HomeMy WebLinkAboutAgenda Fire Pension 071017
PALM BEACH GARDENS FIREFIGHTERS’
PENSION FUND
Meeting of Monday July 10, 2017
Location: City Hall, Council Chambers
Palm Beach Gardens City Hall
10500 North Military Trail
Palm Beach Gardens, FL 33410
Time: 1 PM
AGENDA
1. Call Meeting to Order
2. Public Comments
3. Minutes:
• Regular Meeting Held on May 3, 2017
4. ICMA – Steve Feigilis
5. Investment Monitor Report: AndCo Consulting (Dan Johnson)
6. Attorney Report: Sugarman & Susskind, P.A. (Pedro Herrera)
• BanCorpSouth, Inc. Litigation Memo
• Legislative Update & Action Plan Memo
7. Administrative Report: Resource Centers (Audrey Ross)
• Disbursements
• Benefit Approvals
• Financial Statements
8. Old Business
• KTMC Brochure
9. New Business
10. Next Meeting Previously Scheduled Wednesday August 2, 2017 at 1PM
11. Adjourn
PLEASE NOTE:
Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a
record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony
and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation
to participate in this meeting should contact The Resource Centers, LLC no later than four days prior to the meeting.
THE RESOURCE CENTERS , LLC
4360 Northlake Boulevard, Suite 206 Palm Beach Gardens, FL 33410
Phone (561) 624-3277 Fax (561) 624-3278 WWW.RESOURCECENTERS.COM
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
WILLIAM E. BURGES, et al., )
)
Plaintiffs )
v. ) NO. 3:14-cv-1564
) CHIEF JUDGE CRENSHAW
BANCORPSOUTH, INC., et al., )
)
Defendants )
MEMORANDUM OPINION
Pending before the Court, for the second time, is a Motion to Certify the Class (Doc. No. 97),
filed by Palm Beach Gardens Firefighters Pension Fund (“the Fund”).1 On April 28, 2016, this Court
entered an Order granting the Fund’s Motion to Certify the Class (Doc. Nos. 157-58.) The Sixth
Circuit Court of Appeals vacated that Order and remanded the case to this Court for further
proceedings. (Doc. No. 178.)
The parties have agreed, since that remand, that all discovery necessary to the determination
of class certification is completed and no further briefing on class certification is necessary. (Doc.
No. 197.) The Magistrate Judge has ordered a stay of merits discovery pending resolution of the
class certification motion. (Id.)
INTRODUCTION
In this federal securities fraud action, the Plaintiffs allege that Bancorpsouth, Inc. (“the
Bank”) and its Chief Executive Officer (James Rollins), its Chief Operating Officer and President
1
The Court appointed Palm Beach Gardens Firefighters Pension Fund to be Lead Plaintiff in
this action on October 22, 2014. (Doc. No. 31.) It found that the Fund, which possesses the largest
financial interest in the relief sought by the class, would fairly and adequately represent the interests
of the class. 15 U.S.C. § 78u-4(a)(3)(B).
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(James Kelley), and its Chief Financial Officer (William Prater) (collectively, “Defendants”) made
materially false and misleading statements and omissions regarding the Bank’s compliance with
federal laws and that those statements and omissions violated the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder. The Amended Complaint (Doc. No. 39) alleges that
Defendants made false, misleading statements and omissions regarding (1) the Bank’s compliance
with critical anti-money laundering and Bank Secrecy Act regulations as well as the Bank’s fair
lending practices and (2) the closing of two pending mergers/acquisitions. Plaintiffs allege that
Defendants knew the Bank was not in compliance with the anti-money laundering and Bank Secrecy
Act regulations, and yet they affirmatively stated that (1) they were in compliance with all banking
laws and regulations, (2) they expected the two planned mergers to close in the second quarter of
2014, and (3) they expected to receive regulatory approval for those mergers.2 (Doc. No. 39, ¶¶ 108-
155.)
The Fund seeks to bring this action on behalf of all persons who purchased or otherwise
acquired the common stock of the Bank from January 8, 2014, through July 21, 2014, and it asks
the Court to certify a class of those persons pursuant to Fed. R. Civ. P. 23. Defendants maintain that
the Fund has not met the requirements of Rule 23.
2
On July 10, 2015, this Court dismissed the alleged misrepresentations that were “forward
looking” statements concerning the timing and the expected regulatory approvals of the two mergers
at issue. (Doc. Nos. 72-73.) Federal securities law includes a “safe harbor” which excuses liability
for statements containing projections of revenues, income, earnings or other financial items;
statements of plans and objectives of management for future operations; and statements of future
economic performance. 15 U.S.C. § 78u-5. The Court dismissed the forward-looking statements
concerning what Defendants anticipated and/or expected to happen concerning the two mergers,
finding they were protected by the Safe Harbor and were not false or misleading. (Doc. Nos. 72-73.)
2
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In vacating this Court’s prior Order certifying a class, the Sixth Circuit stated that this Court
(1) did not set forth the standard requiring it to “rigorously analyze” Plaintiffs’ claims before
certifying the action as a class action, (2) did not address the bulk of Rule 23's requirements in its
Order, and (3) did not define the class it certified. (Doc. No. 178.) The Court will address those
concerns and further expand on why it is appropriate to grant Plaintiffs’ Motion.
The Court adopts its prior Order granting the Motion to Certify the Class (Doc. No. 158) that
specifically defines the class as:
All persons who purchased or otherwise acquired the publicly traded common stock
of BancorpSouth, Inc. between February 12, 2014 and July 21, 2014, inclusive, and
who were damaged thereby. Excluded from the Class are Defendants, the officers
and directors of the Company at all relevant times, members of their immediate
families and their legal representatives, heirs, successors or assigns and any entity
in which Defendants have or had a controlling interest.
(Doc. No. 158 at 2.)
CLASS CERTIFICATION
In order to certify a class, the Court must be satisfied that the Fund has met the requirements
of both Rule 23(a) and Rule 23(b) of the Federal Rules of Civil Procedure.3 A class action will be
certified only if, after rigorous analysis, the Court is satisfied that the prerequisites of Rule 23(a)
have been met and also that the action falls within one of the categories under Rule 23(b). Castillo
v. Envoy Corp., 206 F.R.D. 464, 467-68 (M.D. Tenn. 2002). The decision whether to certify a class
is committed to the sound, broad discretion of the district judge and turns on the particular facts and
circumstances of each individual case. In re Whirlpool Corp. Front-Loading Washers Product
Liability Litigation, 722 F.3d 838, 850 (6th Cir. 2013); Ballan v. Upjohn Co., 159 F.R.D. 473, 479
3 As the Sixth Circuit noted, in contesting certification, Defendants challenged only
some of Plaintiffs’ allegations. (Doc. No. 178 at 3.)
3
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(W.D. Mich. 1994). The party seeking class certification bears the burden of showing that the
requirements for class certification are met. Bridging Communities Inc. v. Top Flite Financial Inc.,
843 F.3d 1119, 1124 (6th Cir. 2016).
RULE 23(a)
Rule 23(a) establishes four requirements for class certification: the class is so numerous that
joinder of all members is impracticable; there are questions of law or fact common to the class; the
claims or defenses of the representative party are typical of those of the class; and the representative
party will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a).
Numerosity
Rule 23 (a)(1) requires that the proposed class be so numerous that joinder of all members
is impracticable. While there is no strict numerical test, “substantial” numbers usually satisfy the
numerosity requirement. In re Polyurethane Foam Antitrust Litigation, 314 F.R.D. 226, 237 (N.D.
Ohio 2014) (citing Daffin v. Ford Motor Co., 458 F.3d 549, 552 (6th Cir. 2006)). Numerosity is
generally assumed to have been met in class action suits involving nationally traded securities. In
re Direct General Corp. Securities Litigation, 2006 WL 2265472 at * 2 (M.D. Tenn. Aug. 8, 2006);
Ross v. Abercrombie & Fitch Co., 257 F.R.D. 435, 442 (S. D. Ohio 2009).
The Fund has adequately shown that the Bank’s common stock is nationally traded, with
more than 200 large institutional investors, and that there are most likely thousands of class
members. (Doc. No. 98 at 8.) The Court finds that the numerosity requirement has been met in this
case and that Defendants do not suggest otherwise. (Doc. No. 115.)
4
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Commonality
Rule 23's second requirement for class certification is that there be questions of law or fact
common to the class. Fed. R. Civ. P. 23(a)(2). To demonstrate commonality, the Fund must show
that class members have suffered the same injury. Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541,
2555 (2011); Whirlpool, 722 F.3d at 851. Their claims must depend upon a common contention of
such a nature that it is capable of class-wide resolution, which means that determination of its truth
or falsity will resolve an issue that is central to the validity of each claim in one stroke. Id.; Wal-
Mart, 131 S.Ct. at 2551.
What matters to class certification is not the raising of common questions, but the capacity
of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation.
Wal-Mart, 131 S.Ct. at 2551. The mere fact that questions peculiar to each individual member of
the class remain after the common questions of the defendant’s liability have been resolved does not
dictate the conclusion that a class action is impermissible. In re American Medical Systems, Inc.,
75 F.3d 1069, 1080 (6th Cir. 1996); see also Young v. Nationwide Ins. Co., 693 F.3d 532, 543 (6th
Cir. 2012) (presence of questions peculiar to each individual member of the class was no bar when
liability arose from a single course of conduct).
The Fund asserts that common questions in this case include: (1) whether Defendants’
alleged statements and omissions were materially false or misleading; (2) whether federal law was
violated by Defendants’ alleged acts; and (3) to what extent class members have sustained damages.
Defendants contest commonality based on the lack of reliance. The Court will address
reliance and the Fund’s reliance upon the “fraud-on-the-market presumption” in the discussion
concerning Rule 23(b)(3) and predominance. See Halliburton Co. v. Erica P. John Fund, Inc., 134
5
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S.Ct. 2398, 2404 (2014) (elements of the presumption have everything to do with the issue of
predominance under Rule 23(b)(3)). In summary, as it relates to commonality, application of the
“fraud-on-the-market presumption” allows the Court to presume that class members relied upon the
alleged misstatements such that the question of liability is not an individualized issue.
The first two common questions posed by the Fund – whether the alleged misstatements
and omissions are materially false or misleading and whether Defendants’ alleged acts violated
federal law – do arise from a single course of conduct by Defendants. The alleged misstatements and
omissions were the same as relates to all potential class members. Determination of their truth or
falsity will resolve an issue that is central to the validity of each of the claims in one stroke. In re
Whirlpool, 722 F.3d at 852. If those misstatements and omissions violated federal law, they violated
federal law as to all potential class members. Therefore, answering those questions will generate
common, class-wide answers concerning liability. The Court finds that the commonality requirement
is satisfied.
Typicality and Adequacy
Rule 23(a)(3) requires the Fund to show that its claims are typical of the claims of the
proposed class. A plaintiff’s claim is typical if it arises from the same event, practice, or course of
conduct that gives rise to the claims of other class members and if its claims are based on the same
legal theory. American Medical Systems, 75 F.3d at 1082. The Fund’s interests must be aligned
with those of the putative class and, in pursuing its own claims, the Fund must also advance the
interests of the class members. Id.
Rule 23(a)(4) requires the Court to find that the Fund will fairly and adequately protect the
interests of the class. In order to satisfy the requirement of adequacy, the class representative must
6
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be part of the class and possess the same interest and suffer the same injury as the class members.
Young, 693 F.3d at 543. In other words, the Fund must have common interests with unnamed
members of the class and must be able to rigorously prosecute the interests of the class through
qualified counsel.
The Fund has carried its burden of establishing that its claims are the same as those of the
class. The Fund and the class both allege that Defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act and Rule10b-5 by making statements that misrepresented or omitted
material facts. The claims of the Fund and the class involve the same security (BancorpSouth), the
same alleged misstatements and omissions, the same legal theories, and the same evidence. Whether
those allegations are true or not will be the same for the Fund as for the proposed class members.
Defendants argue that because the Fund failed to file the mandatory Reform Act Certification
with its Amended Complaint (Doc. No. 39), it does not meet the typicality and adequacy
requirements of Rule 23(a). Federal law provides that each plaintiff seeking to serve as a
representative party on behalf of a class shall provide a sworn certificate with the complaint. 15
U.S.C. § 78u-4(a)(2)(A). The Fund filed a certification with its Motion for Appointment as Lead
Plaintiff (Doc. No. 19-2) but not with its Amended Complaint.
A class representative need not file a new certification each time the complaint is amended.
Thorpe v. Walter Investment Mgmt. Corp., 2016 WL 4006661 at * 10 (S.D. Fla. March 16, 2016);
Atlas Air Worldwide Holdings, Inc. Sec. Litig., 324 F.Supp.2d 474, 500 (S.D. N.Y. 2004) (“[W]e
think such a requirement would be a useless burden”). The Court finds nothing improper about the
Fund’s certification in this litigation and Defendants have shown no prejudice because of the
certification. The certification submitted by the Fund with its earlier motion is sufficient.
7
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Defendants next argue that the Fund cannot adequately represent the class because of its lack
of meaningful involvement in and understanding of its “lawyer-driven” litigation. Defendants
contend that the Fund did not become a Plaintiff in this case on its own, but rather, Plaintiffs’
counsel brought the case to the Fund’s attention pursuant to a portfolio monitoring agreement
between counsel and the Fund.2 Defendants point out that some courts have criticized such
agreements as raising conflicts of interest.
For example, in Iron Workers Local No. 25 Pension Fund v. Credit-Based Asset Servicing
and Securitization, LLC, 616 F.Supp 2d 461, 464 (S.D. N.Y. 2009), the court held that the pension
fund was in no position adequately to monitor the conduct of the litigation based, in part, on its
monitoring agreement with counsel. In that monitoring agreement, the attorneys provided free
monitoring of the pension fund’s investments in exchange for the pension fund’s agreement that, if
the attorneys recommended bringing a securities class action, the pension fund would retain those
same attorneys, on a contingency fee basis, to represent it in that action. Id. Defendants have not
alleged such a provision in this case.3
On the other hand, the Fund relies on cases in which the courts have recognized the
importance of such monitoring agreements and held that they present no bar to class certification.
See, e.g., Willis v. Big Lots, Inc., __ F. Supp. 3d __, 2017 WL 1063479 at * 10 (S.D. Ohio March
17, 2017) (fact that plaintiff learned of case through monitoring agreement did not render plaintiff
2
Under such monitoring agreements, a law firm overlooks the specific fund and recommends
to its administrators when the law firm believes a violation of the securities laws has occurred.
Plumbers & Pipefitters Nat. Pension Fund v. Burns, 292 F.R.D. 515, 523 (N.D. Ohio 2013).
3
The Chairman of the Fund and representative designated by the Fund to testify in deposition,
Richard Rhodes, testified that the Fund could have considered other counsel. (Doc. No. 118-3 at 63.)
8
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inadequate to serve as class representative); Plumbers & Pipefitters Nat. Pension Fund v. Burns, 292
F.R.D. 515, 523 (N.D. Ohio 2013) (citing United Food & Commercial Workers Union v.
Chesapeake Energy Corp., 281 F.R.D. 641, 655 (W.D. Okla. 2012)).
In Plumbers, the court found that the fund was under no obligation to retain the law firm to
pursue its claims identified through the monitoring agreement and, noting that other courts routinely
reject attacks on the propriety of portfolio monitoring agreements, held that the monitoring
agreement did not create a conflict or render the plaintiff inadequate to represent the class. Plumbers,
292 F.R.D. at 523. The court stated that at least one other court has held that such a monitoring
agreement might actually favor adequacy of the counsel retained to monitor a fund because the
firm’s ongoing relationship with the fund would depend on its performance in the litigation. Id.
