Insider Trading Actions
Shareholder Derivative Actions
Securities Fraud Class Actions
Corporate Transactions/Shareholder Rights
ERISA Actions
Consumer Class Actions
Antitrust Class Actions

Insider Trading Actions

Abraham Fruchter & Twersky LLP’s Insider Trading Practice Area focuses on both federal and state law claims that seek to remedy and prevent unlawful insider trading by corporate insiders. One type of case involving insider trading brought by Abraham Fruchter & Twersky LLP involves actions arising under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78 p(b). Our Firm and partners are among the leading experts in the country on this particular type of litigation, and we have been at the forefront of obtaining favorable court rulings that have both enabled the acquisition of recoveries benefiting investors and helping to prevent future acts of corporate malfeasance associated with insider trading.

In one such case, Abraham Fruchter & Twersky LLP successfully negotiated a cash settlement for $20 million dollars despite the fact that the Securities and Exchange Commission (the SEC) had taken the position that there was no Section 16(b) liability. That case is one of many cases in which our Firm has achieved multi-million dollar settlements from persons charged with violating the restrictions imposed on insider trading by Section 16(b) including $9.4 million paid in settlement of a Section 16(b) claim involving a corporate defendant whose CEO served on the issuer’s board of directors and a case involving General Electric Capital Corporation, who paid $1.25 million to settle a Section 16(b) claim relating to its trading in the common stock of Marketing Services Group, Inc.

In another (still pending) case, the United States Court of Appeals for the Third Circuit resolved certain issues of first impression relating to the scope and interpretation of Rule 16b-3 and Rule 16b-7 of the Securities Exchange Act of 1934 [17 C.F.R. §§240.16b-3 and 240.16b-7] promulgated by the Securities and Exchange Commission consistent with the position advocated by our Firm (Levy v. Sterling Holding Company, 314 F. 3d 106 (3rd Cir. 2002)).

In addition to bringing cases under Section 16(b), our Firm has been at the forefront of efforts to cause corporate insiders to disgorge the proceeds of insider trading profits earned during the time that companies’ financial results were improperly reported or other material facts were improperly concealed from members of the investing public. These cases have involved asserting claims arising under the Sarbanes-Oxley Act of 2002, provisions of the federal securities laws and state law principles of fiduciary duty in shareholder derivative actions which are described in the section below concerning shareholder derivative actions.

Shareholder Derivative Actions

Abraham Fruchter & Twersky LLP’s Shareholder Derivative Actions Practice Area focuses on actions brought by individual shareholders of a corporation in order to obtain a recovery for that corporation from a corporate insider for a violation of state or federal law, which has caused damage to the corporation. Often times, these actions are directed at requiring corporate insiders to disgorge the proceeds of insider sweetheart deals which function to deprive the company and its public shareholders of the true value of the assets involved. On other occasions, the lawsuits seek to require corporate insiders to disgorge the proceeds of insider trading or of excess bonuses paid as a result of wrongful corporate conduct and to otherwise hold those corporate officials responsible for the damages they have caused the corporation.

Among the shareholder derivative cases in which members of our firm have taken a leading role, was a case brought on behalf of HealthSouth Corporation in the Delaware Court of Chancery in which a judgment was obtained against Richard Scrushy, the former Chief Executive Officer of HealthSouth, requiring him to disgorge more than $17 million in proceeds from insider trading in HealthSouth stock.

Our Shareholder Derivative Actions Practice Area also extends to cases in which reckless management of a company’s operations causes damage to the company. One action making such allegations in which members of our Firm played a leading role, was a shareholder derivative action brought on behalf of the Bank of New York Corporation against corporate insiders with respect to the damage caused to the company by their failure to properly institute the internal controls necessary to prevent money laundering. After denial of a motion to dismiss, the taking of substantial pre-trial discovery and the defeat of an effort to have the case decided by a special committee, the case was resolved for a cash payment of $26.5 million for the benefit of the Bank of New York.

Other shareholder derivative actions in which members of our firm have taken a leading role include one brought on behalf of ImClone Systems Inc. which settled for a cash payment of $8.75 million and remedial benefits designed to prevent a recurrence of the corporate malfeasance which originally gave rise to the claim. The Firm is currently taking a leading role in shareholder derivative actions brought on behalf of, among other companies, Southern Peru Copper, Tenet Health Systems, Merck & Co., Inc., MedcoHealth Solutions, Inc., El Paso Corporation, Schering Plough Corporation and Direct General Corporation.

Securities Fraud Class Actions

Abraham Fruchter & Twersky LLP’s Securities Fraud Class Actions Practice Area handles cases brought on behalf of purchasers or sellers of securities with respect to the misrepresentation of, or failure to disclose, material facts to investors. The most common type of action is brought on behalf of people who purchased securities in the open market and arises under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78j(b). In order to prevail in a Section 10(b) action, a defendant must, among other things, have acted with either intent or in reckless disregard of known facts. In situations where an investor has purchased securities issued pursuant to a registration statement and prospectus field with the SEC, he or she may maintain an action pursuant to Sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. §§77k and 771(a)(2), which enables a plaintiff to recover even if the defendant(s) only acted negligently rather than with intent.

Abraham Fruchter & Twersky LLP has substantial experience and has achieved excellent results in many such shareholder actions, including In re Global Crossing Securities Litigation, 2005 U.S. Dist. LEXIS 16232 (S.D.N.Y.), in which our Firm is acting as co-lead counsel for a sub-class consisting of purchasers of Asia Global Crossing securities. Our Firm’s actions have helped result in the recovery to date of approximately $18 million representing 8% of the funds recovered in the entire Global Crossing case, a substantial premium to the 1% of losses suffered by the Asia Global Crossing sub-class members with respect to total losses suffered by investors in the entire Global Crossing case.

