Investors and issuers alike should take note of the Supreme Court's opinion in Morrison v. National Australian Bank as it could have major implications for their ability to sue or be sued for securities fraud in the future. 

In a ground breaking decision decided yesterday the High Court in Morrison rejected years of federal jurisprudence on the extraterritorial application of US securities fraud legislation. In a scathing opinion by Justice Scalia, the Court criticized the Second Circuit's vaunted "conduct" and "effects" test for establishing subject matter jurisdiction over foreign investors trading foreign securities on foreign exchanges (the so called "foreign cubed" case). The Court found that the authority to hear a securities fraud case involving foreign investors and securities is a question of "merit" and not a question of subject matter jurisdiction. In other words, rather than diving into the particulars of the defendant's conduct or the nationality of the parties, the Court found that the question is whether Section 10(b) gives rise to a private cause of action for securities that are traded outside of the territory of the United States.

In opposition to the Second Circuit's test involving foreign securities traded on foreign exchanges, the Court promulgated the "transactional test" for determining the extraterritorial reach of US securities fraud laws. The Court held that "[T]hose purchase-and-sale transactions are the objects of the statue's solicitude...And it is in our view only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which Section 10(b) applies."

First the good news - there aren't a whole lot of options backdating cases left.

Now the bad news - we have to update the numbers again, with the settlement earlier this week of the options backdating litigation involving  Maxim Integrated Products, Inc. (NASDAQ: MXIM)  for $173 million.

Thus, of the 39 options backdating cases that were filed as securities class actions, 36 have now reached a resolution. Of the resolved cases, 8 of those cases have been dismissed and 28 have substantially or completely settled.

The twenty eight settlements total $2.32 billion, for an average of $79.7 million.  Removing the largest settlement (UnitedHealth Group) lowers the average back to $51.88 million.  And due to a reader comment, we have a new metric - the median settlement value is $16 million including the UnitedHealth case, or $14 million if that case is excluded.  Removing the outlier on the other end (the $2 million PainCare Holdings settlement) returns the median back to $16 million.

Co-lead counsel in the Maxim case are Bernstein Litowitz Berger & Grossmann and Chitwood Harley Harnes.

As always, our complete analysis can be accessed in this presentation.

Continuing their series of "trends" studies for non-US securities class actions, NERA Economic Consulting has released a study of securities litigation trends in the Australia market.

Covering the period from 1993 - 2009, the study has several notable findings, chief among them:

• New case filings have accelerated in recent years.
• The vast majority of Australian actions settle.
• Cases are concentrated in the financial industry

According to the authors (and borne out by our own SCAS data), securities class action filings in Australia set a new record in 2009, breaking the previous record set in 2008.  Moreover, the total number of new cases filed in 2007-2009  represents half of all securities class action cased ever filed in Australia.

As with US cases, a majority of Australian cases alleged either misleading or deceptive conduct, or failure by companies to promptly disclose information material to the value of their securities.

Also, more than half of all securities class actions were brought against companies in the "financial industry," though the report has a broad definition of that term, including both real estate and insurance companies for example.

The study also found that a super-majority of securities class action cases in Australia settle. Of the 12 class actions resolved by the end of 2009, 8, or 75%, were settled.  Apparently, this trend has become even more pronounced in recent years – every case filed after 2003 that has been resolved was settled.

The full report can be downloaded here.

In perusing our options backdating scorecard, we realized that we hadn't updated two cases.

1. The Vitesse Semiconductor Corp. (Pink Sheets: VTSS) litigation actually had two settlements, one with the corporate defendant and the directors and officers, and a separate settlement with KPMG, the auditors.  The revised total value of the two settlements is $20,774,322.

2. The UTStarcom, Inc. (Nasdaq: UTSI) case, which was initially dismissed by the District Court, was settled for $9.5 million back in 2009.

Thus, of the 39 options backdating cases that were filed as securities class actions, 35 have now reached a resolution. Of the resolved cases, 8 of those cases have been dismissed and 27 have settled.  There are now only 4 cases waiting for a substantial final resolution - just over 10% of the filed options backdating class actions.

The twenty seven settlements total $2.15 billion, for an average of $79.7 million.

As always, our complete analysis can be accessed in this presentation.

While it is far too late to suggest that we have reached an inflection point with regard to the options backdating litigation, we have certainly reached a reflection point, with the recently announced Juniper Networks, Inc. (NYSE: JNPR) settlement.  The $169 million class action settlement is the 6th nine-figure settlement of an options backdating securities class action.  Given that some early prognosticators suggested the total settlement value of all of these cases would not exceed $1 billion, it's time to crunch the numbers once more.

Of the 39 options backdating cases that have been filed as securities class actions, 34 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 25 have settled.

The twenty five settlements total $2.13 billion, for an average of $85.1 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $50.08 million. This continues the recent trend of the average settlement value of these cases rising, after a prolonged decline following the UnitedHealth settlement.

As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The twenty five cases have settled in an average of 717 days. While the numbers have been slowly creeping up as the remaining cases linger, the average time from filing to settlement is still below historical levels.

As always, our complete analysis can be accessed in this presentation.

One of the many reports that we publish here at SLW World Headquarters is a quarterly review of the largest securities class action settlements since the passage of the PSLRA, known as the "SCAS Top 100."

Our most recent edition (through Q4 2009) of the SCAS Top 100 was published yesterday, and can be accessed here.

