Practice/Industry Group Overview
Sullivan & Cromwell’s securities litigation practice is renowned for providing superior legal representation in the highest-profile, most complex securities litigation matters before courts, arbitration panels and regulators worldwide. The Firm has earned the trust of some of the world’s most demanding clients, who repeatedly turn to S&C to represent them in their most challenging high-stakes matters.
S&C’s securities litigators are among the most well respected in the legal profession by courts, regulators and adversaries alike. They are frequently called upon to serve in prominent government positions and have been fundamental in the evolution of the banking and securities laws of the United States. Leadership roles include service as the Former Chief Counsel of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, a primary drafter of the Private Securities Litigation Reform Act of 1995 and the author of the Sarbanes-Oxley Deskbook, a three-volume guide hailed by Fortune Magazine as “the bible for securities lawyers.”
The Firm’s securities litigation practice has been top-ranked by Chambers USA in its last five consecutive editions, and the Firm’s litigators are widely recognized as leaders in the securities litigation field by independent rankings and prominent legal media, including Chambers USA, The International Who’s Who of Business Lawyers, Lawdragon, The Best Lawyers in America, The Legal 500 US and New York Super Lawyers.
S&C’s securities litigators have exceptional depth of expertise representing clients in high-profile matters including:
- securities class action litigation
- shareholder derivative actions
- mergers and acquisitions litigation
- investigations and enforcement actions by the Department of Justice, SEC, FINRA (formerly NASD and NYSE) and other federal, state and non-U.S. regulators
- internal investigations conducted by corporations and their Boards of Directors
The Firm regularly defends some of the world’s leading corporations and financial institutions in securities class action or other complex litigation. We are representing a number of financial institutions and other clients in matters arising out of the subprime lending crisis, including many non-public investigations of events in the subprime securitization market. S&C lawyers also represent their clients in investigations and enforcement actions brought by the SEC or other regulators, which may be concurrent with private litigation. These investigations and lawsuits often involve allegations of violations of the federal securities laws, such as allegations of false or misleading disclosures to shareholders, insider trading and other types of financial fraud.
S&C has also successfully represented corporations in litigation relating to M&A transactions, including shareholder derivative and class action litigation arising out of corporate control disputes. Our securities litigation practice is actively coordinated among our four U.S. offices and also in London where we are one of very few U.S. firms to have an active and established U.S. law litigation practice representing our U.S. and non-U.S. clients.
The Firm’s securities litigators represent many of the world’s leading business and financial enterprises, boards of directors and individual clients, and other participants in the securities industries in the highest-profile matters, as well as in many representations that have not become public.
The Firm’s financial institution clients include AIG, AmSouth Bancorporation, Archipelago Holdings, Bank of America, The Bank of New York Mellon, Barclays, Goldman Sachs, JPMorgan Chase, KPMG UK, Morgan Stanley, New York Community Bancorp, Regions Financial, Relational Investors, Thomas Weisel Partners, UBS, Unum and Van der Moolen. Other clients include leading corporations such as Amgen, BP, CA, Cablevision, Corporación J.R. Lindley, Digital Insight Corporation, j2 Global Communications, Oxford Health Plans, Koninklijke Philips Electronics, Microsoft Corporation, Softbank, Swift Transportation and VeriFone.
Recent Securities Litigation Highlights
S&C’s securities litigators have a proven track record in bet-the-company securities litigation matters. Recent highlights include the following:
- S&C won a victory for Barclays in a January 2011 decision dismissing a federal securities law class action brought against the bank and current and former members of Barclays’ board of directors in the U.S. District Court for the Southern District of New York in connection with four offerings of American Depositary Shares, totaling more than $5 billion in value. The plaintiffs alleged three main categories of misrepresentations and omissions: Barclays’ failure to disclose its holdings of various sub-categories of mortgage-related assets; Barclays’ alleged overvaluation of those assets and failure to take timely write-downs; and Barclays’ allegedly inaccurate description of its risk-management policies and practices. The Court granted the defendants’ motion to dismiss in its entirety and expressly denied the plaintiffs leave to further amend their complaint. Among its findings, the Court ruled that a statute of limitations barred plaintiffs right to seek action on three of the four offerings and rejected the plaintiffs’ claim that Barclays failed to adequately and timely write down the value of its mortgage-related assets, holding that “Barclays’ valuations and write downs were . . . matters of judgment and opinion” and that, as such, plaintiffs’ failure to allege that “Barclays did not truly believe its own valuation[s]” was fatal to their claim. Subsequently, plaintiffs moved for the Court to reconsider its decision; in May 2011, the Court denied this motion.
- Obtaining a victory for client The Boeing Company in a securities class action litigation related to Boeing’s much anticipated aircraft, the 787 Dreamliner. In a March 2011 opinion, Judge Suzanne Conlon of the Northern District of Illinois granted Boeing’s motion for reconsideration and dismissed with prejudice a complaint brought by a putative class of Boeing shareholders. Judge Conlon issued her decision just months after originally sustaining the complaint solely on the basis of four paragraphs attributed to a single confidential source. S&C moved for reconsideration after the confidential source at deposition repudiated every material allegation attributed to him in the complaint, even testifying that he had never before spoken to plaintiffs’ counsel but only to an investigator for plaintiffs who had tried to pressure him to make allegations that would support plaintiffs’ theory of the case. Judge Conlon’s opinion, which The Wall Street Journal called “the biggest plaintiff smackdown of the year,” was critical of plaintiffs’ lawyers for misleading the court and for failing to conduct an adequate investigation. David Tulchin was recognized on March 11, 2011 by The Am Law Litigation Daily as its “Litigator of the Week” for his role in leading the S&C team that secured the dismissal with prejudice, and the same publication also featured S&C’s victory as its top story on March 9.