Our Firm is also co-lead counsel in In re Peregrine Systems, Inc. Securities Litigation, 2002 U.S. Dist. LEXIS 27690 (S.D.Cal.) in which we represent a sub-class of persons who acquired Peregrine securities through a series of mergers initiated by Peregrine during the class period. To date, partial settlements totaling more than $15 million have been achieved with the case proceeding against the primary defendants.

In re: Dreyfus Aggressive Growth Mutual Fund Litigation, 98 CV 4318 (HB) (S.D.N.Y.), a case in which members of our Firm served in the executive committee of a class action brought on behalf of purchasers of two mutual funds for damages arising from misleading statements made in the offering prospectuses. The case was settled for $18.5 million in cash.

Our Firm is currently a lead counsel in several class actions brought on behalf of securities purchasers. These include claims brought on behalf of purchasers of InVision Technologies, Inc., AirGate PCS, Inc., Printcafe Software, Inc., and KhongZhong Ltd.

In addition, our Firm is often asked to participate in other major litigations in which it is not a court designated lead counsel including, for example, the IPO litigation brought against the major underwriting firms with respect to alleged malfeasance in underwriting and post-underwriting market-making activities in certain “hot” initial public offerings.

Corporate Transactions/Shareholder Rights

Abraham Fruchter & Twersky LLP’s Corporate Transactions/Shareholder Rights Practice Area handles cases dealing with transactions in which the interests of minority shareholders or limited partners are eliminated through either the sale of the entity’s underlying assets or through the sale of the entity itself. Such transactions often provide a tempting opportunity for corporate officers to advance the financial or corporate interests of the controlling shareholder or general partners at the expense of minority investors. These cases often arise under Section 14(a) of the Securities Exchange Act of 1934 and state law principles requiring corporate officers and controlling shareholders to discharge their fiduciary duties with loyalty, care and prudence.

Members of our Firm have been active in this area of practice. In one case brought on behalf of the limited partners of a series of limited partnerships controlled by Jones Intercable, Inc., a settlement of $10.5 million was achieved. In another case arising out of the sale of the last cable television system owned by American Cable TV partners V, L.P., a settlement of $5 million was achieved. In another case, our Firm obtained a $1.7 million increase in the initially proposed price of $8.3 million in a management buyout of the minority interests in a trust.

Our Firm has also brought similar cases on behalf of shareholders of publicly traded companies where it appears that the price being offered is inadequate. One such case was In re Ugly Duckling Corp. Shareholders’ Derivative and Class Litigation, C.A. No. 18746 (Del. Ch.), which settled for a $9 million increase in the price of a proposed tender offer made by a controlling shareholder. In another similar case, In re CFSBDirect Tracking Stock Shareholder Litigation, C.A. No. 18307 (Del. Ch.), the claims were settled for a $36.4 million or 50 % increase in the price offered by a controlling shareholder in a tender offer.

ERISA Actions

Abraham Fruchter & Twersky LLP’s ERISA Practice Area handles actions brought under the Employee Retirement Income Security Act, which seeks to recover funds lost by employees in their pension accounts caused by imprudent investment decisions or other wrongful acts taken by investment plan fiduciaries. In one such action brought on behalf of employees of CIGNA, our firm acted as a co-lead counsel and the case has been settled for substantial material changes to the plan benefiting the employees. We are also a member of the plaintiffs’ executive committee in an ERISA case being brought on behalf of EDS employees. Our Firm has also been, and expects to continue, playing an active role in an ERISA case filed for the benefit of Marsh & McLennan employees.

Consumer Class Actions

Abraham Fruchter & Twersky LLP’s Consumer Class Actions Practice Area focuses on actions that arise out of deceptive representations or business practices directed at consumers. In one such case, Lawrence v. Gouldd, et al., CV-S-99-969 JBR (RLH) (D. Nev.), members of our Firm represented individuals who were alleged to have been the victims of a pyramid scheme. The case settled two weeks into trial for proceeds, based upon the estimated liquidation value of defendants’ assets, of approximately $30 million.

In another case, our Firm obtained a favorable ruling from a New York State Appellate Court on an issue of first impression barring mortgage lenders from charging New York State residents a fax fee in connection with providing mortgage pay-off statements and holding that consumers had an implied private right of action to recover any such fees paid. The decision was “Decision of the Day” in the November 19, 1999, edition of The New York Law Journal and is reported as Negrin v. Norwest Mortgage, Inc. (163) A.D.2d 39, 700 N.Y.S.2d 184 (2d Dep’t 1999).

In a case our Firm brought on behalf of consumers across the country against the four largest sunscreen manufacturers in the U.S. alleging false advertising and labeling of sunscreen products, our Firm was appointed lead counsel for the plaintiffs and the classes, and subsequently obtained a favorable ruling on issues relating to federal preemption of state law, primary jurisdiction, and similar doctrines. The case is currently pending in the Superior Court of California, Los Angeles County. In re Sunscreen Cases, JCCP 4352 (Sup. Ct. Cal.)

Antitrust Class Actions

Abraham Fruchter & Twersky LLP’s Antitrust Class Actions Practice Area focuses on actions that typically arise out of alleged price-fixing conspiracies, which hurt consumers. Members of our Firm have experience litigating antitrust claims and have been involved in cases alleging price fixing conspiracies with respect to the pricing of options, the pricing of sausage casing, commission rates charged in art auctions, and credit card fees.