Tag: Discovery


Chancery Court on Disclosure-Only Settlements

Jason M. Halper is a partner in the Securities Litigation & Regulatory Enforcement Practice Group at Orrick, Herrington & Sutcliffe LLP. This post is based on an Orrick publication by Mr. Halper, Peter J. Rooney, and Gregory Beaman. This post is part of the Delaware law series; links to other posts in the series are available here.

It’s a familiar story in M&A transactions. A merger is announced and, within days, the plaintiffs’ bar scrambles to file suits on behalf of the selling company’s stockholders, alleging that the seller’s board agreed to an inadequate price and made misleading disclosures about the deal. After going through “the motions”—the plaintiffs file a motion for preliminary injunction and the defendants produce certain agreed-upon documents—a settlement is reached whereby the plaintiffs give defendants a broad release in exchange for (often immaterial and unhelpful) supplemental disclosures and the defendants’ agreement to pay (and not to oppose court approval of) a “six-figure” fee award to plaintiffs’ counsel. According to the Trulia Court, the result is tantamount to a deal “tax” on M&A transactions.

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SEC Proposed Amendments to Rules for Administrative Proceedings

Barry R. Goldsmith is a partner at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn client alert by Mr. Goldsmith, Joel CohenMarc J. Fagel, Monica K. Loseman, and Mark Schonfeld.

On September 24, 2015, the Securities and Exchange Commission announced it had voted to propose amendments to rules governing its administrative proceedings. SEC Chair Mary Jo White noted that the “proposed amendments seek to modernize our rules of practice for administrative proceedings, including provisions for additional time and prescribed discovery for the parties.” [1] These proposals follow the SEC’s June 2014 announcement that it intended to bring more cases through administrative proceedings rather than in federal court [2] and the release of the Division of Enforcement’s May 2015 guidance entitled “Approach to Forum Selection in Contested Actions,” explaining how the SEC chooses between administrative proceedings and federal court to litigate its claims. [3]
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Exception to Attorney-Client Privilege in Shareholder Suits

William Savitt is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savitt, Jonathan M. Moses, Kevin Schwartz, and Nathaniel D. Cullerton.

The New York appellate court overseeing cases arising in Manhattan last week clarified and limited the circumstances in which corporations are obligated to produce confidential attorney-client communications to stockholder plaintiffs in the context of derivative litigation. Nama Holdings, LLC v. Greenberg Traurig LLP, No. 14738-14739N, 2015 WL 5839311 (N.Y. App. Div. 1st Dep’t. Oct. 8, 2015). The decision endorsed a multi-factored approach to determining when shareholder plaintiffs have established “good cause” for production of privileged communications.

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U.S. Enforcement Policy and Foreign Corporations

John F. Savarese is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savarese, David GruensteinRalph M. LeveneDavid B. Anders, and Lauren M. Kofke.

We recently reported on a new U.S. Department of Justice policy which expanded expectations for corporate cooperation in white collar investigations. While the initial wave of attention given to the DOJ pronouncement focused on U.S. companies, this new policy is also important for all companies with operations in the U.S. or whose activities otherwise bring them within the long arm of U.S. enforcement jurisdiction. Underscoring the relevance of these new policies to non-U.S. companies, Deputy Attorney General Yates noted in her remarks announcing the new policy that among “the challenges we face in pursuing financial fraud cases against individuals” is the fact that “since virtually all of these corporations operate worldwide, restrictive foreign data privacy laws and a limited ability to compel the testimony of witnesses abroad make it even more challenging to obtain the necessary evidence to bring individuals to justice.”

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DOJ Adopts New Requirements for Corporations Seeking Credit for Cooperation

John F. Savarese is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savarese, Ralph M. LeveneWayne M. CarlinJonathan M. Moses, and David B. Anders.

In an important development for corporations responding to federal investigations, the Department of Justice announced on September 10, 2015 revisions to its Principles of Federal Prosecution of Business Organization (“Principles”). The new policies, set out in a memorandum authored by Deputy Attorney General Sally Yates and sent to federal prosecutors across the nation, instruct prosecutors to focus their efforts to secure evidence against individuals responsible for corporate wrongdoing. The memorandum (accessible here) specifically encourages increased attention by DOJ attorneys on considering cases against individual wrongdoers, and also establishes additional guidelines that federal prosecutors and civil enforcement attorneys must follow in conducting and resolving corporate investigations.

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D.C. Circuit Upholds Privilege For Internal Investigation Documents

John F. Savarese is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savarese, Peter C. Hein, and David B. Anders.