Similarly, in United Food, the court concluded that the monitoring agreement did not present
a conflict of interest impacting the adequacy of the lead plaintiff’s representation. United Food, 281
F.R.D. at 654-655. The court said that some courts have found that monitoring agreements actually
illustrate a lead plaintiff’s involvement in and awareness of the financial issues involved in the
litigation. Id.
The Court finds that the monitoring agreement between the Fund and counsel in this case,
which does not require the Fund to hire specific counsel for this purpose, does not render the Fund
inadequate to be the class representative in this case. The agreement does not create a conflict of
interest, impair the Fund’s exercise of independent judgment, and most of all, does not render the
Fund substantially different from other members of the class.
Defendants also contend that the Fund has ceded control of this litigation to counsel.
According to Defendants, this fact is shown because the Fund’s representative, Mr. Rhodes, knew
9
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very little about the litigation. Both Defendants and the Fund cite excerpts from the testimony of Mr.
Rhodes to support what he did and did not know about the litigation.4 The Court has reviewed the
deposition of Mr. Rhodes (Doc. No. 118-3) and finds the Fund representative’s understanding of the
litigation and commitment to it is adequate. It does not preclude the Fund from being Lead Plaintiff
in this case.
Mr. Rhodes explained the allegations underlying this litigation and the specific
misrepresentations allegedly made – that in connection with buying two banks, BancorpSouth made
statements that they were in compliance with all the rules and regulations of banking when they
were not. (Doc. No. 118-3 at 67.) He also explained why the Fund was asked to serve as lead
plaintiff – because it was the largest client and had the largest loss. (Id.) As noted above, Mr.
Rhodes understood that the Fund’s role was to act as a fiduciary of the class and to maximize the
recovery for the class and that the Fund would be required to answer depositions, provide records
and hire counsel. (Doc. 118-3 at 71.) This understanding of the basic facts underlying the claims,
some general knowledge, and a willingness and ability to participate in discovery are sufficient to
meet the adequacy requirement of Rule 23(a)(4). Plumbers, 292 F.R.D. at 520.
Defendants assert two additional arguments that the Fund is not typical or adequate in this
case. First, Defendants argue that the Fund is represented by outside counsel, the Sugarman firm,
which will be able to participate in a share of any class recovery without Court approval. Any
4
For example, Defendants point out that Mr. Rhodes testified that the Fund would be required
to answer depositions, provide records and hire counsel. (Doc. 118-3 at 71.) But just before that,
he also testified that the Fund’s role was to act as a fiduciary of the class and to maximize the
recovery for the class. (Id.)
10
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attorneys’ fee awards in this matter, however, will be determined by the Court, so they will not be
without court approval.
In addition, the Sugarman firm is the Fund’s regular outside counsel and represents the Fund,
not the class. The Robbins Geller firm represents the class. The fact that both firms may eventually
recover their fees out of the same settlement or judgment does not change their ethical or
professional duties to their clients and to the proposed class. Plumbers, 292 F.R.D. at 523, n. 11.
Furthermore, representation by the outside law firm will ensure that the Fund will fulfill its duty
adequately to monitor class counsel. Id. at 523.
Second, Defendants claim that Plaintiffs’ case depends in significant part on the testimony
of a third party, David Michael Stamm, who was the Senior Vice-President Portfolio Manager of
Dana Investment Advisors, the Fund’s outside investment manager. Defendants contend that Mr.
Stamm has a view of the facts that clashes with important allegations of the Amended Complaint.5
If that is true, then Defendants will be able to challenge that testimony at trial, but it does not show
that the Fund is not adequate or typical to represent the class. Defendants have not shown that
statements of Mr. Stamm are binding on the Fund.
For all these reasons, the Court finds that the Fund has shown sufficient typicality and
adequacy and meets the requirements of Fed. R. Civ. P. 23(a).
5
Mr. Stamm testified that the corrective disclosures in this case did not correct any
“misunderstanding” he had about BancorpSouth. (Doc. No. 116 at 122.) The Amended Complaint
alleges that the corrective disclosures “shocked investors.” (Doc. No. 39 at 34.)
11
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Rule 23(b)
As indicated above, if a plaintiff satisfies the requirements of Rule 23(a), then the Court
looks to whether the proposed class action falls into any of the categories under Rule 23(b).
Plaintiffs claim that their action satisfies the requirements of Rule 23(b)(3). Under that subsection,
Plaintiffs must show that common questions of law or fact predominate over any questions affecting
only individual members and that a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy. Fed. R. Civ. P. 23(b)(3).
Plaintiffs assert that, as with their arguments concerning commonality, common questions
of law and fact predominate in this case and the claims of all class members will be proved by the
same evidence. To recover damages for securities violations, the Fund must prove (1) a material
misleading statement or omission by Defendants, (2) scienter, (3) a connection between the
misrepresentation or omission and the purchase or sale of a security, (4) reliance upon the
misrepresentation or omission, (5) economic loss, and (6) loss causation. Halliburton, 134 S.Ct. at
2407. Class members will be required to prove the same elements.
Defendants argue that Plaintiffs cannot show that common issues of fact or law predominate
over individual issues here because there are individual issues concerning reliance. In order to
recover damages in a private securities action such as this one, Plaintiffs must prove that they relied
on Defendants’ misrepresentations. Halliburton , 134 S.Ct. at 2405. Defendants argue that Plaintiffs’
reliance is a predominant, but not common, issue in this case because each Plaintiff’s reliance or
lack thereof is an individual issue. Plaintiffs contend that, with regard to the alleged
misrepresentations, they can show reliance by means of the fraud-on-the-market presumption.
12
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Fraud-On-The-Market Presumption
The Supreme Court has found that investors may satisfy the reliance requirement by
invoking a presumption known as the “fraud-on-the-market presumption.” Halliburton, 134 S.Ct.
at 2411-15; Basic Inc. v. Levinson, 108 S.Ct. 978, 989-90 (1988). Without the presumption of
reliance, a Rule 10b-5 suit cannot proceed as a class action because each plaintiff would have to
prove reliance individually, so common issues would never predominate over individual ones as
required by Rule 23(b)(3). Halliburton at 2416.
The fraud-on-the-market theory is based on the hypothesis that, in an open and developed
securities market, the price of a company’s stock is determined by the available material information
regarding the company and its business. Basic, 108 S.Ct. at 989; Wilkof v. Caraco Pharmaceutical
Laboratories, Ltd., 280 F.R.D. 332, 342 (E.D. Mich. 2012). Misleading statements will therefore
defraud purchasers of stock even if the purchasers do not directly rely on the misstatements because
the market price of the stock was adversely affected by the misrepresentation. Id.
To demonstrate that the fraud-on-the-market presumption of reliance applies, a plaintiff must
show that (1) the alleged misrepresentations were publicly known, (2) they were material, (3) the
stock traded in an efficient market, and (4) the plaintiff traded the stock between the time the
misrepresentations were made and when the truth was revealed.6 Halliburton, 134 S.Ct. at 2408. The
theory is based on the premise that certain well-developed markets are efficient processors of public
information. Amgen Inc. v. Conn. Retirement Plans and Trust Funds, 133 S.Ct. 1184, 1192 (2013).
If a market is generally efficient in incorporating publicly available information into a security’s
6
Plaintiffs have in fact alleged that they and the proposed class members traded the stock
between the time the misrepresentations were made and the time when the truth was revealed. (Doc.
No. 39 at 60.) The Defendants do not dispute that allegation.
13
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market price, it is reasonable to presume that a particular public, material misrepresentation will be
reflected in the security’s price. Id.
The presumption can be rebutted by appropriate evidence, such as proof that news of the
truth entered the market and dissipated the effects of the prior misstatements. Amgen, 133 S.Ct.
at1193 and 1204. Any showing that severs the link between the alleged misrepresentation and either
the price received or paid by the plaintiff or his decision to trade at a fair market price will be
sufficient to rebut the presumption. Halliburton,134 S.Ct. at 2408. For example, evidence that a
plaintiff knew the company’s statements were false but sold his shares nevertheless could rebut the
presumption of reliance. Basic, 485 U.S. at 248.
a) Publicly Known
Defendants argue that Plaintiffs cannot show that the misrepresentations at issue were
publicly known.7 If the misrepresentation was not publicly known, then it could not have distorted
the stock’s market price. Halliburton, 134 S.Ct. at 2413. Defendants assert that showing the alleged
misrepresentations are in the public domain falls short of proof that they are “publicly known” as
required for the presumption to apply. Defendants contend that the Fund must at least demonstrate
that a critical mass of analysts, market makers or other market actors knew of the alleged
misrepresentations and wrote about them or took some other action that would tend to affect the
stock price. (Doc. No. 115 at 2.) Requiring Plaintiffs to show that certain people read and relied on
7
A market may more readily process certain forms of widely disseminated and easily
digestible information, such as public merger announcements, than information more difficult to
acquire and understand, such as obscure technical data buried in a filing with the SEC. Amgen, 133
S.Ct. at 1197, n. 6. The information in the merger agreements here, however, was not obscure
technical data or buried. It was information filed publicly with the SEC in which BancorpSouth
represented that it was in compliance with all applicable laws, statutes, and regulations.
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the alleged misrepresentations, however, would circumvent the presumption by requiring Plaintiffs
to show reliance.
The misrepresentations at issue herein were found in Registration Statements, Proxy
Statements, and Merger Agreements, public documents that were filed with the Securities and
Exchange Commission (“SEC”). For example, the Bank’s February 28, 2014 Registration Statement
included, as Annex A, an Agreement and Plan of Reorganization in which BancorpSouth allegedly
misrepresented that it was in compliance with all applicable laws, statutes, and regulations. (Doc.
No. 39 at ¶ 127.)
Other courts have summarily recognized that SEC filings are sufficiently public to be
“publicly known.” See, e.g., In re Neustar, Inc. Securities Litigation, 2015 WL 5674798 at * 7 (E.D.
Va. Sept. 23, 2015) and In re Red Hat, Inc. Securities Litigation, 261 F.R.D. 83, 91 (E.D. N.C.
2009). The Court agrees with these cases and finds that the merger agreements filed with the SEC
in this case are sufficiently public to satisfy the Fund’s obligation under the first element of the
presumption for purposes of class certification.
b) Materiality
Even though materiality is an element for invoking the fraud-on-the-market presumption,
the Supreme Court has held that it should be left to the merits stage of the litigation because it does
not bear on the predominance requirement of Rule 23(b)(3). Halliburton at 2416. In Amgen, the
Court stated that proof of materiality is not a prerequisite to class certification, noting that
materiality is a common question and the class will either prevail or fall in unison as to that issue.
Amgen, 133 S.Ct. at 1191.8 Thus, the Court need not address materiality on this motion.9
8
Similarly, the Supreme Court has held that loss causation need not be proved at the class
15
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c) Efficient Market
As noted above, the fraud-on-the-market theory rests on the premise that certain well-
developed markets are efficient processors of public information. Amgen, 133 S.Ct. at 1192. In such
markets, the market price of shares will reflect all publicly available information. Id. Here, the Fund
asserts that because the stock was widely traded on the New York Stock Exchange (“NYSE”), the
market is efficient. Defendants contend that the Fund has not carried its burden to prove an efficient
market, relying upon price impact arguments and challenging the findings of the Fund’s expert as
inadequate.
A district court may consider five factors10 in determining whether a security was traded on
an efficient market: (1) a large weekly trading volume; (2) the existence of a significant number of
reports by securities analysts; (3) the existence of market makers and arbitrageurs in the security;
(4) the eligibility of the company to file an S-3 Registration Statement; and (5) a history of
immediate movement of the stock price caused by unexpected corporate events or financial releases.
Freeman v. Laventhol & Horwath, 915 F.2d 193, 197-98 (6th Cir. 1990); Bovee v. Coopers &
Lybrand, 216 F.R.D. 596, 605 (S.D. Ohio 2003). Defendants have not challenged or argued these
certification stage. Amgen, 133 S.Ct. at 1200 (citing Halliburton, 131 S.Ct. at 2184).
9
Defendants acknowledge that the materiality showing need not be made prior to class
certification. (Doc. No. 115 at 15.)
10
Rather than apply these factors as a checklist, they are to be used as analytic tools by the
court to assist in its market efficiency determination. In re Accredo Health, Inc. Securities Litigation,
2006 WL 1716910 at * 10 (W.D. Tenn. April 10, 2006). Here, as in Accredo, the stock was traded
in a national security market that is widely regarded as efficient.
16
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factors but instead rely on their price impact arguments to try to rebut the Plaintiffs’ assertion of an
efficient market. (Doc. No. 115 at 16-24.)
The Court finds that shares of the Bank’s stock traded in an efficient market because they
were traded on the NYSE. Certain markets, such as the NYSE, are well-suited for application of the
fraud-on-the-market theory because “[a] well-developed and impersonal market, such as the New
York or Pacific stock exchanges, will instantaneously incorporate all publicly available information
about a given security into the market price of that security.” Bovee, 216 F.R.D. at 606. Because the
Bank’s stock was traded on the NYSE during the class period (Doc. No. 39 at 9), the Court is
satisfied that the Fund has established, for purposes of class certification, that the stock traded in an
efficient market.
d) Rebuttal - Price Impact
Defendants argue that they have rebutted Plaintiffs’ allegations of an efficient market by
showing that the alleged misrepresentations had no price impact. Plaintiffs are not required to
present direct evidence to prove price impact in order to rely on the fraud-on-the-market
presumption. Sterling Heights General Employees’ Retirement Sys. v. Prudential Financial, Inc.,
2015 WL 5097883 at * 12 (D. N.J. Aug. 31, 2015) (citing Halliburton, 134 S.Ct. at 2414). They can
establish entitlement to the presumption through evidence of publicity and market efficiency, an
indirect way of showing price impact. Sterling Heights at * 12; Halliburton, 134 S.Ct. at 2415.
Before Halliburton, courts around the country held that the presumption of reliance could
be rebutted at trial. See, e.g., In re Accredo Health, Inc. at *11 (presumed reliance can be rebutted
at trial); In re Polymedica, 432 F.3d at 17 (at the class certification stage, court will not address
whether defendants can rebut the presumption of reliance). In Halliburton, however, the Court held
17
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that defendants must be afforded an opportunity before class certification to demonstrate that an
alleged misrepresentation did not actually affect the market price of the stock.11 Willis at * 15. Price
impact is the consideration of whether the alleged misrepresentations affected the market price. Id.
at *16. The burden to prove lack of price impact by a preponderance of the evidence rests on the
defendant in order to rebut the fraud-on-the-market presumption at this stage. Id. at 16; In re
Goldman Sachs Group, Inc. Securities Litigation, 2015 WL 5613150 at * 4 and n. 3 (S.D. N.Y. Sept.
24, 2015).
Price impact is demonstrated by plaintiffs through either evidence that a stock’s price rose
in a statistically significant manner after a misrepresentation or evidence that the stock’s price
declined in a statistically significant manner after a corrective disclosure. Willis at 16. Defendants
argue that the alleged misstatements in this case did not affect the stock price at the time those
statements were made. They assert that this alone sufficiently demonstrates the absence of price
impact. (Doc. No. 115 at 17.) To successfully rebut the fraud-on-the-market presumption, however,
a defendant cannot simply show that a price did not rise after a misrepresentation. Willis at 16.
