Below is a representative sampling of the Firm’s international securities litigation and arbitration cases.
A large group of institutional investor clients is pursuing an international securities class action against Anglo-Australian mining company BHP Billiton (“BHP”). During October 2013–November 2015, BHP made a series of intentionally false representations touting its mining safety practices and risk management, and failed to make appropriate disclosures to investors about significant and immediate safety risks at its Brazilian operations. On November 5, 2015, the Fundão dam at the Germano iron ore mine in Brazil (co-owned by BHP) collapsed, causing a toxic mudslide that swept away the village of Bento Rodrigues, killing 19 people and causing permanent environmental damage. On this news, BHP’s stock price dropped, and it continued to fall as news about the ever-worsening financial consequences of the collapse kept coming out until, by late November 2015, the stock had fallen 20%. On July 19, 2019, the Full Appellate Court approved class certification and appointed our group as co-lead, staying all other putative class actions. The parties are currently briefing BHP’s motion to dismiss.
G&E, along with three other U.S. and international law firms, is currently representing over 950 Greek individuals and institutional investors in an arbitration proceeding against the Republic of Cyprus in the wake of the Cypriot government’s 2013 bailout. The arbitration was filed with the International Centre for Settlement of Investment Disputes after the Cyprus government failed to negotiate with investors seeking to recover their losses, estimated at hundreds of millions of euros. The investors, who are depositors and bondholders of Laiki Bank and the Bank of Cyprus, claim their investments were wrongfully confiscated following Cyprus’ €10 billion bailout and the restructuring of its financial sector. Greek investors also claim that they were discriminated against during the bailout, alleging that foreign investors were subject to extreme measures while certain Cypriot entities were exempt from such treatment. This is the first time that Greece and Cyprus’ bilateral investment treaty, which provides that the parties must first attempt to settle their dispute for at least six months before resorting to taking legal action, will be tested as a group action for large numbers of investors.
G&E reached a $1.5 billion (€1.3 billion) settlement—the largest in European history—resolving claims under the laws of the Netherlands in a case against Fortis, N.V. and Fortis SA/NV (now called Ageas N.V./S.A.) for materially misleading investors by disseminating inaccurate and incomplete information about its solvency status, and its exposure to the U.S. subprime market in the run-up to Fortis’ purchase of ABN Amro Bank. G&E represented over 180 institutional investors with more than 80 million shares, which was more than 3.5 percent of the Fortis shares that were outstanding at the end of 2008. After seven years of litigation in Dutch and Belgian courts, and months of intense mediation on behalf of at least four different claimant groups, a record settlement of $1.5 billion was reached, exceeding all but a few securities class action settlements in the United States.
In March 2015, G&E (in conjunction with two other U.S. law firms and Japanese counsel) reached a $92.4 million settlement with Olympus Corporation, a Japanese manufacturer of imaging systems and cameras, in the largest settlement of its kind in Japan. The settlement resolves allegations that Olympus falsely misrepresented its finances for over five years and hid large losses by characterizing them in its financials as fees paid to investment advisors for work on corporate acquisitions. This fraud came to light in late 2011 when the company’s former CEO questioned the high advisory fees—the disclosure of which led to a loss of nearly 81% in market capitalization, or more than $6 billion. The accounting scandal also led to government regulatory investigations, millions of dollars in civil penalties, and convictions of company executives across Japan, the UK, and the U.S.
G&E, along with three other U.S. and international law firms, represents more than 100 institutional investors alleging claims under Brazilian law in a case against Petróleo Brasileiro S.A. (“Petrobras”), a Brazilian oil and gas company and the largest corporation in Brazil in terms of revenue. Petrobras is involved in a major corruption and kickback scandal, which resulted in its common and preferred securities losing more than 60% of their value once the scandal became public. The case is proceeding in an arbitration in front of and under the rules of the Market Arbitration Chamber of the Brazilian Stock Exchange.
G&E, along with German counsel, is prosecuting claims in a German court against Porsche and Volkswagen arising out of the “short squeeze” orchestrated by Porsche with respect to Volkswagen shares in 2008. The claims arise out of losses suffered by investors who engaged in short sales and other transactions respecting Volkswagen stock and who were injured by Porsche’s allegedly false and misleading statements concerning its lack of intention to increase its holdings of Volkswagen stock. On behalf of its clients, G&E initially filed claims in the U.S. under the federal securities laws, but after the Supreme Court’s decision in Morrison v. National Australia Bank, G&E looked for an alternative forum in which the investors might be able to recover their losses, and a case was filed in Germany in late 2011 asserting claims under German corporate and tort law. A large number of institutional investors, from both the U.S. and Europe, have joined the case, asserting damages in excess of $1 billion. In April 2016, the court in Hanover granted G&E’s application to have the case treated as a model proceeding. In December 2016, our plaintiff was officially appointed by the court as model plaintiff. Proceedings are ongoing.