- S&C continues to represent UBS in responding to a variety of regulatory inquiries, investigations and private litigation arising from the recent financial crisis and losses related to mortgage-backed securities. The Firm also represents UBS and several of its current and former officers and directors in a putative securities fraud class action brought in the Southern District of New York. The putative securities fraud class action involves share-holders from the United States and numerous foreign jurisdictions who purchased UBS securities on U.S. and foreign exchanges and who assert that losses to UBS’s share price were caused by UBS’s activities associated with U.S. residential mortgage-backed securities, Auction Rate Securities and certain cross-border tax issues. S&C also represents UBS in a putative ERISA class action, which asserted similar allegations as the putative securities fraud litigation, and which was brought by four former members of two UBS pension plans who sought damages totaling hundreds of millions of dollars. In March 2011, the Southern District of New York dismissed this action.
- S&C continues to represent VeriFone in consolidated securities class action litigation, federal shareholder derivative litigation and additional state court derivative litigation (stayed in California Superior Court in San Jose pending the outcome of the federal derivative action) – all related to VeriFone’s late-2007 financial restatement, which preceded a precipitous single-day share-price drop and resultant decrease in market capitalization of almost $2 billion. In March 2011, the U.S. District Court in San Francisco dismissed with prejudice the class action for plaintiffs’ failure to adequately plead scienter. This follows the District Court’s August 2010 dismissal with prejudice of the federal shareholder derivative action. Plaintiffs have since appealed both decisions to the U.S. Court of Appeals for the Ninth Circuit. S&C also represented VeriFone in a related investigation by the Securities and Exchange Commission, which resulted in a settlement.
- The Firm won a victory for Porsche SE in a decision on December 30, 2010 by Judge Harold Baer dismissing a suit valued at more than $2.5 billion brought by a group of hedge funds in the Southern District of New York. S&C successfully argued the motion for Porsche SE, drawing on recent Supreme Court case law to show that the Securities Exchange Act does not apply to securities-based swap agreements referencing foreign-traded securities. The legal ramifications of this case – and S&C’s role in this victory – were covered extensively by The New York Times and The Wall Street Journal. The Am Law Litigation Daily (January 3, 2011) reported on the importance of this decision, highlighting that:
“[Sullivan & Cromwell] was right on the money last summer when [the Firm] asked Manhattan federal district court judge Harold Baer Jr. to dismiss suits by hedge funds alleging fraud against Porsche for its alleged manipulation of Volkswagen’s stock price.” The article continued, “The hedge funds asserted that they lost about $2.5 billion in swap deals based on Volkswagen’s share price; [S&C] argued that the U.S. Supreme Court’s ruling in Morrison v. National Australia Bank precluded the hedge funds’ suits because their claims involved the alleged manipulation of a foreign company’s stock traded on a foreign exchange . . . . [S&C’s] Robert Giuffra Jr., who argued for Porsche at the Dec. 7 hearing on the motion to dismiss, [noted that] Judge Baer’s ruling cuts off what might have been a significant exception to the Morrison ruling.”
Other notable securities litigation highlights include:
- Acting as liaison counsel for 55 underwriting firms, S&C secured a groundbreaking decision that denied class certification in 306 IPO cases. The Second Circuit’s opinion in In re IPO Securities Litigation set the stage for a favorable settlement that was approved in 2009.
- In the Enron securities class action – widely considered to be the most complex and largest securities class action litigation ever – S&C has represented defendants Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. (collectively, “Barclays”) for more than nine years. In March 2009, as part of its long-term litigation strategy, Barclays achieved a successful final result of that litigation, obtaining summary judgment from the district court dismissing the securities fraud claims brought by the class against Barclays and Barclays’ co-defendants, Credit Suisse and Merrill Lynch. Plaintiffs had sought damages of $40 billion under the theory that financial institutions had a duty to disclose Enron’s financial position to investors; other financial institution defendants had settled these claims, agreeing to pay a total of $6.6 billion to plaintiffs in 2005.
- The Firm has represented UBS in several complex securities litigations, including major Enron-related securities class actions, and class action and derivative litigation in connection with its role as lead investment banker to HealthSouth.
- The Firm represented leading banking associations in obtaining a favorable ruling from the U.S. Supreme Court barring “scheme” liability under Section 10(b) of the Securities and Exchange Act in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., which made clear that plaintiffs cannot seek to impose liability on secondary actors—such as investment banks, auditors and vendors—in a so-called “scheme to defraud.”
- Our Firm helped to achieve an important victory on behalf of our clients Wachovia Bank and The Clearing House Association in Watters v. Wachovia Bank, N.A. and Wachovia Mortgage Corp., where the U.S. Supreme Court held that state laws apply to operating subsidiaries of national banks only to the same extent as they apply to parent national banks. This decision imposes important limitations on state regulation of national banks and their operating subsidiaries.
- In a significant victory for the directors of AmSouth Bancorporation, the Firm obtained a precedent-setting decision from the Delaware Supreme Court that sets high hurdles for plaintiffs attempting to assign blame to corporate directors.
- S&C successfully defended JPMorgan Chase and current and former members of its Board of Directors following the company’s merger with Bank One, obtaining a decision in the Delaware Supreme Court that set an important precedent regarding the standards for obtaining proxy damages.
- The Firm continues to defend CA in shareholder litigation arising out of the alleged accounting misconduct by prior management.
- The Firm represents a leading financial institution in putative class action litigation in connection with the February 2008 marketwide failures in auction rate securities.