As explained in Halliburton, price impact (not lack of price impact) can be shown by the
plaintiffs through evidence that the price was affected either at the time of the misrepresentation or
at the time after a corrective disclosure. Willis at 16 (citing Halliburton at 2414). Analysis of the
price impact usually focuses on stock price movement at the time the truth is disclosed. Goldman
Sachs at * 6. “So the fact that there was no stock price increase when the statements were made does
not suggest a lack of price impact.” Id. In other words, in order to rebut the presumption for class
11
Halliburton held that the defendants may seek to defeat the presumption at the class
certification stage through direct as well as indirect price impact evidence. Halliburton, 134 S.Ct.
at 2417.
18
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certification purposes, Defendants must show that the misrepresentation did not in fact affect the
stock price; but “affecting the stock price” can occur at the time the misrepresentation is made or
at the time the corrective disclosure is given. Willis at * 15.
The Fund contends that the price impact occurred at the time the corrective disclosure was
made. The Amended Complaint alleges that when Defendants’ “corrective disclosure” was made
in July of 2014, the price of BancorpSouth stock tumbled more than 8% the first day and another
1.72% the second day. (Doc. No. 39 at ¶ 93.) Defendants have not rebutted this change in the stock
prices at the time of disclosure.
Defendants assert that any decline in stock price after the corrective disclosure likely reflects
other factors besides the corrective disclosure. Whether Defendants are correct, however, involves
merits issues as to causation. The case cited by Defendants, Dura Pharmaceuticals, Inc. v. Broudo,
125 S.Ct. 1627 (2005), dealt with a motion to dismiss, not a motion for class certification, and the
Court was analyzing loss causation, not price impact. Loss causation is not price impact. Erica P.
John Fund, Inc. v. Halliburton Co., 131 S.Ct. 2179, 2187 (2011). Price impact simply refers to the
effect of a misrepresentation on a stock price. Id.
For all these reasons, the Court finds that Defendants have not rebutted the fraud-on-the-
market presumption for purposes of this Motion, and Plaintiffs are entitled to rely on that
presumption.
19
Case 3:14-cv-01564 Document 200 Filed 06/26/17 Page 19 of 22 PageID #: 6595
Affiliated Ute Presumption
Plaintiffs also contend that, with regard to the Defendants’ failures to disclose (as opposed
to misrepresentations), they are entitled to the “Affiliated Ute Presumption.” In Affiliated Ute
Citizens of Utah v. United States, 92 S.Ct. 1456 (1972), the Supreme Court held that in securities
actions involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to
recovery. Id. at 1473. “All that is necessary is that the facts withheld be material in the sense that
a reasonable investor might have considered them important in the making of this decision.” Id.
More recently, the Supreme Court stated that if there is an omission of a material fact by one with
a duty to disclose, the investor to whom the duty was owed need not provide specific proof of
reliance. Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 128 S.Ct. 761, 769 (2008).
Defendants argue that Plaintiffs have admitted this case does not involve omissions. The
sentence from Plaintiffs’ Memorandum in Support of Motion to Dismiss (Doc. No. 64 at 21) that
Defendants quote, however, is not such an admission: “Nowhere does Plaintiff allege that
Defendants had a stand-alone duty to disclose the existence of [an FDIC investigation].” In context,
that sentence begins an explanation of how Defendants, having chosen to speak, had a duty — not
an independent, stand-alone duty, but a duty brought about by their choosing to speak — to disclose
certain information. (Doc. No. 64 at 21.) Indeed, Plaintiffs allege situations where Defendants’
failure to disclose certain information is what makes the alleged misrepresentations misleading or
false.
20
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Plaintiffs have alleged both omissions and misrepresentations.12 (Doc. No. 39.) Where
plaintiffs’ claims are based on a combination of omissions and misstatements, courts have
acknowledged the applicability of the Affiliated Ute presumption as to the element of reliance with
regard to alleged omissions. Dodona I, LLC v. Goldman, Sachs & Co., 296 F.R.D. 261, 270 (S.D.
N.Y. 2014). The Court finds that, for purposes of class certification, the Fund is entitled to the
Affiliated Ute presumption as to its failure to disclose claims.
Individualized Issues
Finally, Defendants maintain that individual issues concerning reliance and damages remain.
Under the fraud-on-the-market and Affiliated Ute presumptions, for purposes of class certification,
reliance will be presumed. Similarly, Defendants’ argument concerning damages as an
individualized issue will be addressed at trial. As noted above, the presence of questions peculiar
to each individual member of the class is no bar when liability arose from a single course of conduct.
Young, 693 F.3d at 543. There is a “battle of the experts” with regard to damages, and it is
unnecessary for the Court to rule on that battle at this time because this is a motion for class
certification. If, after class certification, Plaintiffs cannot show that damages are capable of
measurement on a class-wide basis, the Court may bifurcate the issues of liability and damages or
Defendants may move to decertify the class.
CONCLUSION
For all these reasons, the Court finds that the Fund’s Motion to Certify the Class (Doc. No.
97) should be GRANTED.
12
The Affiliated Ute Presumption applies to cases involving primarily a failure to disclose,
which is not the same as exclusively a failure to disclose. Dodona I, 296 F.R.D. at 269.
21
Case 3:14-cv-01564 Document 200 Filed 06/26/17 Page 21 of 22 PageID #: 6597
An appropriate Order will enter.
___________________________________
WAVERLY D. CRENSHAW, JR.
CHIEF UNITED STATES DISTRICT JUDGE
22
Case 3:14-cv-01564 Document 200 Filed 06/26/17 Page 22 of 22 PageID #: 6598
End October End November End December End January End February End March End April End May1001 CenterState Bank0.00 0.00 200,006.85 310,857.75 238,701.66 415,934.02 305,635.31 391,052.401230 Accounts Receivable Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2,700.651300 Prepaid Other0.00 0.00 0.00 3,708.78 0.00 0.00 0.00 0.00Salem Trust-Consolidated1400 Cash and Equivalents0.00 0.00 0.00 0.00 0.00 1,642,999.12 1,694,204.02 1,725,191.891410 Equities0.00 0.00 0.00 0.00 0.00 47,732,657.74 48,262,098.10 48,498,317.491420 Fixed Income0.00 0.00 0.00 0.00 0.00 24,392,461.98 24,535,199.92 24,696,694.301431 American Core Realty0.00 0.00 0.00 0.00 0.00 4,386,990.31 4,474,141.36 4,474,141.361432 RBC Global0.00 0.00 0.00 0.00 0.00 4,761,250.35 4,990,124.91 4,990,124.911433 U.S. Real Estate0.00 0.00 0.00 0.00 0.00 4,666,977.78 4,738,361.26 4,738,361.261450 Accrued Income0.00 0.00 0.00 0.00 0.00 111,574.99 121,168.19 149,720.211461 Due from Brokers0.00 0.00 0.00 0.00 0.00 435,819.78 2,958,750.78 0.001462 Due to Brokers0.00 0.00 0.00 0.00 0.00 (491,821.37) (2,900,188.80) (17,597.98)Salem Trust Total0.00 0.00 0.00 0.00 0.00 87,638,910.68 88,873,859.74 89,254,953.44Regions Bank-Consolidated1500 Cash and Equivalents 2,345,801.45 1,767,720.92 1,723,178.86 1,856,359.20 2,023,051.48 75,627.03 1,318.47 0.001510 Equities41,069,058.38 43,053,308.94 43,993,635.55 44,594,431.76 44,974,282.39 69,761.37 0.00 0.001520 Fixed19,343,939.41 19,576,790.35 19,626,195.13 19,769,941.26 19,967,923.91 11,215.87 0.00 0.001523 Balanced Mutual Funds 4,067,535.06 4,054,617.97 4,108,032.70 4,163,001.27 4,213,484.87 0.00 13,278.57 0.001525 International2,305,946.06 2,260,230.95 2,276,950.73 2,408,487.09 2,424,531.33 0.00 0.00 0.001540 Partnerships-American Core 4,228,877.98 4,242,891.71 4,242,891.71 4,242,891.71 4,230,089.66 0.00 0.00 0.001550 Accrued Income133,417.20 170,203.39 164,121.15 153,631.05 164,051.72 39,581.53 75.93 43.821561 Due from Brokers38,643.60 1,439,955.95 0.00 33,657.52 139,079.06 0.00 0.00 0.001562 Due to Brokers(57,701.15) (1,432,808.87) (87,882.42) (245,262.99) (83,639.85) 0.00 0.00 0.00Regions Bank Total 73,475,517.99 75,132,911.31 76,047,123.41 76,977,137.87 78,052,854.57 196,185.80 14,672.97 43.821633 RBC Global Asset Management 4,412,046.57 4,359,868.17 4,510,932.56 4,723,263.76 4,761,250.35 0.00 0.00 0.001637 U.S. Real Estate Investment 4,461,129.00 4,461,129.00 4,666,978.00 4,666,978.00 4,666,978.00 0.00 0.00 0.001649 ICMA-RC709,102.49 719,453.27 732,072.55 742,423.33 752,296.44 773,497.76 773,497.76 773,497.762000 Accounts Payable(97,537.17) (97,340.79) (172,951.32) (173,146.64) (20,961.72) (47,166.53) (47,166.53) (8,494.00)82,960,258.88 84,576,020.96 85,984,162.05 87,251,222.85 88,451,119.30 88,977,361.73 89,920,499.25 90,413,754.07Palm Beach Gardens Firefighters' Pension FundBalance SheetFY 2017Account DescriptionTOTAL RESERVE FUND (MARKET VALUE):
End October End November End December End January End February End March End April End May Year To DateIncome:4000 Employer Contributions 2,882,604.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2,882,604.004100 Employee Contributions 19,657.16 34,147.92 51,142.27 34,122.55 34,437.31 34,283.95 34,017.03 35,364.60 277,172.794190 ICMA-RC DROP Contributions 10,350.78 10,350.78 10,350.78 10,350.78 9,873.11 0.00 0.00 0.00 51,276.23Realized Gain/Loss-Salem Trust4210 Equities0.00 0.00 0.00 0.00 0.00 (9,397.76) (10,391.53) 19,880.77 91.484220 Fixed Income0.00 0.00 0.00 0.00 0.00 5,467.96 33,757.46 (3,365.52) 35,859.90Unrealized Gain/Loss-Salem Trust4310 Equities0.00 0.00 0.00 0.00 0.00 (126,319.51) 601,855.39 447,309.62 922,845.504320 Fixed Income0.00 0.00 0.00 0.00 0.00 79,081.02 30,315.58 19,300.22 128,696.824331 American Core Realty 0.00 0.00 0.00 0.00 0.00 0.00 34,085.28 0.00 34,085.284332 RBC Global0.00 0.00 0.00 0.00 0.00 0.00 228,874.56 0.00 228,874.564333 U.S. Real Estate0.00 0.00 0.00 0.00 0.00 0.00 39,593.31 0.00 39,593.31Realized Gain/Loss-Mgr Held4433 RBC Global Asset Management (51.36) 27,589.14 4,479.37 18.98 16,081.29 0.00 0.00 0.00 48,117.424437 U.S. Real Estate Investment 0.00 0.00 (10,737.00) 0.00 0.00 0.00 0.00 0.00 (10,737.00)Unrealized Gain/Loss-Mgr Held4533 RBC Global Asset Management (66,903.67) (79,584.67) 136,928.16 208,225.20 16,832.18 0.00 0.00 0.00 215,497.204537 U.S. Real Estate Investment 0.00 0.00 213,188.00 0.00 0.00 0.00 0.00 0.00 213,188.004549 ICMA-RC Gain/Loss0.00 0.00 2,268.50 0.00 0.00 21,201.32 0.00 0.00 23,469.824600 Interest & Dividend Income 98,100.41 126,211.44 347,885.51 95,612.36 125,854.89 189,515.86 96,300.01 134,779.87 1,214,260.354710 Securities Litigation0.00 0.00 0.00 136.17 0.00 114.38 0.00 0.00 250.554800 Regions Bank Adjustments (0.04) 0.00 0.00 (0.05) (0.01) 0.00 (153.52) (0.01) (153.63)4806 Assets Txfrd to Salem Trust 0.00 0.00 0.00 0.00 0.00 (76,402,121.34) 4,032.22 0.00 (76,398,089.12)4807 Assets Received from Regions 0.00 0.00 0.00 0.00 0.00 76,523,581.42 0.00 0.00 76,523,581.42Realized Gain/Loss-Regions Bank4810 Equities(1.19) 78,910.28 26,836.65 11,092.75 41,977.91 390,760.44 0.00 0.00 549,576.844820 Fixed(6,662.25) (16,274.53) (9,395.17) (4,668.01) (3,282.37) (6,168.69) 0.00 0.00 (46,451.02)4825 International0.00 (2,646.08) 514.29 0.00 1,330.10 0.00 0.00 0.00 (801.69)Unrealized Gain/Loss-Regions Bank4910 Equities(988,765.20) 1,862,819.04 699,391.14 988,444.15 1,385,251.98 (255.67) 0.00 0.00 3,946,885.444920 Fixed55,569.39 (313,047.03) 126,358.46 (37,073.23) 168,364.69 225.33 0.00 0.00 397.614923 Balanced Mutual Funds (34,309.11) (26,775.78) 26,895.13 38,653.68 34,918.39 0.00 97.10 0.00 39,479.414925 International (102,273.21) 32,573.22 38,759.28 71,053.54 52,916.59 0.00 0.00 0.00 93,029.424940 Partnerships-American Core 0.00 14,013.73 0.00 0.00 (12,802.05) 0.00 0.00 0.00 1,211.68Total Income1,867,315.71 1,748,287.46 1,664,865.37 1,415,968.87 1,871,754.01 699,968.71 1,092,382.89 653,269.55 11,013,812.57End October End November End December End January End February End March End April End May Year To DateExpense:5000 Benefit Payments 119,299.74 119,299.74 119,299.74 123,783.00 128,965.43 128,965.43 131,491.61 131,491.61 1,002,596.305020 Disability Payments0.00 0.00 0.00 6,883.24 6,883.24 6,883.24 6,883.24 6,883.24 34,416.205030 ICMA-RC DROP Benefit Payments 10,350.78 10,350.78 10,350.78 10,350.78 10,350.78 (477.67) 9,831.28 4,965.61 66,073.125100 Refund of Contributions 0.00 0.00 0.00 0.00 36,467.48 0.00 0.00 0.00 36,467.485300 DROP Distributions0.00 0.00 0.00 0.00 172,859.85 0.00 0.00 0.00 172,859.855400 Share Lump Sum Distribution 0.00 0.00 0.00 0.00 303,872.46 0.00 0.00 0.00 303,872.466000 Custodian Fees2,584.55 2,637.45 2,669.26 2,700.65 2,736.12 1,351.48 0.00 0.00 14,679.516020 Investment Consultant Fees 0.00 0.00 7,500.00 0.00 0.00 7,500.00 0.00 0.00 15,000.006040 Investment Management Fee 0.00 0.00 116,659.58 0.00 0.00 15,995.00 0.00 0.00 132,654.586110 Administrator Fees0.00 0.00 0.00 2,200.00 4,875.00 0.00 0.00 7,624.60 14,699.606120 Auditor Fees0.00 0.00 0.00 0.00 3,910.00 0.00 0.00 3,370.00 7,280.006130 Bank Charges0.00 0.00 0.00 65.00 15.00 15.00 25.00 55.00 175.006140 Computer Services0.00 0.00 0.00 450.00 0.00 0.00 0.00 0.00 450.006150 Legal Fees0.00 0.00 0.00 2,223.00 0.00 0.00 0.00 5,500.50 7,723.506160 Postage0.00 0.00 0.00 0.00 17.77 0.00 0.00 78.17 95.946200 Trustee Expenses-Conference 0.00 0.00 0.00 0.00 0.00 1,304.70 1,014.24 0.00 2,318.946220 Membership Fees0.00 0.00 0.00 0.00 660.00 0.00 0.00 0.00 660.006300 Fiduciary Liability Insurance 0.00 0.00 0.00 0.00 0.00 12,166.00 0.00 0.00 12,166.006610 ADR Fees0.00 0.00 14.50 0.00 0.00 22.88 0.00 46.00 83.386730 RBC-Other Expenses 251.93 237.41 228.42 252.40 244.43 0.00 0.00 0.00 1,214.596790 Rounding0.00 0.00 2.00 0.00 0.00 0.22 0.00 0.00 2.22Total Expense132,487.00 132,525.38 256,724.28 148,908.07 671,857.56 173,726.28 149,245.37 160,014.73 1,825,488.67Reserve Fund Last Period 81,225,430.17 82,960,258.88 84,576,020.96 85,984,162.05 87,251,222.85 88,451,119.30 88,977,361.73 89,920,499.25 81,225,430.17Balance To/ From Reserve 1,734,828.71 1,615,762.08 1,408,141.09 1,267,060.80 1,199,896.45 526,242.43 943,137.52 493,254.82 9,188,323.90TOTAL RESERVE FUND 82,960,258.88 84,576,020.96 85,984,162.05 87,251,222.85 88,451,119.30 88,977,361.73 89,920,499.25 90,413,754.07 90,413,754.07Palm Beach Gardens Firefighters' Pension FundStatement of Income and ExpenseFY 2017Account DescriptionAccount Description
Fully engaged
means experience across cultures, currencies and courtrooms
Class aCtion litigation Firm oF the Year
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means the trust that we’ll treat your interests like they were our own
Kessler Topaz is widely recognized as a leading firm throughout the
world in protecting the public against corporate fraud and other
wrongdoing. Our lawyers regularly take on the foremost defense
attorneys—and win—in class actions, shareholder derivative suits,
antitrust litigation, direct action and other complex litigation around
the globe. We are proud to have recovered tens of billions of dollars
for our clients.
leading litigation Firm bencHmark LItIgatIon
2
what we do
All of our work is driven by a common goal:
to protect investors, consumers, employees
and others from fraud, abuse, misconduct and
negligence by businesses and fiduciaries. We
represent investors and classes worldwide, and
are particularly known for our work on behalf of
institutional investors. At the end of the day, we
have succeeded if you recover assets you had lost
as a result of business misconduct.
