained, their import did not work to make them judicial records. Read More