Michael Tu leads the firm's securities litigation practice in Southern California. His practice focuses on shareholder litigation under the federal and state securities laws, mergers and acquisitions lawsuits, regulatory investigations and proceedings, securities and corporate governance counseling, and business litigation disputes.
Michael is recognized as a leading trial lawyer who has successfully prosecuted and defended numerous trials to verdict in federal and state courts, and is among the few lawyers in the country who have defended a securities class action trial to verdict. That trial was recognized as one of the "Top Defense Verdicts" in California by the Daily Journal.
He regularly counsels public and private companies regarding securities, 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. His successful representation of clients in high-profile securities and corporate governance disputes has been widely reported by the media (Los Angeles Times, Wall Street Journal, New York Post, Hollywood Reporter, Variety, New York Times, Fortune).
- 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, 2015)
- “Praised” “for his litigation skills” defending securities matters “in both federal and state courts”, noted as “particularly strong in securities class actions with a cross-border element” (The Legal 500, 2015) and "cares about clients and has innovative ways of solving their problems." (The Legal 500, 2016)
- 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 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 securities and accounting liability issues.
He is a member of the Executive Committee of the Litigation Section of the Los Angeles County Bar Association, and serves as the Editor of the Court Alerts Committee. He previously served as the Co-Chair of the Federal Courts Committee and the Breakfast at the Bar Committee. He served as a Lawyer Representative for the Central District of California to the Ninth Circuit Judicial Conference from 2006-2009. He is a member of the Board of Advisors of the monthly Securities Reform Act Litigation Reporter. Michael is also a preapproved panel counsel member of AIG's Directors & Officers (Securities Claims) Panel.
Michael's notable representations include the following.
- The former president of the nation's largest mortgage lender in dozens of class action, derivative, investigative and other related litigation matters by shareholders, bondholders, institutional investors, and federal and state regulators, alleging fraud and securities violations.
- Principal officers and directors of a leading media and marketing company in a shareholder class action alleging securities violations in connection with a reverse merger transaction that resulted in a complete defense verdict following trial, which was affirmed on appeal.
- Hong Kong- and China-based affiliates of two international accounting firms with respect to securities counseling and audit issues, and shareholder class action lawsuits alleging securities fraud claims.
- Special committees and special litigation committees of the boards of four public companies with respect to internal investigations and litigation in connection with executive stock option and compensation issues.
- An interactive music and entertainment company and its officers and directors in a shareholder lawsuit alleging fraud, breaches of fiduciary duties, dilution, unfair business practices and other direct and derivative claims, which was dismissed with prejudice, and affirmed on appeal.
- Principal executive officers and directors of one of the country's leading multi-state managed health care organizations in shareholder class action and derivative lawsuits filed in federal and state courts alleging accounting violations, resulting in dismissal of claims.
- Underwriters, investment banks and financial institutions in the defense of shareholder class action and derivative litigation matters alleging violations of securities laws in connection with public securities offerings brought in federal and state courts.
- Principal executive officers and directors of a water company in multiple federal and state shareholder class action and derivative lawsuits alleging securities violations.
- An Internet media company and its principal officers and directors in several federal and state cases involving merger, derivative and shareholder class action litigation.
- Principal officers and directors of financial services company in shareholder class action and related bankruptcy proceedings with respect to allegations of securities fraud in connection with the securitization of loan receivables, resulting in complete dismissal of claims.
- A foreign sovereign entity in international and U.S. securities fraud litigation regarding an early stage internet investment fund.
- A fiber optics technology company and its principal officers and directors in securities fraud litigation brought by investors, resulting in complete dismissal of claims.
- A national restaurant company and its principal officers and directors in shareholder class action alleging accounting and disclosure violations, resulting in dismissal of claims.
- A technology services company and its principal officers and directors in securities fraud class action and related bankruptcy proceedings.
- An international pharmaceutical company in the defense of a federal securities fraud lawsuit, and member of the trial team that obtained a favorable trial verdict.
- A software company and its principal officers and directors in securities class action alleging accounting and disclosure violations.
- A healthcare insurance company and its principal officers and directors in securities class action litigation, resulting in dismissal of all claims.
- A software modeling company and its principal executive officers in securities class action litigation alleging accounting allegations, resulting in dismissal of all claims.
- A medical device company and its principal officers and directors in shareholder class action and derivative lawsuit brought in federal and state courts.
Cryptocurrencies, including Bitcoin, have been in the news a lot lately, but many people still don’t know what they are—or whether they’re regulated. Here’s a quick rundown.
What Are Cryptocurrencies?
Cryptocurrencies are decentralized digital cash systems. Eschewing centralized control, such as a bank or government, cryptocurrencies instead rely on pseudonymous peer-to-peer networks—think Napster of yore—in which all actors in the network must recognize and reflect a transaction. To illustrate how this works, if Person A has an apple and trades it to Person B for her orange, Person A cannot thereafter trade that apple to Person C because everyone knows from a public ledger that Person A has already traded his one apple.
The security of the public ledger is then of paramount importance—so how do cryptocurrencies ensure ledger security? They rely on people called miners. Miners are basically the bookkeepers of the public ledger, and anyone with the time, energy, and equipment can be a miner. When a transaction occurs, it is not immediately added to the public ledger; instead, a miner must first confirm it. To do so, miners generate a complicated code that: (1) memorializes the data relating to the transaction; (2) refers to the previous confirmed transaction in the system (a sequential timestamp of sorts); and (3) complies with the particular cryptocurrency’s specific requirements. This is a challenging and necessary task that protects the public ledger—a transaction won’t be confirmed if a code can’t be generated that aligns with previous ledger entries. Using the earlier example, once Person A’s apple-orange trade has been confirmed, he can’t trade the apple again because any code generated after that reflects that he has already traded his apple. Without an acceptable code, no new transaction can be confirmed.