Our lawyers can help you navigate through every stage of a
dispute—from assessing potential claims, to motion practice,
to trials and through appeals, to settlement negotiations
and claims administration. We are skilled advocates not
only in court, but also in arbitration and other alternative
dispute resolution fora. In addition to obtaining financial
compensation, we have been instrumental in achieving
significant corporate governance reforms to prevent future
violations of law.
“ Counsel actively, thoroughly and impressively
litigated a complex subject matter (both
factually and legally), all the while confronting
formidable defense counsel . . .”
Securities Fraud Litigation
Shareholder Derivative Actions
Mergers and Acquisitions Litigation
Global Securities Litigation
Direct and Opt-Out Actions
Fiduciary Litigation
Antitrust & Unfair Business
Practices
Whistleblower Representation
Arbitration
Portfolio Monitoring and Claims
Administration
Corporate Governance
– Honorable George H. Wu, United States District
Court for the Central District of California
3
SeCURiTieS FRAUD LiTiGATiOn
Kessler Topaz’s renowned shareholder
litigation practice has recovered billions of
dollars for defrauded investors around the
world. We are aggressive, effective advocates
in securities fraud claims against public
companies—and their officers, directors and
advisors—that misrepresent information and
cause harm to their shareholders.
Our sophisticated client base is composed of
more than 250 institutional investors—including
100+ public pension funds—as well as Taft-Hartley
funds, mutual fund managers, asset managers,
insurance companies, sovereign wealth funds,
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the United States and around the world.
representative successes
$3.2 billion
Tyco international, Ltd.: landmark settlement
included the largest securities class action recovery
from a single corporate defendant in history
$2.425 billion
Bank of America/Merrill: settlement resolved
allegations of fraud surrounding merger
$730 million
Citigroup, inc.: second largest recovery ever under
Section 11 of the Securities Act
$627 million
Wachovia Preferred Securities and Bond/notes:
one of the most significant cases arising out of the
financial crisis
$616 million
Lehman Brothers: shareholders recover despite
Lehman bankruptcy
$500 million
Countrywide Financial Corp.: litigation raised
several issues of first impression in the Ninth Circuit
“it is difficult to overstate the complexity of
[the litigation],” which also “put [Plaintiffs] at the
cutting edge of a rapidly changing area of law.”
– The Honorable Paul Barbadoro, United States District
Court for the District of New Hampshire
4
Mergers and acquisitions can offer great
opportunities for shareholders to increase
value. But they also present temptation for
self-dealing and dishonesty by directors and
officers, often at shareholder expense. We
give shareholders the next best thing to a seat
at the negotiating table—strong, effective
representation in cases alleging unfairness in
a transaction’s price or process.
Each case is different, whether we seek additional
merger consideration or non-monetary deal terms
that increase shareholder value. Unlike many
of our competitors, Kessler Topaz has proven
experience bringing massive transactional cases
to trial—and winning, as we did in Southern Peru
Copper ($2 billion) and Dole Foods ($148 million).
In matters both large and small, our creative and
aggressive approach and trial readiness have
helped our clients recover billions of dollars of
increased merger consideration both through trial
and through pre-trial settlements.
RePReSenTATive SUCCeSSeS
$2 billion
Southern Peru Copper Corp.: both the largest
trial verdict and largest damages award in Delaware
Chancery Court history
$148 million
Dole Food Company, inc.: the second-largest post-
trial verdict in merger litigation in Delaware Chancery
Court history
$64 million
Cole Real estate investments: additional merger
consideration after shareholders challenge REIT sale
$26 million
Harleysville Mutual: expedited injunction hearing for
policyholders after mutual insurer sold to Nationwide
$24 million
GSi Commerce: case challenged insider dealings in
eBay acquisition
MeRGeR & ACqUiSiTiOn LiTiGATiOn
When corporate fiduciaries abuse their
power, shareholder derivative actions can
balance the scales. We have recovered
millions of dollars from wayward fiduciaries
in both high-profile matters and smaller
disputes.
Our success stories involve a wide array of
corporate misconduct, ranging from executive
compensation abuses, to related-party
transactions, to the “backdating” of stock options.
RePReSenTATive SUCCeSSeS
$62 million
Comverse Technology, inc.: overhauled the
Company’s corporate governance and internal controls
$6 million
Helios Closed-end Funds: recovered for mutual funds
in action authorized by board of directors
$4.9 million
Under Armour, inc.: monetary and corporate
governance relief for minority stockholders in dilutive
recapitalization
$3.25 million
China Agritech, inc.: cash recovery for stockholders
of Chinese “reverse merger” company
SHAReHOLDeR DeRivATive ACTiOnS
5
.GLOBAL SeCURiTieS LiTiGATiOn
investment strategies transcend national
borders. Unfortunately, so does fraud. Our
Global Securities Litigation group is dedicated
to helping investors prosecute corporate fraud
claims and recover assets around the world.
international Leadership
Through our border-crossing work, we have
developed a deep understanding of foreign laws
and procedures, as well as important relationships
with lawyers and experts in more than a dozen
countries. Our international experience gives
clients a unique advantage in pursuing claims on
a global basis.
Today, global shareholder litigation continues
to evolve, as new jurisdictions begin to allow
multiparty or group shareholder actions
and debate class action procedures. We are
committed to remaining at the forefront of these
developments and expanding our resources to
best serve shareholders around the world.
“We like the flexible and professional way Kessler
Topaz has been working with us in different cases
and their filing of settlement claims is invaluable.”
representative successes
€1.2 Billion
Fortis Bank: one of the largest securities
settlements outside the United States
$352 million
Royal Dutch Shell: landmark settlement opens
doors to class recovery in the Netherlands
$92 million
Olympus Corporation: one of the largest
securities-fraud recoveries ever achieved in Japan
–Richard Gröttheim, CEO
AP7 – Seventh Swedish National Pension Fund
6
.Looted pension funds, fraudulent
investments and vanishing profits are
the stuff of headlines—and nightmares.
When trusts and their beneficiaries find
themselves on the losing end of fiduciary
mismanagement, we help them recover
assets believed to be gone forever.
Our Fiduciary Litigation group has recovered
more than $1 billion for clients victimized by
fiduciary failures. We have served as lead or
co-lead ERISA counsel in some of the most
significant cases in history.
FiDUCiARy LiTiGATiOn
Class action litigation is not for every
investor in every case. if you’ve been injured
by corporate misconduct, there may be
other routes to recovery.
With experience in hundreds of shareholder
actions worldwide, Kessler Topaz has the skill
and perspective to help you analyze the options
and choose the one that’s right for you.
Know your Options
In a direct action, an investor or small group of
investors “opt-out” of a pending or potential class
action against a publicly traded company, its
officers or directors, and/or its advisors. Instead
of being part of a class, your fund pursues its own
claim in its own lawsuit.
We are litigating dozens of opt-out cases on
behalf of institutional investors throughout the
country and the world.
DiReCT AnD OPT-OUT ACTiOnS
representative successes
$280 million
Bny Mellon Bank, n.A.: BNY Mellon settled claims
alleging that it breached its fiduciary duties under
common law, and committed a breach of its contractual
obligations under the securities lending agreements.
$150 million
JPMorgan Chase Bank, n.A.: JPMorgan settled
claims for allegedly breaching its fiduciary duties under
the Employee Retirement Income Security Act (ERISA).
$79 million
Global Crossing, Ltd.: Global Crossing settled claims
that it allegedly breached its fiduciary duties. In 2004,
this represented the largest recovery received in a
company stock ERISA class action.
$75 million
AiG, inc: AIG settled claims with Transatlantic
Holdings, Inc., who allegedly breached its fiduciary
obligations as investment advisor.
7
“. . . the Court finds that KTMC is one of the most
experienced eRiSA litigation firms in the country,
with particular expertise in the area of eRiSA
breach of fiduciary class actions . . .”
–Vicki Miles-LaGrange, Chief United States District
Judge, United States District Court for the Western
District of Oklahoma
AnTiTRUST & UnFAiR BUSineSS PRACTiCeS
Competitive markets are at the heart of the
U.S. economy. Kessler Topaz helps protect
competition against those who would
curtail choices, control prices or otherwise
interfere with fair markets.
Help for Homebuyers
Our RESPA (Real Estate Settlement Procedures
Act) Litigation practice is nationally known for
actions that challenge unfair lending and related
insurance practices. We have been selected as
lead or co-lead counsel in cases against lenders
and mortgage servicers that:
• Refer borrowers to private mortgage insurers
in return for kickbacks or fee-sharing
• Force-place borrowers into grossly over-
priced homeowners insurance or flood
insurance in return for kickbacks
In recent RESPA litigation against 13 major
national lenders, we recovered millions of dollars
on behalf of affected borrowers and have several
actions pending.
representative successes
$150 million
Flonase: millions recovered in pharmaceutical
monopoly case
$69 million
Bank of America/WaMu: consolidated class
recovers WaMu losses
$36 million
Remeron: consumers allege patent claims would
create unlawful monopoly
8
For many of our clients, arbitration is an
integral part of the dispute resolution
process. Our lawyers are seasoned advocates
in domestic and international arbitration,
handling challenging disputes before panels
across the United States and europe.
An Approach That Works
We understand the unique rules and procedures
of arbitration and how to work within the
arbitration context in ways that are most
advantageous to our clients. Representing
institutional investors, corporate entities and
others, we have achieved significant arbitration
results, such as a $75 million award for
Transatlantic Holdings, Inc. and its subsidiaries
in a subprime mortgage dispute against AIG.
In addition, we advise on alternative dispute
resolution methods such as mediation and can
counsel you on the best options for any given
situation.
We combine our understanding of the arbitration
process with industry knowledge, geographic
reach and a commitment to the highest
standards of litigation. We communicate clearly,
respond quickly and strive to maintain your trust
throughout the arbitration process and beyond.
it takes conscience, courage and conviction
to bring wrongdoing to light. Kessler Topaz
knows how to use the whistleblower laws
to protect and reward those who uncover
wrong-doing and step forward to fight it.
Champions for Whistleblowers
Whistleblowers are the unsung heroes of the
marketplace, often risking career and reputation
harm to report illegal conduct and to do the right
thing in the face of corporate fraud. If you have
information about a fraud and are considering
becoming a whistleblower, we can help you make
a compelling case to authorities, protect yourself
from retaliation and claim a share of the money
the government recovers.
At Kessler Topaz, you’ll find lawyers who
have dedicated their careers to representing
whistleblowers. Fighting corporate fraud
is what we do—all day, every day. Our
whistleblower team includes lawyers who
have worked as federal and state prosecutors,
as SEC enforcement lawyers and as litigators
with decades of international experience in
complex health care, pharmaceutical, securities,
corporate and government contract fraud
cases. Clients also have access to our renowned
Investigative Services Division—which includes
former law enforcement agents known for their
relentless pursuit of evidence.
WHiSTLeBLOWeR RePReSenTATiOn
ARBiTRATiOn
9
PORTFOLiO MOniTORinG AnD CLAiMS ADMiniSTRATiOn
For institutional fiduciaries, monitoring and
protecting investments is as important as
selecting them. But how do you keep track of
a diverse, active, global securities portfolio
without creating a more-than-full-time job?
Our proprietary Securities Tracker program is
the answer.
Securities Tracker Makes it easy
Offered at no cost to our institutional clients,
Securities Tracker finds every securities action
that impacts your fund, puts it on your radar
screen early and monitors it all the way through
resolution and disbursement of any recovery.
Simply put, Securities Tracker is a must-have
solution for fulfilling your fiduciary obligations.
The Securities Tracker program includes:
• New case summaries and analyses
• Quarterly reports
• Email alerts
• Claims administration auditing and filing
• Settlement chart
Up-to-Date information
Securities Tracker works 24/7, 365 days a year.
So even when you’re at a conference, on an
airplane or in another time zone, we stay on top
of your portfolio. Learn more and see a demo at
www.ktmc.com/securities-tracker.
CORPORATe GOveRnAnCe
Corporate governance doesn’t just
happen in boardrooms. it affects every
aspect of a business, every day. When you
want to make a tangible impact on how a
company is run, corporate governance is
the place to start.
We have helped our clients implement creative,
effective governance changes in diverse areas,
including:
• Director nominations
• Director election procedures
• Required disclosures for shareholder voting
• Executive compensation policies
• Internal and external audit functions
• Worker safety
Our lawyers will listen carefully to your
concerns, tailor a strategy to your unique
circumstances and adhere to the highest
standards of client service.
“Kessler Topaz’s claims filing service is an added
value to the strong litigation skills they are
providing to our fund. They have helped us recover
settlement dollars we would have otherwise
missed and served as lead counsel for us as well.”
–David H. Prince, Retirement Administrator
Imperial County Employees Retirement System
10
KTMC.COM
COnTACT US
Darren J. Check, esquire
Please direct all inquiries regarding this
publication to Darren J. Check, esquire, at
610.822.2235 or dcheck@ktmc.com
Fully commited
means the trust that we’ll treat your interests like they were our own
280 King of Prussia Rd.
Radnor, PA 19087
P 610.667.7706
F 610.667.7056
One Sansome St., Suite 1850
San Francisco, CA 94104
P 415.400.3000
F 415.400.3001
Shareholder Litigation Counsel, Securities
Monitoring and Claims Administration for the
City of Palm Beach Gardens Firefighters'
Pension Fund
10500 North Military Trail
Palm Beach Gardens, FL 33410
1
Thank you for the opportunity to provide you with information about Kessler Topaz Meltzer &
Check, LLP (“Kessler Topaz” or the “Firm”) and how we can assist the City of Palm Beach Gardens
Firefighters' Pension Fund (the “Fund”) in the identification, evaluation, management and prosecution of
securities class action cases and claims. Below you will find summary information on our Firm and the
services that we provide.