Earlier this week, the D.C. Circuit Court of Appeals for the second time granted a writ of mandamus and vacated district court orders that would have provided for the disclosure of privileged documents created in the course of a company’s internal investigation. In Re Kellogg Brown & Root, Inc., No. 14-5319 (Aug. 11, 2015).

As noted in our prior memo, in a 2014 decision in this same case the D.C. Circuit granted a writ of mandamus and made clear that a proper application of privilege principles would protect documents created in the course of a company’s internal investigation—even if the investigation was conducted by in-house counsel without outside lawyers, even if non-attorneys (serving as agents of attorneys) conducted many of the interviews, and even if the internal investigation was conducted pursuant to a company compliance program required by a statute or government regulation (and thus arguably had in part a business purpose in addition to the purpose of obtaining or providing legal advice).

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Delaware Court Curtails Books & Records, Validates Board-Adopted Forum Selection Bylaws

William Savitt is a partner in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savitt, Ryan A. McLeod, and A.J. Martinez. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

A unanimous Delaware Supreme Court yesterday reaffirmed the ability of Delaware companies to organize corporate litigation in the Delaware courts. United Technologies Corp. v. Treppel, No. 127, 2014 (Del. Dec. 23, 2014) (en banc).

The case involved an action to produce corporate books and records under Section 220 of the Delaware General Corporation Law, an increasingly frequent preliminary battleground in derivative litigation. Following a familiar pattern, stockholder plaintiffs demanded access to certain books and records of United Technologies Corporation, allegedly to assist in their consideration of potential derivative litigation. UTC asked that all demanding stockholders agree to restrict use of the materials obtained in the inspection to cases filed only in Delaware, pointing out that litigation had already been filed relating to the same matters in the Delaware courts and that any derivative lawsuit would be governed by Delaware law. Then, further evincing its concern to organize corporate governance litigation in the courts of Delaware, UTC’s board adopted a forum selection bylaw during the pendency of the Section 220 lawsuit.

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The Application of Common-Interest Privilege to Merger Pre-Closing Communications

Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, William Savitt, Elaine P. Golin, and Justin V. Rodriguez.

A New York appellate court today [December 04, 2014] ruled that the “common-interest privilege” can protect from discovery pre-closing communications among merger parties and their counsel made for the predominant purpose of furthering a common legal interest, even if there is no pending or anticipated litigation. Ambac Assurance Corp. v. Countrywide Home Loans, Inc., No. 651612/10 (N.Y. App. Div. 1st Dep’t Dec. 4, 2014). The ruling recognizes that after a merger agreement is signed, the merging parties must often share legal advice to complete the transaction.

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Delaware Court Affirms Order Requiring Production of Privileged Documents

The following post comes to us from Lewis R. Clayton, partner in the Litigation Department and co-chair of the Intellectual Property and ERISA Litigation Groups at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

In Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, the Delaware Supreme Court formally recognized the “Garner doctrine,” an exception to the attorney-client privilege, in connection with a stockholder’s demand for records under Section 220 of the Delaware General Corporation Law, and confirmed that the exception also applies to other stockholder claims. The decision may allow derivative plaintiffs to obtain certain sensitive privileged communications and attorney work-product in cases involving substantial allegations of serious fiduciary misconduct.

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Supreme Court on Statute of Limitations for SEC Enforcement Actions

The following post comes to us from Jay B. Kasner, head of the Securities Litigation Practice at Skadden, Arps, Slate, Meagher & Flom, and is based on a Skadden memorandum by Mr. Kasner, Matthew J. Matule, Edward B. Micheletti, and Peter B. Morrison.

Gabelli v. Sec. & Exch. Comm’n, No. 11-1274 (U.S. Feb. 27, 2013)

In a unanimous opinion authored by Chief Justice Roberts, the U.S. Supreme Court held that the five-year limitations period that governs SEC enforcement actions begins to run when the alleged fraud is complete. The Court reversed the Second Circuit on the issue, which had held that the discovery rule applied in cases where the defendant allegedly committed fraud. The SEC alleged that two mutual fund managers allowed one of the fund’s investors to engage in market timing in the fund in exchange for an investment in a separate hedge fund, but the SEC filed the action more than five years after the conduct was alleged to have taken place. The Court explained that limitations periods ordinarily begin to run upon a party’s injury, but in cases of fraud — when the injury itself is concealed — courts have developed the discovery rule to protect individuals, who are after all not required to be in a constant state of investigation. That rationale however does not apply to the SEC, whose mission is to investigate (and prevent) fraud and which has statutory authority to demand detailed records, including those extra-judicial subpoenas. Therefore, the Court concluded the discovery rule does not apply to the SEC.

Click here to view the opinion.