G&E worked with a number of institutional investors to achieve a $1 billion settlement against Royal Bank of Scotland brought in the High Court in London under UK law. The case involved a ₤12 billion 2008 Rights Offering by RBS, initiated by the company in order to rebuild the company’s deteriorating balance sheet, in which G&E alleged that the associated prospectus contained numerous material misrepresentations and omissions concerning, among other things, its subprime-related credit market exposure and the value of its goodwill relating to its then-recent acquisition of ABN Amro. Just three months after the offering, the bank failed and had to be rescued by the UK government. In January 2009, RBS was forced to disclose that it had incurred billions of dollars in losses relating to its subprime exposures and acquisition of ABN Amro. Investors who purchased shares in the Rights Offering lost nearly all of the value of their investment. The case was settled and a settlement agreement was signed that requires RBS to pay an aggregate of ₤800 million ($1 billion) to the claimants bringing suit. The settlement is the second largest securities fraud recovery in the history of the UK, which is a notoriously difficult jurisdiction for large scale plaintiffs’ litigation.
G&E represented more than 100 European institutional investors in a pan-European class action settlement with Royal Dutch Shell relating to misrepresentations concerning its proven oil and gas reserves between 1999 and 2004, when Shell traded as two stocks: Shell Transport & Trading and Royal Dutch Petroleum. After several months of negotiations, a settlement was reached, valued at approximately $450 million, including $352.6 million in cash paid from Shell and a payment to non-U.S. shareholders of an additional $120 million fine Shell paid to the U.S. Securities and Exchange Commission. In addition to this amount, Shell agreed to pay all fees and expenses relating to the settlement. The settlement was reached under Dutch law and was the first pan-European class settlement of its kind in history. This ground-breaking settlement provided the opportunity for non-U.S. investors to be part of a novel event by resolving a dispute without resorting to litigation. In addition to the settlement, G&E was able to work with Shell to increase goodwill with shareholders by making corporate governance changes.
G&E is working with French counsel in representing a number of European investors in an action in the Commercial Court of Paris against Vivendi Universal (“Vivendi”) and its former Chief Executive Officer and Chief Financial Officer. The investors were purchasers of Vivendi’s shares that traded on the Paris Bourse. The claims allege that from at least October 2000 through mid-2002, Vivendi engaged in a scheme to inflate its share prices artificially by materially and fraudulently misstating its financial results. In particular, Vivendi and its CEO, Jean-Marie Messier, concealed the existence of a severe liquidity crisis at the company. The claims are based on the losses incurred by purchasers of Vivendi shares from 2000-2002, when Vivendi’s stock price plummeted from over €80 to under €20 per share as a result of the disclosures that came out between January and August 2002. As G&E is not admitted to practice in France, G&E retained French counsel to handle the court appearances, however, G&E has been heavily involved in directing case strategy and actively participating in all decisions as well as reviewing all substantive briefs and other papers prior to filing. In this way, G&E’s role has been very much like that of in-house counsel managing outside lawyers litigating a case. In January 2015, Paris Commercial Court issued a decision rejecting defendants’ preliminary motions, and the Court appointed an expert to review plaintiffs’ evidence as to their transactions in Vivendi stock – his report was submitted to the court in March 2018. The court had set a trial date for June 2019, which was pushed back and a new trial date is yet to be scheduled.
G&E is currently working with a number of institutional investors on a securities action against Volkswagen in Braunschweig Court of Appeals (Germany) and a related action against Porsche in the Stuttgart Court of Appeals (Germany) under German law. These investors suffered billions of dollars in losses in connection with their purchases of VW and Porsche securities in the wake of the disclosure that VW had been equipping its diesel cars with “defeat devices” designed to cheat emissions tests in the United States. In March 2016, a complaint was filed against VW on behalf of nearly 300 institutional investors. The case is proceeding under the German KapitalanlegermusterVerfahrensGesetz (Capital Market Investors’ Model Proceeding Act), which is akin to a class action in the United States except investors must affirmatively join the case as plaintiffs in order to recover. Now, more than 500 plaintiffs, representing over $5 billion in losses, are participating in the case.