Shareholder Litigation Counsel
Since 1987, Kessler Topaz has specialized in the prosecution of securities class actions and has
grown into one of the largest and most successful shareholder litigation firms in the field. With offices
in Radnor, Pennsylvania and San Francisco, California, the Firm is comprised of 102 attorneys as well
as an experienced support staff consisting of over 80 paralegals, in-house investigators, legal clerks and
other personnel. Kessler Topaz has developed an international reputation for excellence and has
extensive experience prosecuting securities fraud actions. For the past several years, the National Law
Journal has recognized Kessler Topaz as one of the top securities class action law firms in the country.
In addition, the Legal Intelligencer recently awarded Kessler Topaz with its Class Action Litigation
Firm of The Year award. Lastly, Kessler Topaz and several of its attorneys are regularly recognized by
Legal500 and Benchmark: Plaintiffs as leaders in our field.
The Firm primarily represents institutional investors from public and Taft-Hartley pension funds,
to mutual fund advisors, sovereign wealth funds, hedge funds and insurance companies. Over the last
two decades the Firm has seen steady growth in both our client base and roster of significant shareholder
litigation cases we are prosecuting. Kessler Topaz currently represents, advises, and works with many
of the largest public pension funds and other institutional investors in the United States and around the
world. Some examples of our clients include the California State Teachers’ Retirement System, the
New York State Common Retirement Fund, the Commonwealth of Pennsylvania State Employees
Retirement System, the Pennsylvania Public School Employees Retirement System, the Ohio State
Retirement Systems, the Washington State Investment Board, the North Carolina Retirement System,
the State of Connecticut Retirement Plans & Trust Funds, the Iowa Public Employees’ Retirement
System, PGGM - Dutch National Pension Fund, Forsta AP-Fonden – First Swedish National Pension
Fund, Fjarde AP-Fonden – Fourth Swedish National Pension Fund, Sjunde AP-Fonden – Seventh
Swedish National Pension Fund, ATP Arbejdsmarkedets Tillaegspension – Danish National Pension
Fund, Danske Invest Administration A/S and Nordea Invest Fund Management A/S. Most recently
Kessler Topaz was retained by the Alaska Permanent Fund Corporation, the State of Alaska Department
of Revenue (Treasury Division), Dimensional Fund Advisors LP, Aberdeen Asset Management,
Delaware Investments, the Russell Investment Company Funds, and Manning & Napier, to litigate
claims related to the massive fraud at Petróleo Brasileiro S.A. (Petrobras).
In addition, the Firm represents a broad base of county, municipal, and Taft-Hartley pension
funds throughout the country, including 24 Pennsylvania County retirement systems, Los Angeles
County Employees Retirement Association, Alameda County Employees’ Retirement Association, San
Diego City Employees’ Retirement System, Clayton County, Georgia Public Employee Retirement
System, the Firemen’s Retirement Fund of St. Louis, the City of Alpharetta Combined Defined Benefit
Pension Plan, the Fort Worth Employees’ Retirement Fund, the City of Austin Police Retirement
System, Key West Police and Fire Pension Board of Trustees, the City of Fort Lauderdale General
Employees’ Retirement System, the City of Oakland Police & Fire Retirement System, City of
Knoxville Employees’ Pension System, the Employees’ Pension Plan of the City of Clearwater, Florida,
2
the Imperial County Employees’ Retirement System, Teamsters Local 272, Iron Workers District
Council (Philadelphia & Vicinity) Retirement and Pension Plan, Iron Workers Local 405 Annuity Fund,
1199 SEIU Healthcare Employees, the Equity-League Pension & Health Trust Fund, American
Federation of Television & Radio Artists Health & Retirement Funds, American Federation of
Musicians and Employers’ Pension Fund, the Massachusetts Laborers, the Buffalo Laborers’ Benefit
Funds, IBEW Local 237, Teamsters Union No. 142 Pension Trust Fund, and the Washington State
Plumbers & Pipefitters. Attached as “Exhibit A” please find the Firm’s complete institutional investor
client list.
Currently, Kessler Topaz is serving as lead or co-lead counsel in many of the largest and most
significant securities actions currently pending in the United States, including actions against:
Qualcomm, Allergan, Inc., Pfizer and Ocwen Financial Corporation, among others. As demonstrated by
the magnitude of these high-profile cases, we take seriously our role in advising clients to seek lead
plaintiff appointment in cases, paying special attention to the factual elements of the fraud, the size of
losses and damages, and whether there are viable sources of recovery.
Additionally, the Firm has a robust shareholder Derivative and Mergers & Acquisition Litigation
Department which has been a leader in prosecuting shareholder actions in state and federal courts across
the country. This Department has been at the forefront of representing institutional investors in all types
of shareholder derivative actions, including cases on behalf of companies such as Monster Worldwide,
Southwest Airlines, and Comverse Technology. These actions have focused on corporate governance
abuses, such as the recent options backdating scandal, excessive executive compensation, and conflict
transactions with controlling shareholders. This Department also specializes in takeover litigation, and
actively representing institutional investors in actions where shareholders are not receiving fair value for
their investments. Notable recent takeover actions include Genentech, Inc., Amicas, Inc., American
Italian Pasta Company and GSI Commerce, Inc.
Finally, Kessler Topaz is very proud of its recent trial experience in cases against (or on behalf
of) Longtop Financial Technologies Ltd., Southern Peru Copper Corporation, Dole Foods Co., Inc., and
BankAtlantic Bancorp. Our trials against BankAtlantic (2010) and Longtop (2014) were only the tenth
and thirteenth trials, respectively, to reach a verdict since the enactment of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). Separately, in October 2011 and February/March 2015, the
Firm concluded trials in the Delaware Court of Chancery in stockholder actions on behalf of Southern
Peru Copper Corp. and former Dole Foods Co., Inc. shareholders. In Southern Peru, following a week-
long trial, Kessler Topaz secured the largest damage award in Delaware Chancery Court history -- $2
billion. This award was upheld by the Delaware Supreme Court in August 2012. In Dole, following a
nine day trial, Kessler Topaz won a $148 million verdict -- representing the second-largest post-trial
verdict ever in merger litigation, behind only the Firm’s landmark $2 billion verdict in Southern Peru.
Kessler Topaz has recovered billions of dollars in the course of representing defrauded
shareholders from around the world and takes pride in the reputation we have earned for our dedication
to our clients. Kessler Topaz devotes significant time to developing relationships with its clients in a
manner that enables the Firm to understand the types of cases they will be interested in pursuing and
their expectations. Further, the Firm is committed to pursuing meaningful corporate governance reforms
in cases where we suspect that systemic problems within a company could lead to recurring litigation
and where such changes also have the possibility to increase the value of the underlying company.
3
Shareholder Litigation Highlights
In re Bank of America Corp. Securities, Derivative, and Employee Retirement Income Security
Act (ERISA) Litigation
Plaintiffs asserted claims for violations of the federal securities laws against Bank of America Corp.
(“BoA”) and certain of BoA’s officers and board members relating to BoA’s merger with Merrill Lynch
& Co. (“Merrill”) and its failure to inform its shareholders of billions of dollars of losses which Merrill
had suffered before the pivotal shareholder vote, as well as an undisclosed agreement allowing Merrill to
pay up to $5.8 billion in bonuses before the acquisition closed, despite these losses. On September 28,
2012, the Parties announced a $2.425 billion case settlement with BoA to settle all claims asserted
against all defendants in the action. BoA also agreed to implement significant corporate governance
improvements. The settlement, reached after almost four years of litigation with a trial set to begin on
October 22, 2012, amounts to 1) the sixth largest securities class action lawsuit settlement ever; 2) the
fourth largest securities class action settlement ever funded by a single corporate defendant; 3) the single
largest settlement of a securities class action in which there was neither a financial restatement involved
nor a criminal conviction related to the alleged misconduct; 4) the single largest securities class action
settlement ever resolving a Section 14(a) claim (the federal securities provision designed to protect
investors against misstatements in connection with a proxy solicitation); and 5) by far the largest
securities class action settlement to come out of the subprime meltdown and credit crisis to date.
In re Southern Peru Copper Corp. Derivative Litigation
On October 14, 2011, following a week-long trial, Kessler Topaz and its Delaware co-counsel secured
the largest damage award in Delaware Chancery Court history — a $2 billion derivative judgment
against Southern Peru’s majority shareholder Grupo Mexico. The litigation stemmed f rom Southern
Peru’s 2005 acquisition of Minera Mexico, a private company owned by Grupo Mexico, for more than
$3 billion in Southern Peru stock. Plaintiffs alleged that the private company was worth more than a
billion dollars less, but that Southern Peru’s board had approved this conflicted transaction in deference
to its majority shareholder’s interests. Discovery in the case spanned years and continents, with
depositions in Peru and Mexico.
In re Lehman Brothers Equity/Debt Securities Litigation
Plaintiffs alleged that the registration statements and prospectuses used to market Lehman’s numerous
offerings leading up to its bankruptcy contained false and misleading information and omitted material
facts regarding Lehman’s net leverage, risk management and concentration of risks. A $616 million
settlement was reached on behalf of shareholders — $426 million of which came from various
underwriters of the Offerings, representing a significant recovery for investors in this now bankrupt
entity. In addition, $90 million came from Lehman’s former directors and officers (which is significant
considering the diminishing assets available to pay any future judgment) as well as $99 million from
Lehman’s auditor Ernst & Young.
In re Wachovia Preferred Securities and Bond/Notes Litigation
This recovery of $627 million on behalf of purchasers of certain Wachovia Corporation preferred
securities is one of the most significant recoveries from litigation arising out of the financial crisis.
Plaintiffs alleged that the registration statements, prospectuses and prospectus supplements used to
market the Offerings contained materially false and misleading statements and omitted material
information. The settlement included a $37 million recovery from the company’s outside auditor.
4
In re Countrywide Financial Corp. Mortgage-Backed Securities Litigation
This settlement in the amount of $500 million on behalf of investors who purchased mortgage-backed
securities issued by Countrywide Financial Corporation (“Countrywide”) represents the largest MBS
class action recovery under the Securities Act in history. Plaintiffs alleged that Countrywide and various
of its subsidiaries, officers and U.S. investment banks violated Sections 11, 12(a) (2) and 15 of the
Securities Act of 1933 by making materially false and misleading statements in over 450 prospectus
supplements relating to the issuance of more than $300 billion in Subprime and Alt-A MBS and the
quality of the loans underlying the MBS. The matter further alleged that when information pertaining to
the loans materialized, the value of the MBS declined, damaging investors. The settlement, which
received final court approval on December 5, 2013, was achieved through prolonged mediation after
more than five years of hard fought litigation.
In re Citigroup Inc. Bond Litigation
This litigation was filed on behalf of purchasers of 48 offerings of Citigroup preferred stock and bonds
issued from May 2006 through August 2008 (the “Offerings Period”). Bond plaintiffs alleged that
throughout the Offerings Period, Citigroup raised billions of dollars from investors in a series of public
offerings while misrepresenting its exposure to toxic assets linked to residential mortgage-backed
securities. Plaintiffs also alleged that Citigroup materially understated the loss reserves for its portfolio
of high-risk residential mortgage loans, and falsely stated that risky assets held in off-balance sheet
entities known as structured investment vehicles (“SIVs”) were of high credit quality. The $730 million
settlement reached in the case was approved by the Court on August 20, 2013 and represents the second-
largest recovery in securities class-action litigation ever brought on behalf of bond investors.
In re Tyco International, Ltd. Securities Litigation
This landmark $3.2 billion settlement on behalf of investors included the largest securities class action
recovery from a single corporate defendant in history as well as the second largest auditor settlement in
securities class action history at the time.
Tenet Healthcare Corp. Securities Litigation
This recovery of over $280 million on behalf of investors included a substantial monetary commitment
by the company, personal contributions from individual defendants, the enactment of numerous
corporate governance changes, as well as a substantial recovery from the company’s outside auditor.
In re Dole Food Co., Inc. Stockholder Litigation
Kessler Topaz filed this stockholder class action alleging that Dole’s long-time controlling stockholder
and chairman, David Murdock, and Dole’s president and long-time general counsel, C. Michael Carter,
breached fiduciary duties owed to Dole’s public stockholders in connection with Murdock’s buyout of
the public stockholders in a deal that closed on November 1, 2013. Kessler Topaz sought to force
Murdock to pay a fair price for Dole’s stock, above the $13.50 per share that Murdock had paid in the
take-private transaction. Acting as co-lead counsel for a certified class of former Dole stockholders, and
after rebuffing Murdock and Carter’s efforts to have the case dismissed before trial, Kessler Topaz
conducted a nine-day trial before the Delaware Court of Chancery in February and March 2015. In
August 2015, the court issued its verdict in a detailed, 108-page post-trial opinion, finding that Murdock
and Carter “primed the market for the freeze-out by driving down Dole’s stock price” and provided the
company’s outside directors with “knowingly false” information and intended to “mislead the board for
Mr. Murdock’s benefit.” Because of the “fraud” perpetrated by Murdock and Carter, the court ruled that
the former Dole public stockholders were entitled to an additional $2.74 per share, or approximately
5
$148 million in total, plus pre-and-post judgment interest. This verdict represents the second-largest
post-trial verdict ever in merger litigation, behind only Kessler Topaz’s landmark 2011 $2 billion verdict
in In re Southern Peru.
In re Genentech, Inc. Shareholders Litigation
This shareholder litigation surrounded the July, 2008 attempt by Roche Holdings, Inc. to acquire
Genentech for $89 per share. The litigation resulted in the companies entering into an amended
affiliation agreement, which allowed a negotiated transaction between Roche and Genentech to close,
and enabled Roche to acquire Genentech for $95 per share, approximately $3.9 billion more than Roche
offered in its hostile tender offer.
In re Monster Worldwide, Inc. Stock Option Derivative Litigation
This derivative litigation resulted in the recipients of backdated stock options being forced to disgorge
more than $32 million in unlawful gains back to the Company plus the implementation of significant
corporate governance measures.
International Shareholder Litigation
Litigating Cases Outside the U.S.
Kessler Topaz has been at the forefront of representing institutional investors in non-U.S.
jurisdictions as a growing number of potential claims are barred from being brought in U.S. Courts. The
Firm is currently actively involved in representing clients in shareholder litigation in the Netherlands,
France, Germany, Japan, Canada, Portugal and the United Kingdom.
In 2010, the Supreme Court of the United States significantly limited certain aspects of investor
rights. Specifically, Morrison v. National Australia Bank eliminated the right of U.S. investors to seek
redress from fraud when they purchase shares on a non-U.S. exchange. In an increasingly global
market, this ruling has already proven to present significant hurdles for U.S. pension funds. Some recent
examples of cases where U.S. investors could not effectively pursue their claims are those against
Volkswagen, UBS, Toyota, BP, Fortis, and Royal Bank of Scotland to name just a few. Having a law
firm in place that can monitor, provide legal guidance on, and pursue these claims outside the U.S. is of
growing importance to pension funds.
