Shareholder Rights and Corporate Governance

For over twenty-five years, Bernstein Liebhard has focused on protecting shareholders’ rights, through actions which ensure director and officer accountability, preserve corporate assets, improve corporate disclosure, and protect shareholder voting rights and shareholder value. Our shareholder rights and derivative litigation team protects the rights of shareholders in actions involving tender offers, mergers and acquisitions, and other transactions involving changes in control of a public company including actions on behalf of retail bond investors who were excluded from participating in bond exchange offers (known as “bond exchange offer litigation”) in which corporate issuers attempt to alleviate the pressure of servicing their debt by making exchange offers to Qualified Institutional Buyers (“QIBs”) as defined under Rule 144A of the Securities Act of 1933.  These exchanges often create a new class of bonds having priority over the original bonds that were purchased by retail bond investors.  The retail bond investors, however, were denied the right to approve or to participate in the exchange, which may violate the Trust Indenture Act of 1939.

Through aggressive representation, our firm has secured hundreds of millions of dollars of additional consideration for shareholders, as well as therapeutic changes in the context of mergers and acquisitions. Examples include:

  • In re Freeport-McMoRan Copper & Gold, Inc. Derivative Litigation ($153.75 million recovery for shareholders as well as corporate governance reforms – one of the largest derivative settlements in the Delaware Court of Chancery history).
  • In re Great Wolf Resorts, Inc. Shareholders Litigation (the firm obtained the elimination of stand-still provisions that allowed third parties to bid for Great Wolf Resorts, Inc. (“Great Wolf”) – resulting in the emergence of a third-party bidder and approximately $94 million in additional merger consideration for Great Wolf’s shareholders).
  • In re Atlas Energy, Inc. Shareholders Litigation (the firm obtained a settlement providing an additional $7.45 million in merger consideration for Atlas Energy shareholders).
  • In re Pride International, Inc. Shareholders Litigation (the firm obtained a proposed settlement providing material modifications to a contested merger agreement and the dissemination of supplemental disclosures in connection with a proxy statement sent to Pride shareholders).
  • In re Mutual Funds Investment Litigation [Federated Sub-Track (the firm obtained a total settlement of $3,381,500 in addition to significant corporate governance reforms. The benefits were in addition to $72 million that Federated Investors, Inc. (“Federated”) paid pursuant to the settlement of regulatory investigations concerning Federated’s alleged market-timing and late-trading activities).
  • In re Mutual Funds Investment Litigation [Bank of America/Nations Sub-Track (the firm, with lead counsel, achieved settlements that resolved the class action and several related litigations arising from alleged market timing and late trading in various mutual funds in the Bank of America mutual fund family. The settlements established a jointly-recommended minimum allocation of at least $60 million to shareholders of the Nations Funds from a fund created as a result of Bank of America’s settlement of regulatory investigations.  In addition to the monetary allocation, the settlements provided for corporate governance changes concerning the detection and prevention of future market timing and late trading in the Nations Funds).

DERIVATIVE ACTIONS

A shareholder derivative action is a lawsuit brought by a shareholder of a public company, on behalf of, and for the benefit of the company for harm suffered by all shareholders. Derivative actions seek the corporate recovery of damages and/or equitable relief stemming from allegedly unlawful or improper conduct by directors, officers or other persons in control of the company. A derivative action allows shareholders to monitor and redress harm to the corporation caused by management where it is unlikely that management will redress the harm itself. A successful derivative action, in addition to the corporate recovery of damages, may include corporate governance reforms that strengthen and protect shareholder value.

Corporate governance reforms adopted as a result of derivative litigation make corporate officers and directors more accountable to shareholders, inspire investor confidence in the financial markets, and protect companies and their shareholders from fraud and egregious corporate conduct.  Bernstein Liebhard is among the original champions of corporate governance reform and accountability, and remains at the forefront of this important movement. Founding Partner Stanley D. Bernstein was named by The National Association of Corporate Directors and Directorship magazine to the “Directorship 100,” the list of “The Most Influential People in the Boardroom,” in recognition of his career at the forefront of the corporate governance reform movement. Mr. Bernstein pioneered the use of litigation to achieve corporate governance reform in In re Sears, Roebuck Derivative Litigation (Ill. Ch. Ct.), where he successfully negotiated a settlement that included an enhancement to the independence of the Sears board of directors by adding outside, non-employee directors to the board, and expanding the role of outside directors in the company’s nominating committee. Since that time, we have used litigation as a tool to gain corporate reforms and accountability when such changes would benefit shareholders.

MERGERS & ACQUISITIONS

Class actions are also brought to protect and defend the rights of public shareholders whose companies have entered into management-led buyouts, mergers, or other similar business transactions. Although directors of publicly traded companies owe their companies’ shareholders duties of care, loyalty and full and fair disclosure, takeover proposals are all too often approved by directors without properly shopping the corporation for the best price or providing shareholders with adequate information. Shareholder interests are often overlooked or completely disregarded. Bernstein Liebhard has prosecuted numerous class actions on behalf of shareholders who have been unfairly or inadequately treated in a merger or business combination. Our efforts have resulted in substantial recoveries for the clients we have represented.

For more information about our recoveries for shareholders, including corporate governance reforms, click here.  For more information about our shareholder rights and derivative litigation work, please contact Joseph R. Seidman, Jr. or info@bernlieb.com.