John Oberdorfer
Aggressive Opposition to Class Action Motions: Strategy and Benefits in Securities Fraud Cases
John Oberdorfer, chair of Patton Boggs' Litigation practice group in Washington D.C., presented a discussion on class action law suits as they relate to shareholder derivative suits, and offered his insight on defense strategies for corporate defendants.
He began his presentation with the generally held notion that businesses view the class action procedure created by Federal Rule of Civil Procedure 23 as a weapon to be used only against them. In Oberdorfer's view, however, this belief is not entirely true At the class certification stage, a corporate defendant can utilize Rule 23's procedural safeguards to its benefit, and, in so doing, increase the likelihood of favorably resolving the case. This certification process provides an opportunity that is often overlooked to diminish the plaintiff's case or diminish the size of the class.
When plaintiffs bring class actions, particularly in the securities fraud area, John noted that they sometimes do so hastily without considering all the issues that must be addressed. The primary goal of the complaint at that time is to survive a motion to dismiss and serve as a vehicle to compete for lead plaintiff designation. Taken together, Rule 23 and the Private Securities Litigation Reform Act of 1995 create an excellent opportunity for corporate defendants to mount strong challenges to class certification and thereby puncture a plaintiff's case.
Before formulating a corporate defense strategy for responding to and taking advantage of the class certification process, John stressed the importance of understanding certain key fundamental facts about securities fraud class actions. Namely, that most securities class actions settle for just a few cents of shareholder loss, that most shareholder classes comprise two subgroups, whose financial interests in the litigation are often quite different, and that the suit will actually damage the true financial interests of much of the class.
In Mr. Oberdorfer's experience, aggressive opposition to class action certification motions is beneficial. Rather than ceding the stage at the outset of the case to plaintiffs, and being in a defensive position (opposing document requests, objecting to interrogatories, and defending depositions of your client's top management), defense counsel can take center stage and put the plaintiff on the defensive.
Mr. Oberdorfer concluded by reiterating that it is essential to raise questions about the plaintiff and the class. "You might gain a favorable ruling; you certainly will strengthen your hand for settlement purposes."
Cheryl Moore
Cost Effective Management of Litigation and Coordination of Inside/Outside Counsel
Cheryl Moore, a partner in Patton Boggs' Dallas office, spoke on "Cost Effective Management of Litigation and Coordination of Inside/Outside Counsel" at FindLaw's Securities seminar in Dallas.
The first step in cost effective management of litigation is knowing when—and when not—to retain outside counsel. You must consider the scope of legal issues involved in the litigation and who is involved, whether board members, directors, officers or employees. Whether a matter is a government investigation or enforcement action or a complex litigation also influences whether or not to outsource legal services and ultimately affects the ability to effectively manage litigation. Finally, the extent of insurance coverage—D&O, E&O or Fidelity Bond—is also an important consideration in exploring outsourcing options.
Ms. Moore counseled that a request for proposal (RFP) soliciting prospective outside counsel must take into account, and communicate to bidding firms, whether or not the work requires experience in specialized areas of law, for example, as well as the complexity of legal issues. Complex matters may require selection of a firm with a more extensive legal support system. An RFP should spell out such things as how lawyers will be required to achieve strategic objectives, budget constraints or requirements, covered versus non-covered costs, and invoicing. Exploring these issues in advance can prevent unexpected costs later. A clearly defined reporting system, outlining the review and approval process for correspondence and pleadings, is also essential.
Strategic considerations for cost effective litigation must include plans for document retention and management, taking into account forum and venue selection, potential for multiple front litigation, cross and/or counter claims and the nature of response. Issues surrounding electronic data, hard documents, recordings (voice mail, conversations) attorney/client work product privilege and anticipation of litigation privilege are also best addressed in advance in order to contain costs.