Kessler Topaz was co-counsel in the groundbreaking Royal Dutch Shell European Shareholder
Litigation case that that recovered $352 million on behalf of non-U.S. investors in the Dutch Enterprise
Court, relating to Royal Dutch Shell plc’s 2004 restatement of oil reserves. This settlement of securities
fraud claims on a class-wide basis under Dutch law was the first of its kind, and sought to resolve claims
exclusively on behalf of European and other non-United States investors. Uncertainty over whether
jurisdiction for non-U.S. investors existed in a 2004 class action filed in federal court in New Jersey
prompted a significant number of prominent European institutional investors from nine countries,
representing more than one billion shares of Shell, to actively pursue a potential resolution of their
claims outside the United States. Among the European investors which actively sought and supported
this settlement were Alecta pensionsförsäkring, ömsesidigt, PKA Pension Funds Administration Ltd.,
Swedbank Robur Fonder AB, AP7 and AFA Insurance, all of which were represented by Kessler
Topaz.
6
This case challenged the Firm a great deal, requiring mastery of non-U.S. class action law,
extraordinary travel requirements, liaising with local Dutch counsel, and the uncertainty of how the
litigation would conclude. Ultimately, the Firm made the decision to pursue this action not only in order
to provide an avenue for recovery for our clients, but also to gain invaluable international litigation
experience. The Firm has been able to use the Royal Dutch Shell litigation model as a template for
pursuing actions that must be pursued outside of the United States. Indeed, Kessler Topaz has
successfully investigated, organized, funded, and represented large groups of institutional investors in
the following actions that have reached a successful resolution:
1. On behalf of a number of institutional investors, the Firm pursued a case in Tokyo, Japan
against Olympus Corp. The case against Olympus was based on allegations that Olympus and
certain of its officers and directors violated their duties under Japanese Company Law and
committed accounting and securities fraud between 1998 and 2011. The allegations against
Olympus stemmed from Olympus’ public disclosure in November 2011 concerning the falsity of
its financial statements. On June 28, 2012, we filed a complaint against in Tokyo on behalf of 47
plaintiffs with over ¥ 19 billion in claimed damages. In June 2013, we filed a second complaint
on behalf of 41 additional plaintiffs with total claims for over ¥ 16 billion in damages Following
the filing of the second complaint, Olympus agreed to mediation and, a third group of 12
claimants, who had not previously filed a complaint, were also added to the claims. Kessler
Topaz and its partners were able to convince Olympus to agree to mediation. Kessler Topaz was
an active participant in the mediation and successfully negotiated an ¥11 billion (approximately
$90 million) settlement with Olympus.
2. In January of 2011, the Firm and its partners established a Dutch Foundation and filed a
claim on behalf of more than 200 institutional investors with €2 billion in losses against Fortis
Bank, N.V. (Fortis) and its successor companies BNP Paribas and Ageas NL. The case against
Fortis arose out of the subprime mortgage crisis and alleged fraud in connection with the
company’s failed 2007 attempt to acquire Dutch bank ABN Amro Holding NV (ABN Amro).
Specifically, we alleged that Fortis misrepresented the value of its collateralized debt obligations,
its exposure to subprime-related mortgage-backed securities, and the extent to which the decision
to acquire ABN Amro jeopardized its solvency. After the acquisition failed, Fortis encountered
financial difficulties and broke up in the fall of 2008. Its investors lost as much as 90% of the
value of their investments. Our lawsuit survived rigorous jurisdictional challenges before both
the Utrecht District Court and the Dutch Court of Appeals. An appeal (on the jurisdictional
challenges) to the Dutch Supreme Court (and possibly the European Court of Justice) was
pending as were the proceedings on the merits, however, the Firm helped successfully negotiate
a settlement agreement with the defendants for $1.3 billion. The settlement is currently pending
approval by the Dutch Courts.
Beyond these two group actions, the Firm has also taken an active role in pursuing securities
class action litigation in Canada in order to protect the interests of the Firm’s clients trading securities in
Canadian markets. For example, Kessler Topaz was U.S. counsel to a European institution serving as a
named plaintiff on behalf of investors pursuing Canadian securities claims against Agnico Eagle Mines
Limited (Agnico). In this capacity, the Firm assisted Canadian counsel in developing and prosecuting
claims arising from Agnico’s failure to disclose ongoing operational issues at its Goldex mine prior to
the suspension of mining operations at the mine in October 2011. In February 2016, courts in Ontario
and Quebec approved a CDN$17 million settlement of the claims against Agnico. The Agnico
7
settlement is notable in that a companion case in the U.S. (which covered purchasers of Agnico’s stock
on a U.S. stock exchange and was based on nearly identical facts) had previously been dismissed.
In addition to these successfully concluded cases, the Firm is currently engaged in representing
clients in shareholder litigation in the following actions outside the United States:
1. The Firm is representing and funding a number of institutional investors in a direct action
venued in Paris, France, against Vivendi Universal, S.A. and Jean-Marie Messier (Vivendi’s
former CEO) arising from the facts tried in the securities class action In re Vivendi Universal
Securities Litigation in the Southern District of New York. The Paris suit represents investors
who purchased Vivendi’s securities on the Paris Bourse and whose claims were excluded from
the U.S. litigation due to the Supreme Court’s decision in Morrison v. National Australia Bank.
2. The Firm, in partnership with local Canadian firms, is litigating two class actions in Canada
against Sino-Forest and Valeant Pharmaceuticals International, Inc. in an effort to protect
investments our clients made on the Toronto exchange. Our involvement has allowed us to
assist our clients in pursuing litigation in Canada. At the same time, and because securities
fraud class actions are relatively new in Canada, we have been able to offer the Canadian firms
our expertise in prosecuting the cases. In the Sino-Forest case, Judge Perell of the Ontario
Superior Court of Justice recognized the value of our involvement when he decided the carriage
motion. In the Reasons for Decision, Judge Perell noted that Kessler Topaz has “a very high
profile and excellent reputation as counsel in securities class action lawsuits in the United
States.”
In Valeant, Kessler Topaz is serving as U.S. counsel to a European client seeking to represent
investors who purchased the Company’s shares on the Toronto Stock Exchange. The Valeant
action was filed following revelations that the Company concealed its reliance on affiliated
specialty pharmacies to distribute certain of its high-priced drugs and improperly recording sales
to these specialty pharmacies in order to artificially inflate revenue. The Company’s reliance on
affiliated specialty pharmacies is currently the subject of a probe by the United States
Department of Justice.
In both the Sino-Forest and the Valeant cases the Firm has been active in assisting Canadian
counsel with litigation strategy, crafting legal arguments, preparing and defending client
depositions, and settlement negotiations. In Sino-Forest, while the action against the company is
still pending, we helped negotiate a claims settlement with Ernst & Young, the C ompany’s
auditor, for approximately $117 million Canadian. The $117 million settlement is the largest
payment ever made by an auditor in Canada to settle a class action.
3. The Firm is representing and funding a large group of institutional investors in an action
against Royal Bank of Scotland (“RBS”) for its £44 billion loss in market value stemming from
facts which suggest that RBS materially mislead investors with respect to its true exposure to
subprime-related assets and collateralized debt obligations and inflated the value of its assets
including those assets it acquired from the Dutch bank ABN Amro.
4. The Firm is representing and funding a group of institutional investors who hold senior Banco
Espirito Santo bonds in a recently filed action against the Bank of Portugal. The action is an
administrative challenge against the Bank of Portugal’s December 29, 2015 decision to re-
8
transfer certain senior notes from Novo Banco S.A. back to the now defunct Banco Espirito
Santo. When Banco Espirito Santo collapsed in August of 2014, the Bank of Portugal created a
new bank, Novo Banco, and transferred all assets and some bonds to Novo Banco. On
December 29, 2015, the Bank of Portugal decided to retransfer €2 billion worth of bonds from
Novo Banco (which has assets) back to Banco Espirito Santo (which has no assets and is
currently in bankruptcy proceedings). The result is that bondholders lost at least 90% of the value
of their bonds.
5. The Firm is representing and funding a group of over 500 institutional investors in securities
litigation in Germany against Volkswagen and Porsche concerning Volkswagen’s “dieselgate”
emissions scandal that caused substantial monetary damages to Volkswagen and Porsche
shareholders. In March of 2016, the firm filed an initial complaint against Volkswagen on behalf
of 278 institutional investors alleging €3.25 billion in damages, and in September of 2016 the
firm filed a second complaint against Volkswagen on behalf of 263 institutional investors
alleging €1.25 billion in damages and a complaint against Porsche on behalf of 147 institutional
investors alleging €547 million in damages. Altogether the Firm’s group is the largest group of
investors pursuing action against Volkswagen and the claims represent more than 50% of the
total claims filed in Germany against Volkswagen. The litigation against Volkswagen and
Porsche is ongoing.
6. The Firm is representing a number of institutional investors in securities litigation in Tokyo,
Japan against Toshiba Corporation (Tokyo District Court, Heisei 28 (wa) 20446). The first
complaint was filed on behalf of 45 institutional investors on June 22, 2016. The complaint
claims a total of ¥ 16,396,952,512 (approximately $245 million) in damages and alleges that
Toshiba violated the Japanese Financial Instruments & Exchange Act and the Japanese Civil
Code by issuing false and misleading statements with regard to its accounting practices over the
past several years.
Monitoring Cases Outside the U.S.
The Morrison decision has resulted in a proliferation of shareholder litigation cases being filed
outside the United States. Not only has Kessler Topaz been at the forefront of representing institutional
investors in non-U.S. jurisdictions, but the Firm is also able to monitor these cases for our clients and
ensure they are participating in any and all settlement opportunities – something U.S.-based custodian
banks are not equipped to do. To that end, Kessler Topaz works with law firms in a number of
countries around the world, including the Netherlands, France, Canada, Australia, United Kingdom,
Germany, Sweden, Denmark, Italy and Israel, to assist the Firm with tracking cases and settlements in
their respective jurisdictions, and also with evaluation trends in shareholder litigation. We are currently
following more than 100 non-U.S. jurisdiction actions for our clients, and have alerts set up in 13
countries to advise us each time a new action is filed. For these many reasons we feel that the Firm is
especially well positioned to serve and represent institutional investors in an increasingly global market.
Pursuing Litigation/Case Evaluation
In determining whether to recommend the filing of a lead plaintiff motion or individual action,
Kessler Topaz has a Case Evaluation Department consisting of six attorneys whose primary
responsibility is to evaluate and analyze the merits of potential class actions or opt-out suits. These
9
attorneys – who focus their practice on servicing the needs of institutional investors – collectively have
more than 50 years of experience litigating federal securities class action and opt-out lawsuits in various
jurisdictions. We believe that by committing an entire team of skilled securities litigators to the case
evaluation process, we are uniquely positioned to provide timely, comprehensive, and highly detailed
analysis to our clients regarding the merits and risks of a particular course of action, including analysis
of changes in the law and real world difficulties in prosecuting cases.
We typically employ the following methodology for analyzing cases: When a securities class
action lawsuit is filed, our Case Evaluation Department reviews the allegations in the pleading and,
operating with a degree of professional skepticism, seeks to independently verify each theory of liability.
The analysis consists of reviewing: corporate filings with the Securities and Exchange Commission;
corporate press releases; conference call transcripts; news articles; analyst reports; executive
compensation figures; insider trading reports; and stock price movement (for the company being
analyzed as well as the target company’s peers). We also analyze case law in the circuit where the
action is pending, the opinions of the judge assigned to the case, and potential alternative forums for the
action. After analyzing the relevant information, attorneys may consult with other departments within
the Firm (such as the ERISA or Derivative Departments), forensic accountants and/or other experts to
fully analyze the relevant issues and provide a comprehensive recommendation. Our Case Evaluation
Department also has at its disposal an internal Investigative Services Department with six (6) fulltime
investigators led by a former Special Agent with the Federal Bureau of Investigation. Our Investigative
Services Department regularly assists our attorneys with developing facts supporting theories of liability
(either pled in the complaint or developed by our analysis).
We generally employ the same methodology for evaluating potential actions abroad. Where an
action has a non-U.S. component, and after assessing the merits of the case, if warranted, we consult
with attorneys in non-U.S. jurisdictions to determine whether our factual analysis supports claims under
the laws of the non-U.S. jurisdiction. As evidenced by the number of non-U.S. actions the Firm is
currently involved in (e.g., Fortis Bank, Olympus, RBS, Sino-Forest, Agnico Mining Corp., Vivendi), our
working relationships with counsel in countries outside the United States has been of particular benefit
to the Firm in light of the Morrison decision.
Following our investigation, we prepare a comprehensive memorandum summarizing the
relevant facts of the case, explaining our theory of liability, and analyzing the strengths and weaknesses
of every potential claim. This memorandum will analyze arguments likely to be raised by the
defendants, and includes our assessment of the merits of such arguments. Our analysis strives to provide
the client with all of the necessary facts and legal authority to sufficiently weigh the risks and benefits of
actively pursuing (or remaining passive in) an action. Attached as “Exhibit B” please find a sample
client research memorandum. Our clients receive this level of detailed reporting in any instance in
which the Firm recommends active participation in a shareholder action.
Although we review every U.S. securities class action filed, along with a number of actions filed
overseas, we again emphasize that we are highly selective in cases we recommend that a client seek lead
or representative status. The Firm only advises clients to seek appointment as lead plaintiff, named
plaintiff, or otherwise become actively involved, in cases where our analysis reveals a compelling case
of fraud, with significant damages and viable sources of recovery. Where any of the foregoing factors
are absent, we recommend that our clients remain passive class members. Even when we advise clients
to remain passive, we continuously assess developments and will revisit our recommendation should
10
new facts warrant a different course of action. We strive to ensure that any case we bring to a client to
consider will be a significant action worthy of leadership by a committed institutional investor.
The following points highlight and summarize what we believe make us especially suited to serve
the Fund:
• Kessler Topaz has expertise litigating an extremely wide variety of cases in the securities class action,
direct action, derivative, and merger/acquisition arenas and, in the process, serves a significant
number of large, sophisticated institutional investors with varied interests. We are one of very few
firms in the field that has equally robust securities, derivative and mergers/acquisition practices and
that has a truly international practice litigating cases in non-U.S. jurisdictions.
• The Firm’s size, resources and capitalization enable it to litigate a case of any magnitude through
trial. We have sufficient personnel and resources to litigate against any defense firm in the country.
Nevertheless, we stress selectivity in recommending cases that our clients pursue.
• In November 2014, after the Firm took only the 24th securities class action to trial since 1996, an
eight-person New York federal jury entered a verdict holding former Longtop Financial Technologies
CFO Derek Palaschuk liable for the company’s alleged misrepresentations about its financial
condition – this, after a default judgment order was entered against the company in 2013 which
included a damages award of $882.3 million. In 2011, after a week-long trial, Kessler Topaz
achieved the largest award of damages in a shareholder derivative case ever ordered in the Delaware
Court of Chancery, a $2 billion award on behalf of Southern Peru Copper Corporation. Additionally,
in February/March 2015, the Firm concluded another trial in the Delaware Court of Chancery in a
stockholder action on behalf of former Dole Foods Co., Inc. shareholders. Following this nine day
trial, Kessler Topaz won a $148 million verdict -- representing the second-largest post-trial verdict
ever in merger litigation, behind only the Firm’s landmark $2 billion verdict in Southern Peru.
Finally, in 2010 after over a month of trial, Kessler Topaz received an initial, favorable verdict from a
jury in a case against BankAtlantic Bancorp, Inc. in Federal Court in Miami, Florida. Defendants
know we are willing to take a case the distance.
• Kessler Topaz takes an aggressive, yet deliberate, approach to litigation. While our clients’ interests
are always our primary concern, we remain keenly aware of the need to ensure, whenever possible,
that the companies we pursue are in better shape going forward than they were at the start of
litigation.
• Kessler Topaz takes great pride in the relationships we have developed and continue to develop with
our clients. Regardless of whether the client has a pension fund with $10 million in assets or more
than $1 trillion in assets, all of our clients receive the same high level of personal service.
