Gibson Dunn Lands One-Two Punch in SAIC Investor Cases

, The Litigation Daily

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Andrew Tulumello of Gibson, Dunn & Crutcher
Andrew Tulumello of Gibson, Dunn & Crutcher

The government contractor SAIC Inc. (now Leidos Holdings Inc.) must still be reeling from the $500 million settlement it reached with the U.S. Department of Justice in 2012, which resolved allegations that its employees took kickbacks and engaged in overbilling while revamping New York City's payroll system. But the company had plenty of reason to be pleased on Thursday, when Andrew Tulumello of Gibson, Dunn & Crutcher helped it win two major rulings in lingering investor litigation over the kickback scandal.

In a brief order, the U.S. Court of Appeals for the Second Circuit dismissed a shareholder derivative suit alleging that SAIC's board failed to halt the corrupt payments. Affirming a prior ruling by U.S. District Judge J. Paul Oetken in Manhattan, the appeals court ruled that plaintiffs lawyers failed to meet their burden of showing that the board ignored "red flags" that SAIC employees were taking illegal kickbacks. Tulumello handled the oral argument for SAIC, squaring off against plaintiffs lawyer Brett Stecker of the Weiser Law Firm in Berwyn, Penn.

SAIC got more good news later in the day, when U.S. District Judge Deborah Batts in Manhattan issued a 14-page decision that dismissed the remnants of a securities class action Robbins Geller Rudman & Dowd brought on behalf of SAIC shareholders. The shareholders alleged that SAIC misled them through a March 2011 regulatory filing. According to Robbins Geller, the filing should have disclosed that SAIC would likely be implicated in scandal, which at the time had only resulted in criminal charges against non-SAIC employees. Batts dismissed that argument, writing that SAIC's disclosure obligation hadn't yet kicked in.

Batts' ruling is a significant reversal from a prior decision. Back in September, she trimmed the case, but allowed the shareholders to proceed with claims relating to the March 2011 regulatory filings. Tulumello and fellow Gibson Dunn partner Jason Mendro apparently changed her mind through an October 16 motion for reconsideration.

"Our major point was that if the standard is too lenient and plaintiffs are able to second- guess a company's disclosures, then you really are putting public companies in a bind whenever they're dealing with a government investigation," Tulumello told us. "We're extremely grateful that the court took the time to review the papers carefully."

In the shareholder derivative case, Kirkland & Ellis represents SAIC's board. Some individual board members and executives hired individual counsel. The firms handling that work include Goodwin Procter, Brown Rudnick, and Zuckerman Spaeder.

Robbins Geller's Samuel Rudman was not immediately available for comment.

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