It emerged on May 5 that the Department of Justice opened an investigation into Uber’s use of software called “Greyball” that concealed the ride-sharing company’s operations from regulators in cities and countries that did not permit Uber’s services. Since then, the Portland City Council has voted to subpoena documents concerning the program, and lawmakers in Philadelphia and Austin have said they are cooperating with DOJ investigation. Uber allegedly deployed Greyball not only in the United States (including in Boston, Philadelphia, and Las Vegas), but also in Australia, Paris, China, and South Korea.
On February 10, the Senate confirmed Representative Tom Price (R-GA) as Secretary of Health and Human Services, where he will oversee the U.S. Food and Drug Administration (FDA). His nomination has not been without controversy, including several Senators and a coalition of public interest advocacy groups demanding an investigation into whether Price violated insider trading laws when he invested in an Australian pharmaceutical company last summer. This highlights some basic precautionary steps that public companies can take when considering private placements.
The company Price invested in, Innate Immunotherapeutics, is working to develop a single product. The company is essentially a bet that the drug will succeed in clinical trials and receive FDA approval. Price was introduced to the company by Representative Chris Collins (R-NY), who sits on the company’s board and is its largest shareholder. The introduction was regarding a private placement that Innate was offering to select U.S. investors to raise additional working capital for a clinical trial and to “seek approval from the United States Food and Drug Administration for an Investigational New Drug programme in the United States,” among other purposes. The private placement was priced at $0.18 USD per share, a 12% discount to the stock’s market price in early June 2016 (the stock is publicly traded on the Australian Securities Exchange). Even though both Price and Collins sit on committees that oversee the health care and pharmaceutical industries, both invested in the private placement last summer.
President Trump nominated Price to head HHS on November 29, 2016. By then, Innmate’s share price had risen to $0.58 USD. The stock peaked at $1.39 USD on January 25, 2016, representing a 670% increase on the congressmen’s investments. Last Friday, when the Senate confirmed Price, the stock closed at $0.71 USD.
On February 2, 2017, the New York Appellate Division, First Department, issued a decision in Gordon v. Verizon Communications, Inc., No. 653084/13, 2017 WL 442871 (1st Dep’t 2017), approving the settlement of litigation over an acquisition by Verizon Communications (“Verizon”) and articulating a new test to evaluate the fairness of such settlements. The Gordon decision signals that New York will remain a friendly venue to disclosure-based M&A settlements and may see increased shareholder M&A lawsuits as a result
As we have repeatedly written about (here, here and here), Delaware Chancery Courts have spent the past year attempting to curtail, or eliminate altogether, M&A litigation settlements where the sole remedy is enhanced proxy disclosures. Chancellor Bouchard’s landmark decision in In re Trulia Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016), rejected these “disclosure-only” settlements, finding that the “enhanced” disclosures produced by such settlements were not “material or even helpful” to stockholders. The Chancery Court bemoaned the proliferation of disclosure-only settlements in Delaware, and indicated that these types of settlements would be met by “continued disfavor” unless the supplemental disclosures are “plainly material,” i.e., they must “significantly alter the ‘total mix’ of information made available.”
In Trulia’s wake, the number of M&A suits filed in Delaware plummeted—declining by almost 75% in the first half of 2016—as plaintiffs’ counsel opted to file in federal court or states other than Delaware in the hope of finding more hospitable fora for “disclosure-only” resolutions. READ MORE
An important issue for companies and their executives that are the subject of an investigation by the federal government is whether, and how early, to cooperate.
On September 27, 2016, Principal Deputy Associate Attorney General Bill Baer delivered remarks at the Society of Corporate Compliance and Ethics Conference, where he laid out in some detail his views on the value of early cooperation with the federal government in financial cases, and the consequences for waiting. As the number 3 attorney in the Department of Justice who is charged with overseeing civil litigation, antitrust, and other large divisions, Baer’s words are significant, and are a further gloss on the so-called “Yates Memo”, which Deputy Attorney General Sally Yates released last September, detailing DOJ’s guidance on individual accountability for corporate wrongdoing.
Speaking specifically about cases against banks and the fallout from protracted litigation involving residential mortgage-backed securities, Baer said those cases could have been resolved more quickly if only the financial institutions “had decided early to cooperate.” Consequently, “each [institution] paid a lot more than it would have if it had cooperated early on.” Recalling that many of these same institutions had nonetheless sought “significant cooperation credit,” Baer stated that DOJ “dismissed the arguments quickly because they so lacked merit.”
So how early is early enough, and how can your company get credit for cooperating? Baer elaborated on recent “internal” guidance he has provided to his attorneys in civil enforcement matters.
On May 31, 2016, the Delaware Chancery Court rejected shareholders’ allegations of corporate wrongdoing in a derivative suit against a national healthcare company, Bioscrip, holding that Plaintiff failed to adequately allege demand futility with respect to Bioscrip’s board of directors. For the first time, the Delaware Court found that Plaintiff was required to demonstrate demand futility with respect to the board of directors that was in place after shareholders filed their derivative complaint. Park Emps.’ & Ret. Bd. Emps.’ Annuity & Ben. Fund v. Smith, No. 11000-VCG (Ch. May 31, 2016).
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.
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.