• We only advise clients to seek lead plaintiff appointment in cases involving compelling instances of
fraud, with significant damages and viable sources of recovery.
• Kessler Topaz’s securities portfolio monitoring and claims administration client service program is
the most comprehensive in the field -- covering both U.S. based and non-U.S. based shareholder
litigation.
11
Portfolio Monitoring & Claims Administration Program
Kessler Topaz’s portfolio monitoring and claims administration client service program was
introduced in 2004, and has evolved into what we are confident is the most advanced and
comprehensive service available. The Firm currently provides these services to more than 250
institutional investors worldwide and takes great pride in the fact that we conduct all work via our 19-
member Portfolio Monitoring and Claims Administration Department. In light of the U.S. Supreme
Court’s decision in Morrison v. National Australia Bank, the Firm has extended its portfolio monitoring
service to include all non-U.S. securities actions involving securities purchased on a non-U.S. exchange
which impact our clients’ portfolios.
Securities Portfolio Monitoring
Kessler Topaz attorneys and staff will work with the Fund to monitor, analyze, investigate and
provide consultation regarding potential securities fraud, corporate mismanagement and any other
fiduciary or shareholder issues as requested. We will work closely with the Fund’s staff to identify and
consult on the potential rewards of serving as lead plaintiff versus remaining an absent class member,
objecting to a proposed settlement, filing a direct/opt-out action, and filing a derivative action in state or
federal court depending on the particular situation. More specifically, the portfolio monitoring program
consists of the following:
Securities Tracker
Kessler Topaz, with the assistance of experts in the field, has developed a proprietary, secure,
portfolio monitoring database system, which we have dubbed “Securities Tracker.” We will request
from the Fund (or its custodial bank) a minimum five-year history (preferably ten-year history) of the
Fund’s securities transactions that we will then integrate into Securities Tracker. This information is
updated regularly, and we will work with you to ensure that the information is obtained efficiently and
without cost to the Fund, and is maintained confidentially. Once this information is obtained, Securities
Tracker enables us to identify any trades that are subject to a claim or securities action, which has been
filed or settled. Also, this system, along with our analysts, enables us to quickly calculate financial
losses for the Fund in a particular securities action.
Reporting
New Case Summaries: When it is determined that a claim exists, or a securities class action is filed,
we research our database to identify any and all clients who have an investment that is impacted.
Whenever a client suffers a financial loss (no matter the size of the loss), we automatically prepare for
that client a brief, yet concise, report which details (i) the relevant facts and class period, (ii) the
applicable jurisdiction(s), (iii) all relevant deadlines, including those for filing lead plaintiff motions,
objecting to or opting out of proposed settlements and submitting proof of claim forms, and (iv) the
strengths and weaknesses of the case. This report will include the estimated financial losses suffered by
a client utilizing the first in first out methodology, as well as the estimated damages suffered by the class
as a whole. Further, we will generally recommend a course of action for the client to maximize its
recovery of losses. These reports are provided to the client regardless of the size of the loss suffered ,
something that makes our monitoring service unique in the field. Attached as “Exhibit C” please find a
sample case summary from a recent securities class action.
12
If it is determined that a case has the right mix of facts and losses that warrant consideration by the Fund
to take an active role, Kessler Topaz will provide an in-depth case research memorandum for review.
Attached as “Exhibit B” please find a sample client research memorandum.
Quarterly Reports: To remain current on all securities class actions of interest, we will prepare and
distribute to the Fund a quarterly update report. This report is tailored specifically for each client so that
it can review significant developments in cases that affect only their specific investments, including
listings of all settled cases and the deadline for filing claims. These reports are generated for the benefit
of all our clients, regardless of whether they are serving as representative plaintiffs. These reports
further ensure that our clients are diligently fulfilling their fiduciary responsibilities to plan members by
actively monitoring securities class actions in which they have a financial interest. In light of the
Morrison decision, we have modified our reporting to include a separate section for all non-U.S.
jurisdiction securities actions. Attached as “Exhibit D” please find a sample client quarterly report.
Online Access: All clients have complete, secure (256-bit SSL Encryption), 24/7 online access
(viewable by multiple people in an organization) to information necessary to properly monitor actions in
which they: (i) serve as a plaintiff; (ii) have a financial interest; and/or (iii) have filed proof of claim
forms in connection with settlements. A sample Securities Tracker client page, containing quarterly
reports, case summaries, and settlement charts may be viewed on the Firm’s website: www.ktmc.com
(click on the blue “Log In” button on the bottom right-hand corner of the homepage; Username:
ABCEmployees Password: Asdf123456! then click on the blue “Log In” button. We would be happy to
provide the Fund with an online tutorial upon request.
Claims Administration
Claims Filing
The Firm understands that the recovery of money from class action settlements is extremely
important to pension funds of all sizes. For all monitoring clients we offer to prepare and submit proof
of claim forms on their behalf, prepare authority letters when necessary, and work directly with the
claims administrators to resolve deficiencies and any other issues that may arise in the course of
settlement administration. The Firm also files claims in non-U.S. jurisdiction case settlements --
something U.S.-based custodians are not in a position to do. This service is offered at no cost to the
Fund and we do not take a percentage of moneys recovered from claims administration (something
unique in the field). Importantly, we are flexible in adjusting this program to meet the needs of each
client (for example, several clients have elected to have the Firms be responsible for submitting claims
in non-U.S. actions while the client’s custodian maintains filing responsibility for U.S. claims) and have
seen a growing number of clients take advantage of this aspect of our program as it provides a level of
service that even paid services do not provide.
Kessler Topaz currently files proofs of claim for over one-hundred (100) clients. From 2008-
2016, the Firm helped our clients recover over $270 million in securities class action settlement
proceeds. The Firm’s Portfolio Monitoring and Claims Administration Department is focused solely on
monitoring client investments and processing proofs of claim in settled actions, and is in weekly, if not
daily, contact with over twenty (20) claims administrators around the country. Please refer to the sample
settlement chart attached as “Exhibit E”. This chart is provided to all clients for whom the Firm is filing
13
proofs of claim, is updated bi-weekly and posted to the client’s online account, and provides a full
listing of every settlement in which a client has a financial interest and an accounting of the settlement
proceeds recovered on behalf of the client to date.
The Firm’s claims administration client service program enables trustees to easily inventory the
settled class actions impacting their portfolio and allows them to report back to their pensioners
regarding how much money they have returned to their fund from securities litigation. Finally, this
program enables trustees to fulfill their fiduciary duties to plan members by diligently protecting plan
assets. Should the Fund ever decide to make a change from its current claims filing arrangement and
have our Firm handle the claims administration process on its behalf, we are certain in our ability to
ensure that every dollar entitled to the Fund’s pensioners from securities litigation settlements is
returned properly.
Claims Auditing
Kessler Topaz provides a cost-free auditing service of custodial banks to ensure that claims are
being filed correctly on behalf of our clients in securities class actions and that all sums owed to our
clients are being properly collected. The Firm currently conducts audits of claim filings for over 30
clients. As the Fund already has an arrangement in place for handling the claims administration process
through its custodian (or other third-party filer), the Firm will gladly assist as needed to protect the
Fund’s interests as a member of the class.
First, the Firm would ask that the Fund’s custodian be directed to provide us with a report of the
claims it filed on the Fund’s behalf from January 2015 - present to take a snap-shot of their filing
practices. We will then cross-check this information against what we would have filed to ensure that no
claims were missed and use this information to provide us with a reasonable sample size to determine
the service provider’s accuracy in claims filing. The Firm will then provide the Fund with an audit
report outlining our findings and, to the extent any discrepancies are found, we will assist with the filing
of any missed claims (the Firm will utilize our contacts with various claims administrators to see if it is
possible to submit a late claim if necessary so that the Fund can participate in the settlement proceeds
where entitled to do so). Attached as “Exhibit F” please find a sample claims audit report.
We then ask going forward, that we are provided with monthly reports of all the claims filed on
behalf of the Fund. We will again cross-check this information to ensure that no claims were missed
and will assist with the filing of any missed claims as needed. Each quarter, the Fund will receive an
update report from the Firm which will contain a summary of our auditing efforts.
Investor Education
Kessler Topaz is committed to institutional investor education. The Firm goes to great lengths to
keep its clients abreast of all relevant developments in shareholder litigation impacting their
investments. To that end, the Firm publishes/has published a quarterly newsletter and primer on
shareholder litigation.
14
Kessler Topaz Bulletin
The Kessler Topaz Bulletin is a quarterly newsletter which provides our clients, investors, and
consumers with an overview of the shareholder litigation and corporate governance landscape. The
Bulletin contains articles not only focused on cases the Firm is litigating, but also on a variety of trends
and issues affecting institutional investors. Firm attorneys regularly contribute articles about the cases
they are litigating, important legal precedents, and other issues relevant to our practice.
Kessler Topaz Primer on Shareholder Litigation
Kessler Topaz has published A Primer on Shareholder Litigation to explain the litigation options
available to investors under U.S. federal and state securities laws. Kessler Topaz believes these laws
should be viewed as tools that allow investors, among other things, an opportunity to recover investment
losses suffered as a result of fraud or other illegal conduct and/or to implement corporate governance
changes. Our Primer is intended to provide a thorough background on securities class actions,
derivative actions, takeover actions, opt-outs and direct actions, serving as a lead plaintiff, and litigating
an action.
Kessler Topaz is also proud to have developed two annual conferences of our own (described
below), bringing together public pension fund trustees, investment staff and fund counsel, as well as
industry professionals and legislators, to focus on corporate governance, fiduciary obligations, and other
issues pertinent to institutional investors. These seminars are a reflection of Kessler Topaz’s
commitment to not only serving as legal counsel to its clients, but also to being an educator on all issues
related to shareholder activism and asset protection and recovery. The Firm’s philosophy is that an
educated client not only serves itself better, but with proper education, serves the interests of others as
well.
The Rights and Responsibilities of Institutional Investors (RRII)
Since 2006, the RRII seminar, held each March in Amsterdam, Netherlands, is dedicated to
educating investors about their rights and responsibilities with respect to their U.S. and global
investments. This annual meeting provides a forum for leaders in the investment and legal community
to explore the role that active ownership and shareholder rights can play in better serving their funds and
their beneficiaries.
Each year over 100 senior executives and legal and compliance professionals from public
pension funds, mutual fund companies, hedge funds, insurance companies, and other institutional
investors and their advisors from around the globe, come together to share experiences and learn more
about approaches to active ownership and what they can do to protect and enhance their assets. Past
keynote speakers have included 42nd President of the United States Bill Clinton, President Mikhail
Gorbachev, Former Prime Minister Tony Blair, Vice President Al Gore, Sir Richard Branson, and
United Nations Secretary General Kofi Annan. In addition, the agenda includes high level speakers
from many of the world’s largest institutional investors and the academic community.
The Evolving Fiduciary Obligations of Institutional Investors (EFOII)
Since 2010, the EFOII seminar held each February in Washington, D.C., provides a
comprehensive examination of many vital issues that the advisors of pension plans and other
15
institutional investors must understand in order to properly fulfill their roles. It offers objective
viewpoints on how fiduciaries can best meet their goals and avoid problems, in addition to offering
timely information and guidance on various legal alternatives available to resolve issues as they surface.
Over the course of this one-day event, attendees hear from a variety of peers and outside experts who
share their knowledge, experience, and expertise about the most critical issues facing plan sponsors,
their legal counsel, and their boards.
Past keynote speakers have included former U.S. Secretary of State and Chairman of the Joint
Chiefs of Staff General Colin L. Powell, U.S. Secretary of State Madeleine K. Albright, former U.S.
Representative Barney Frank, former U.S. Securities and Exchange Commission Chairman Richard
Breeden, political/media personalities James Carville and Mary Matalin, as well as high level speakers
from many of the nation’s largest institutional investors and the academic community.
Educational Seminars
Kessler Topaz also has a great deal of experience providing half-day and full-day seminars to
legal and investment professionals on the topics of securities fraud and shareholder litigation. Over the
past five years, the Firm has provided such seminars to public pension funds as well as private investors
from the United States and Europe. Topics have included:
-Class Action Case Development;
-Portfolio Monitoring;
-Morrison v. National Australia Bank and the Non-U.S. Jurisdiction Shareholder Litigation Landscape;
-Being Appointed and Serving as a Lead Plaintiff;
-Litigating a Securities Class Action;
-Direct Actions and Opt-Outs;
-Derivative and Takeover Litigation;
-The Settlement Process and the Importance of Proper Claims Administration
We would be happy to provide these seminars, complete with handout materials and full power-
point presentations for each topic, at the Fund’s office or any other convenient location.
Conclusion
We are confident that Kessler Topaz has the skill, experience, resources and expertise to advise
and represent the Fund on any securities litigation matter and look forward to developing a long term
relationship that will significantly benefit you and your pensioners. Please do not hesitate to contact us
with any questions you may have or for any additional information you may require.