A few interesting observations.

1. More of the Top 100 cases settled in the last 4 years (53) than in the prior ten years.

2. Over the last 4 years, the price of admission to this list has doubled. On the December 31, 2005 version, the 100th largest settlement was the $39 million Washington Group International settlement from 2005. In this version, the 100th largest settlement was the $79.75 million Philip Services Corp. settlement from 2007.

3. The percentage of cases from the Top 100 where an institutional investor is the lead plaintiff continues to creep up. We now have 85% of the cases in the Top 100 with an institutional investor as a lead plaintiff. That compares to 56% 4 years ago.

4. Looking at the firms that serve as claims administrators in these cases, the Top 3 firms have switched places and had the number of settlements on the list move around, but the same three firms make up the Top 3.

A few notes for readers that have not seen a prior version of this report.

1. When a case has multiple settlements, the year listed in the report is for the most recent settlement.

2. The names of the law firms serving as co-lead counsel are left as they were when the case settled.

As always, readers are encouraged to send in any questions or corrections.

It seems like we just updated the options backdating numbers, because we did. But, with the settlement announced yesterday involving alleged options backdating at Broadcom Corporation (NASDAQ: BRCM) for $160.5 million, it's time to crunch the numbers once more.

Of the 39 options backdating cases that have been filed as securities class actions, 32 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 23 have settled.

The twenty three settlements total $1.94 billion, for an average of $84.67 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $46.45 million. While we previously noted that the averages had been slowly creeping down over time, the two settlements this month, Broadcom and Comverse, have bumped the average up by nearly 15%.

As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The twenty three cases have settled in an average of 695 days. While the numbers have been slowly creeping up as the remaining cases linger, the average time from filing to settlement is still below historical levels.

As always, our complete analysis can be accessed in this presentation.

Kevin LaCroix over at The D&O Diary also has a post on the Broadcom settlement, here.

It has been just over one month since we last updated the options backdating numbers. With the settlement announced yesterday involving alleged options backdating at Comverse Technology, Inc. (Pink Sheets: CMVT) for $225 million, it's time to crunch the numbers once more.

Of the 39 options backdating cases that have been filed as securities class actions, 31 have now reached a resolution. Of the resolved cases, 9 of those cases have been dismissed and 22 have settled. This is starting to push the boundaries of historical trends, where settlements outnumber dismissals by approximately 2 to 1.

The twenty two settlements total $1.78 billion, for an average of $81.22 million. But, removing the largest settlement (UnitedHealth Group) lowers the average back to $41.02 million. While we previously noted that the averages had been slowly creeping down over time, the Comverse settlement bumps the average up again by more than 10%.

As we have previously noted, the options backdating cases have settled more quickly on average, than other cases. The twenty two cases have settled in an average of 670 days. Removing the two outliers, Mercury Interactive, and Brocade, which were filed earlier and added the options backdating allegations in a later amended complaint, drops the average time from filing of initial complaint to tentative settlement for the remaining 20 cases to 627 days. The numbers have been slowly creeping up as the remaining cases linger, but the average is still below historical levels.

As always, our complete analysis can be accessed in this presentation.

Kevin LaCroix over at The D&O Diary also has a post on the Comverse settlement, here.

Longtime readers may recall that back in 2005, more than 40 mutual fund managers were sued for allegedly failing to file claim forms in settled securities class actions where the fund had eligible transactions. That began our long running series of posts "File Those Claims ... Or Else."

In general, what little litigation there has been over securities class action settlements has been in a fairly similar vein - that is that an entity that had a legal or contractual duty to file claims on behalf of another failed to do so, or did so improperly.

A case filed earlier this month against several Wachovia and Wells Fargo entities attempts to take that line of cases to an entirely different level (Hat Tip: Courthouse News Service).

The allegation is pretty straightforward, and potentially far-reaching. Essentially, a securities class action was filed in 2001 on behalf of purchasers of various securities issued by Asia Pulp & Paper. That case settled in 2006 for $46 million, and in May 2007 a distribution was made to investors that had filed claims.

Here's where Wachovia and Wells Fargo come into the picture, or not as the case alleges.

As with most securities, the majority of Asia Pulp & Paper investors had their securities held in "street name," or the name of a nominee, typically a bank, broker or custodian. Thus, as is customary in most securities class action settlements, the court overseeing the Asia Pulp & Paper litigation ordered these nominee (record, but not beneficial owner) purchasers to either notify their clients of their eligibility to participate in the Asia Pulp & Paper litigation, or to provide the claims administrator with a list of those clients so that the claims administrator could undertake the notification.

The newly filed complaint alleges that Wachovia and Wells Fargo failed to do so, and as a result, their clients were not informed of the Asia Pulp & Paper settlement, did not submit claims forms, and thus did not collect their pro-rata share of the settlement.

Now, the complaint was just filed, and we have no idea how it will shake out, but it should give any institution that holds securities in their own name on behalf of their clients pause. This was a relatively small case, with the net distribution to the class of just under $35 million. That isn't even halfway to being on our SCAS 100 list of the largest securities class action settlements, and a far cry from many of the mega-settlements that have been reached in the last few years. The potential exposure in the larger cases, such as Enron, WorldCom, Adelphia, Tyco, and Nortel is dramatically larger.

I recently chatted with Bruce Carton over at Securities Docket regarding the case. You can see our discussion here.