Big Suits

Lawrence E. Jaffe Pension Plan v. Household International In re Tobacco Cases II SEC v. Cuban Activision v. Hayes

The American Lawyer

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Lawrence E. Jaffe Pension Plan v. Household International

On October 17 Robbins Geller Rudman & Dowd secured a record $2.46 billion judgment in a long-running securities fraud class action against a unit of British banking giant HSBC Group. In a final judgment, U.S. District Judge Ronald Guzman ordered HSBC and three former executives of the unit, Household International Inc., to pay a total of $1.48 billion in damages and $986 million in prejudgment interest. The verdict is the largest by far in a securities class action trial to date.

Investors filed suit in 2002 against Household, now known as the HSBC Finance Corporation, alleging that the company and its executives misled investors about its lending practices, the quality of its loans, and its financial accounting.

By the time the case went to trial in 2009 before Judge Guzman in Chicago, it was just the seventh securities class action tried to a verdict since the passage of the Private Securities Litigation Reform Act in 1995. HSBC was represented first by Milbank, Tweed, Hadley & McCloy and then by Wachtell, Lipton, Rosen & Katz, before it turned to Cahill Gordon & Reindel's Thomas Kavaler as trial counsel. Cahill continued to represent the bank posttrial, but HSBC also brought on Skadden, Arps, Slate, Meagher & Flom's R. Ryan Stoll and Mark Rakoczy in late 2010 to help with posttrial motions and, in the run-up to a potential appeal, brought on Paul Clement of Bancroft PLLC in July, according to the docket.

In a defense motion filed shortly after Clement signed on, HSBC's lawyers asked Guzman to reverse the jury verdict or to retry the case. Guzman denied that motion in early October. Meanwhile, Robbins Geller partners Spencer Burkholz, Daniel Drosman, Luke Brooks and Michael "Mike" Dowd were continuing to seek damages related to 25,000 additional contested claims. Those claimants allege losses of more than $650 million.

HSBC planned to appeal. —Ross Todd

Activision v. Hayes

On October 9 the Delaware Supreme Court approved the video game publisher Activision Blizzard Inc.'s plan to buy back $5.8 billion in shares from Vivendi SA, handing a major come-from-behind victory to lawyers at Wachtell, Lipton, Rosen, & Katz and Skadden, Arps, Slate, Meagher & Flom.

Reversing a ruling from the Delaware Court of Chancery, the court, in a unanimous decision announced by Chief Justice Myron Steele, ruled that Activision's bylaws don't require the company to let non-Vivendi shareholders vote on the share buyback plan.

Wachtell's William Savitt, who represents Activision's special committee, argued on behalf of all the defendants. Michael Hanrahan of Prickett, Jones & Elliott argued for the plaintiff, Activision shareholder Douglas Hayes. Skadden's Edward Welch and Edward Micheletti represented Activision.

Under the share buyback deal, completed October 14, Vivendi sold 427 million Activision shares back to the company for $5.83 billon. An investor group spearheaded by Activision CEO Robert Kotick acquired another $2.34 billion in shares.

After the plan was announced in July, Prickett Jones and Kessler Topaz Meltzer & Check brought a shareholder derivative suit in September seeking to block the deal. Defendants included Activision's board, the Kotick-headed investor group, and a special committee of Activision's independent directors that signed off on the deal. They argued that it amounted to either a merger or a business combination between Activision and Vivendi, which required a shareholder vote under Activision's bylaws. Delaware Vice Chancellor J. Travis Laster preliminarily enjoined the deal a week later, ruling that the deal was a business combination.

In reversing Laster's ruling, the Delaware Supreme Court found that the purchase agreement was neither type of transaction.—Jan Wolfe

SEC v. Cuban

In a high-profile loss for the U.S. Securities and Exchange Commission, a U.S. district court jury in Dallas returned a verdict on October 16 that business magnate Mark Cuban didn't commit insider trading. For his successful defense, Cuban looked to former Dewey & Le­Boeuf partners Stephen Best and Christopher Clark, now of Brown Rudnick and Latham & Watkins, respectively.

In 2004 Cuban owned 600,000 shares of Momma.com Inc. The company planned to raise capital through a private stock offering. The maneuver was expected to dilute the value of preexisting shares, including shares owned by Cuban. Momma.com's CEO telephoned Cuban and asked him to participate in the equity raise. Cuban declined and instead dumped his shares, avoiding a loss of $750,000.

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