Attorneys at Law A PRIMER ON SHAREHOLDER LITIGATION Securities Class Actions, Non-U.S. Jurisdiction Actions, Shareholder Derivative Actions, Mergers & Acquisitions Litigation, Appraisal Actions, and Direct Actions (Opting-Out) www.ktmc.com Disclaimer: This article is intended to provide a thorough background on various forms of shareholder litigation. However, it is not intended as a substitute for legal advice with your chosen counsel and discussions as to the merits of each particular action you may consider. • All citations are omitted, but available upon request. • All financial figures are in U.S. dollars unless otherwise indicated. Revised February 2017 A Primer on Shareholder Litigation Securities Class Actions, Non-U.S. Jurisdiction Actions, Shareholder Derivative Actions, Mergers & Acquisitions Litigation, Appraisal Actions, and Direct Actions (Opting-Out) Table of Contents Page I. Introduction ........................................................................................................................... 1 II. Overview of the United States Federal Securities Laws ................................................. 1 A. The Securities Act ............................................................................................................................. 1 B. The Exchange Act ............................................................................................................................. 2 C. Private Remedies Under Federal Law .............................................................................................. 4 III. Securities Class Action Litigation..................................................................................... 5 A. The PSLRA and Institutional Investors ............................................................................................ 5 1. Reasons for Reform ...................................................................................................................... 5 2. The PSLRA: Procedure and Substance ........................................................................................ 6 B. What Is Being Accomplished (Important Trends in Securities Class Actions) ................................ 7 1. Increase in Monetary Value of Settlements .................................................................................. 7 2. Decreased Attorney Fees .............................................................................................................. 7 3. Corporate Governance Reforms ................................................................................................... 8 4. Creative Settlements ..................................................................................................................... 9 5. The Morrison Decision ............................................................................................................... 10 C. The Benefits of Serving as the Lead Plaintiff ................................................................................. 10 1. Serving as Lead Plaintiff and Its Advantages ............................................................................. 10 2. Dispelling the Myths of Being a Lead Plaintiff .......................................................................... 11 D. Calculating Your Losses ................................................................................................................. 12 E. Litigating Securities Class Actions ................................................................................................. 15 1. The Amended Complaint and Motion to Dismiss ...................................................................... 15 2. Merits Discovery ........................................................................................................................ 16 3. Class Certification ....................................................................................................................... 16 4. Trial ............................................................................................................................................ 17 IV. Litigating Securities Fraud Actions Outside of the United States ............................... 17 A. Litigating in Non-U.S. Jurisdictions ............................................................................................... 17 B. Factors to Consider When Deciding Whether to Litigate in a Non-U.S. Jurisdiction .................... 18 C. Overview of Litigation in Select Non-U.S. Jurisdictions ............................................................... 19 1. Australia...................................................................................................................................... 19 i (a) Legal System Generally................................................................................................................. 19 (b) Overview of the Australia’s Securities Laws ................................................................................ 20 (c) Collective Securities Litigation in Australia.................................................................................. 20 2. Belgium ...................................................................................................................................... 21 3. Canada ........................................................................................................................................ 23 4. Denmark ..................................................................................................................................... 26 5. France ......................................................................................................................................... 27 6. Germany ..................................................................................................................................... 28 (a) Legal System Generally................................................................................................................. 29 (b) Overview of Germany’s Securities Laws ...................................................................................... 29 (c) Collective Securities Litigation in Germany ................................................................................. 30 7. Italy ............................................................................................................................................. 31 8. Japan ........................................................................................................................................... 32 (a) Legal System Generally................................................................................................................. 33 (b) Overview of Japan’s Securities Laws............................................................................................ 33 (c) Collective Securities Litigation in Japan ....................................................................................... 34 9. Mexico ........................................................................................................................................ 35 10. The Netherlands .......................................................................................................................... 36 (a) Legal System Generally................................................................................................................. 36 (b) Overview of the Netherlands’ Securities Laws ............................................................................. 37 (c) Collective Securities Litigation in the Netherlands ....................................................................... 38 (d) Potential Developments: Introduction of U.S.-Style Class Action in the Netherlands ................. 40 11. Norway ....................................................................................................................................... 41 12. The United Kingdom .................................................................................................................. 42 13. Sweden........................................................................................................................................ 43 V. Shareholder Derivative Actions ........................................................................................... 44 A. Plaintiffs in Shareholder Derivative Actions .................................................................................... 45 B. State Law Fiduciary Duties ............................................................................................................... 45 C. Requirements to Bringing Shareholder Derivative Actions .............................................................. 45 1. Direct or Derivative Harm ............................................................................................................. 46 2. Demand and the Special Litigation Committee (SLC) .................................................................. 46 D. Objectives of Derivative Litigation ................................................................................................... 46 E. Examples of Derivative Cases Litigated by Kessler Topaz ............................................................... 47 ii 1. Options Backdating ........................................................................................................................ 47 2. Corporate Waste and Executive Compensation ............................................................................