EXHIBIT
A
KESSLER TOPAZ’S INSTITUTIONAL INVESTOR CLIENT LIST
U.S. PUBLIC PENSION FUND CLIENTS
Alameda County Employees’ Retirement Association
Alaska Permanent Fund Corporation
Arizona State Retirement System
Arkansas Public Employees Retirement System
Arkansas Teacher Retirement System
Beaver County Employees’ Retirement Fund
Bonita Springs Fire Control and Rescue District Firefighters’ Retirement System
Brockton Retirement Board
Bucks County Retirement Board
Butler County Retirement Board
California State Teachers’ Retirement System (CalSTRS)
Cambria County Employees Retirement System
Carbon County Employees Retirement Board
Chester County Employees’ Retirement Fund
City of Alpharetta Defined Benefit Pension Plan
City of Austin Police Retirement System
City of Avon Park Firefighters’ Retirement System
City of Bethlehem Retirement System
City of Bridgeport Retirement System
City of Brookville Firefighters Retirement Trust Fund
City of Boynton Beach General Employees’ Pension Fund
City of Cape Coral Municipal Firefighters’ Retirement Plan
City of Cape Coral Municipal General Employees’ Pension Trust Fund
City of Coral Springs Firefighters’ Retirement Plan
City of Coral Springs Police Officers’ Retirement Plan
City of Dade City Municipal Firefighters’ Pension Trust Fund
City of Dade City Municipal Police Officers’ Pension Trust Fund
City of Daytona Beach Police and Fire Pension Fund
City of Deerfield Beach Municipal Firefighters’ Pension Trust Fund
City of Deltona Firefighters’ Pension Plan
City of Englewood Florida Firefighters’ Pension Trust Fund
City of Fort Lauderdale General Employees’ Retirement System
City of Fort Meade Pension Trust Funds
City of Fort Myers General Employees’ Pension Fund
City of Fort Myers Police Officers’ Retirement System
City of Hartford Municipal Employees’ Retirement Fund
City of Kanas City Missouri Firefighters’ Pension Trust System
City of Key West General Employees’ Pension Fund
City of Knoxville Employees’ Pension System
KESSLER TOPAZ’S INSTITUTIONAL INVESTOR CLIENT LIST
City of Leesburg Municipal Police Officers’ Pension Trust Fund
City of Leesburg Retirement Plan for General Employees’
City of Marietta/BLW Defined Benefit Pension Plan
City of Miami Fire Fighters’ and Police Officers’ Retirement Trust
City of Miami Fire Fighters’ Relief & Pension Fund
City of Oakland Municipal Employees’ Retirement System
City of Oakland Police and Fire Retirement System
City of Ocoee Municipal Police Officers and Firefighters Retirement Trust Fund
City of Orlando Firefighters’ Pension Fund
City of Orlando General Employees’ Pension Fund
City of Orlando Police Pension Fund
City of Palm Beach Gardens Police Officers’ Pension Fund
City of Philadelphia Board of Pensions & Retirement
City of Phoenix Employees’ Retirement System
City of Pittsburgh Comprehensive Municipal Pension Trust Fund
City of Pompano Beach General Employees’ Retirement System
City of Providence
City of Sanford Firefighters’ Retirement System
City of San Jose 1975 Federated City Employees’ Retirement System
City of San Jose 1961 Police and Fire Department Retirement Plan
City of Seminole Municipal Firefighters’ Pension Trust Fund
City of St. Cloud General Employees’ Retirement System
City of St. Cloud Police Officers’ and Firefighters’ Retirement System
City of Sunrise Firefighters’ Retirement Fund
City of Sunrise General Employees Pension Plan
City of Tallahassee Pension Plan
City of Tarpon Springs Municipal Firefighters’ Pension Trust Fund
City of Titusville General Employees’ Pension Plan
City of Titusville Police Officers’ and Firefighters’ Pension Plan
City of Wilmington
City Pension Fund for Firefighters and Police Officers in the City of Pembroke Pines
Clayton County, Georgia Public Employee Retirement System
Colorado Public Employees Retirement Association
Commonwealth of Pennsylvania State Employees’ Retirement System
Connecticut Retirement Plans & Trust Funds
Cumberland County Retirement Fund
Dauphin County Retirement Board
District of Columbia Retirement Board
Employee Retirement System of Rhode Island and the State Investment Commission
Erie County Employees Retirement System
Fire and Police Pension Association of Colorado
KESSLER TOPAZ’S INSTITUTIONAL INVESTOR CLIENT LIST
Firefighters Pension and Relief Fund for City of New Orleans
Fort Worth Employees’ Retirement Fund
Franklin County Employees Retirement Fund
Georgia Firefighters’ Pension Fund
Harrisburg Police Pension Board
Imperial County Employees’ Retirement System
Iowa Public Employees’ Retirement System
Judges of the Probate Courts Retirement Fund of Georgia
Kern County Employees’ Retirement Association
Key West Police and Fire Pension Board of Trustees
Lackawanna County Employees’ Retirement Fund
Lancaster County Employees Retirement Fund
Lawrence County Employees’ Retirement Board
Lebanon County Employees’ Retirement Fund
Lehigh County Employees Retirement Fund
Los Angeles County Employees’ Retirement Association
Los Angeles Fire and Police Pension System (LAFPP)
Los Angeles Water & Power Employees’ Retirement Disability & Death Benefit Plan
Louisiana Municipal Police Employees Retirement System
Luzerne County Retirement System
Lycoming County Employees’ Retirement System
Maine Public Employees Retirement System
Maryland State Retirement & Pension Plan
Memphis Light, Gas & Water Division Retirement and Pension System
Mercer County Employees’ Retirement System
Miami Beach Employees’ Retirement Plan
Montgomery County Employees’ Retirement System
New Orleans Harbor Police Retirement System
New York State Common Retirement Fund
Northampton County Employees Retirement Fund
North Carolina Retirement Systems
Northumberland County Retirement System
Odessa Firefighters’ Relief and Retirement Fund
Ohio State Retirement Systems
Oklahoma Firefighters Pension & Retirement System
Oklahoma Police Pension & Retirement System
Oklahoma School Land Commission
Oviedo Firefighter’s Pension Trust Fund
Palm Harbor Special Fire Control & Rescue District Firefighters’ Pension Plan
Pattonville Fire Protection District Defined Benefit Pension Plan
Pennsylvania Public School Employees’ Retirement System
KESSLER TOPAZ’S INSTITUTIONAL INVESTOR CLIENT LIST
Pennsylvania Turnpike Commission
Plymouth County Retirement Association
Public Employees’ Retirement System of Mississippi
Retirement Board of Allegheny County
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State of New Jersey and its Division of Investment
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AFA Livforsakringsaktiebolag
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EXHIBIT
B
MEMORANDUM: PRIVILEGED ATTORNEY/CLIENT
COMMUNICATION AND ATTORNEY WORK PRODUCT
TO ABC Employees’ Retirement System
FROM Darren J. Check, Esquire
Sean M. Handler, Esquire
Naumon A. Amjed, Esquire
Ryan T. Degnan, Esquire
DATE February 28, 2016
RE Navient Corporation Securities
Litigation Client Research Memorandum
Approximate Losses Suffered by ABC Employees’ Retirement System: $30,613,212 (FIFO) $25,606,987 (LIFO)
“[Navient’s] behavior is outrageous.”
- Presidential Candidate and Former U.S. Secretary of State Hillary Clinton
This memorandum analyzes claims under the federal securities laws against Navient
Corporation (“Navient” or the “Company”)—the largest student loan servicer in the United
States—and certain of its executive officers (the “Officer Defendants”) for, among other things,
falsely touting the strength of Navient’s business prospects and student loan portfolios,
understating Navient’s loan loss reserves, and concealing the fact that Navient and one of its debt
collection subsidiaries was engaged in improper student loan servicing practices.
The misleading nature of Defendants’ statements were revealed through a series of
disclosures beginning on February 27, 2015 when it was announced that the U.S. Department of
Education (“ED”) had elected to not renew its student debt collection contract with the
Company’s Pioneer Credit Recovery (“Pioneer”) subsidiary. The ED’s decision was based on its
discovery that Pioneer “made materially inaccurate representations to borrowers . . . at
unacceptably high rates.” On this news, the price of Navient common stock declined $1.89 per
share, or nearly 9%, from a close of $21.40 per share on February 27, 2015 to close at $19.51 per
share on March 2, 2015. This single trading-day decline eliminated approximately $760 million
from the Company’s market capitalization value.
Concerns about Navient’s servicing practices also attracted scrutiny from the Consumer
Fraud Protection Bureau (“CFPB”), and Navient admitted on August 24, 2015 that the CFPB
was considering taking legal action against the Company for improper disclosures and
assessments of late fees. In response, Navient common stock declined $1.85 per share, or
approximately 13%, from a close of $13.89 per share on August 23, 2015, to close at $12.04 per
share on August 25, 2015—eliminating more than $380 million from the Company’s market
ii
capitalization value. Then, on September 29, 2015, the CFPB issued a report discussing
inappropriate servicing practices employed by several student loan servicers, including Navient.
On this news, the price of Navient’s common stock declined $1.20 per share, or approximately
10%, from a close of $12.16 per share on September 28, 2015, to close at $10.96 per share on
October 1, 2015. This three trading-day decline eliminated nearly $450 million from the
Company’s market capitalization value.
Additionally, fallout from Navient’s questionable servicing practices directly impacted
the Company’s financial position as it was revealed on December 28, 2015 that the Federal
Home Loan Bank of Des Moines was significantly reducing Navient’s available credit facilities,
reportedly due to Congressional concern that government-sponsored banks should not be lending
on favorable terms to student lenders that are not passing the savings on to borrowers. On this
news, the price of Navient common stock declined $1.15 per share, or approximately 9%, from a
close of $12.61 per share on December 24, 2015, to close at $11.46 per share on December 28,
2015. This decline eliminated an additional $415 million from the Company’s market
capitalization value.
During this time, Navient also belatedly acknowledged on July 13, 2015 that its Private
Education Loan portfolio was significantly weaker than what the Company had previously
touted. Specifically, Navient slashed its fiscal 2015 earnings guidance by more than 15% and
significantly increased its loan loss provisions. In response, Navient stock price fell $1.94 per
share, or approximately 11%, from a close of $18.36 per share on July 13, 2015, to close at
$16.42 per share on July 14, 2015—eliminating $755 million from the Company’s market
capitalization value.
Finally, during a campaign stop in New Hampshire on February 6, 2016, Hillary Clinton
called Navient’s behavior “outrageous” and noted that the Company has been “misleading
people” and “doing some really terrible things.” In response, the price of Navient common
stock declined $0.57 per share, or more than 6% from a close of $9.51 per share on February 5,
2016, to close at $8.94 per share on February 8, 2016. This decline eliminated another $205
million from the Company’s market capitalization value.
Collectively, the corrective disclosures between February 27, 2015 and February 6, 2016
eliminated nearly $3 billion from Navient’s market capitalization value.
To date, at least three class action lawsuits have been filed against Navient and certain of
its executive officers (the “Officer Defendants”) in the United States District Court for the
District of Delaware, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 (the “Exchange Act”) on behalf of all persons who purchased or otherwise acquired
Navient securities between April 17, 2014 and February 5, 2016 (the “Class Period”).1
1 The basis for this analysis comes from, inter alia, the allegations pled in: Menold v. Navient Corp., et al.,
No. 16-cv-00075 (D. Del. filed February 11, 2016); Jagrelius v. Navient Corp., et al., No. 16-cv-00084 (D. Del.
filed February 12, 2016); and Policemen’s Annuity & Benefit Fund of Chicago v. Navient Corp., et al., No. 16-cv-
TBD (D. Del filed February 26, 2016). Each action is currently pending before the Honorable Gregory M. Sleet.
iii
Additionally, claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the
“Securities Act”) have been asserted against Navient, the Officer Defendants, certain of
Navient’s directors, and certain underwriters of three Navient debt securities sold pursuant to
offerings on November 5, 2015 and March 26, 2016 (the “Offerings”). 2
Based on ABC Employees’ Retirement System’s purchases of Navient common stock
during the Class Period, we have estimated that ABC Employees’ Retirement System sustained a
loss of approximately $30,613,212 under a first-in, first-out (“FIFO”) accounting basis and
approximately $25,606,987 under a last-in, first-out (“LIFO”) accounting basis. We believe the
claims against Defendants have substantial merit and that a portion of ABC Employees’
Retirement System’s loss may be recoverable under the federal securities laws. Accordingly, we
recommend that ABC Employees’ Retirement System’s consider moving for appointment as
lead plaintiff in the action. The deadline to seek appointment as lead plaintiff is April 11, 2016.
The Officer Defendants include: John F. Remondi (the Company’s President and Chief Executive Officer, and a
Company Director); and Somsak Chivavibul (the Company’s Vice President and Chief Financial Officer).
2 Navient’s 5% Senior Notes due 2020 and 5.875% Senior Notes due 2024 were underwritten by Credit
Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, RBC Capital Markets,
LLC, Barclays Capital Inc., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and RBS
Securities Inc. Navient’s 5.865% Senior Notes due 2021 were underwritten by Barclays Capital Inc., Credit Suisse
Securities (USA) LLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche
Bank Securities Inc., Goldman, Sachs & Co., RBC Capital Markets, LLC, and Wells Fargo Securities, LLC.
iv
TABLE OF CONTENTS
FACTUAL BACKGROUND .............................................................................................................................. 1
I. The Company .................................................................................................................................... 1
II. Navient Touts Strength of Private Education Loan Portfolio and Servicing Practices
throughout the Class Period ............................................................................................................. 2
III. Navient Capitalizes on Positive Outlook; Sells $1.5 billion in Company Bonds ................................. 6
IV. Navient Slashes Guidance; Significantly Increases Provisions for Loan Losses ................................ 6
V. Navient Comes Under Pressure from the ED, the CFPB, and Politicians .......................................... 7
LEGAL ANALYSIS ........................................................................................................................................... 9
I. Section 10(b) ................................................................................................................................... 10
A. Materiality and Falsity ...................................................................................................... 10
B. Scienter ............................................................................................................................. 14
C. Loss Causation .................................................................................................................. 16
II. Section 20(a) ................................................................................................................................... 17
III. Securities Act Claims ....................................................................................................................... 17
IV. ABC Employees' Retirement System ‐Specific Considerations ....................................................... 18
A. Potential Standing Challenges .......................................................................................... 18
B. ABC Employees' Retirement System’s Trading History and Recoverable Losses ............. 19
CONCLUSION .............................................................................................................................................. 19
1
FACTUAL BACKGROUND
I. The Company
Navient, a Delaware corporation headquartered in Wilmington, Delaware, is the largest
student loan servicer in the United States. As of December 31, 2014, Navient serviced more than
$300 billion in student loans held in its own portfolios and by third-party banks, credit unions,
non-profit education lenders, and the U.S. Department of Education. Navient’s own student loan
portfolios consisted of $29.8 in private education loans (the “Private Education Loan Portfolio”)
and $104.5 billion in loans guaranteed under the Federal Family Education Loan Program
(“FFELP”).
Navient was formed in April 2014 through the spin-off of certain student loan portfolios
and servicing operations from SLM Corporation (“Sallie Mae”). Navient began trading on the
NASDAQ on a when-issued basis on April 17, 2014 and formally began trading on the
NASDAQ under the ticker symbol “NAVI” on March 1, 2014.3
The Company’s market capitalization value reached a Class Period high of $9.3 billion
on December 22, 2014, before falling to just $3.2 billion at the close of trading on February 8,
2016. The Company’s market capitalization value remains depressed and was $3.7 billion at the
close of trading on February 24, 2016. The following chart illustrates the movement of the
Company’s stock price on the NASDAQ over the Class Period:
3 See SLM Corporation, Sallie Mae Board Approves Strategic Separation of Navient Corporation, Sets
Record Date and Distribution Date, April 10, 2014, available at: http://news.salliemae.com/press-release/corporate-
and-financial/sallie-mae-board-approves-strategic-separation-navient-corpora; Navient Corporation, Form S-1 filed
April 22, 2014.
2
II. Navient Touts Strength of Private Education Loan Portfolio and Servicing Practices
throughout the Class Period
The Class Period begins on April 17, 2014 to coincide with the commencement of when-
issued trading of Navient common stock, following the announcement of the Company’s spin-off
from Sallie Mae. In connection with the spin-off, Navient and Sallie Mae filed a registration
statement (the “Registration Statement”) with the SEC disclosing information regarding
Navient’s operations and financial prospects.4 Among other things, the Registration Statement
highlighted several of the Company’s “competitive advantages that will distinguish it from its
competitors, including:”
Premier servicing market share and infrastructure well-
positioned for evolving marketplace. . . . Navient’s premier market
share and tested servicing and collections infrastructure make it
well-positioned to expand its servicing and collections businesses
to additional third-party FFELP, federal, private education and
other loan portfolios.
Strong cash flow generation with ample debt service coverage. . .
. Navient also expects it will be able to continue [Sallie Mae]’s
policy of returning capital to stockholders through dividends and
share repurchases, subject to limitations under a tax sharing
agreement with [Sallie Mae].
Navient will have substantial institutional knowledge and
expertise in student loan assets and finance markets.
Servicing platforms that offer substantial economies of scale.
[Sallie Mae] has internally developed and purchased technology
platforms, which will be owned by Navient. Navient will service
and collect on DSLP loans for ED, on FFELP Loans for guarantor
and other clients and on its own $103.2 billion portfolio of FFELP
Loans and $31.0 billion portfolio of Private Education Loans (on a
pro forma basis, as of December 31, 2013). These platforms are
robust and scalable and will enable Navient to add additional
accounts at low cost.5
The Registration Statement provided assurances to investors regarding the sufficiency of
the Company’s loan loss provisions and declining delinquency rates in the Private Education
Loan Portfolio:
4 Navient Corporation, Form 10-12B/A filed April 14, 2014.
5 Id.
3
Provisions for Loan Losses
Management estimates and maintains an allowance for loan losses
at a level sufficient to cover charge-offs expected over the next two
years.
Charge-Offs and Delinquencies
When we conclude a loan is uncollectible, the unrecoverable
portion of the loan is charged against the allowance for loan losses
in the applicable segment. Charge-off data provides relevant
information with respect to the performance of our loan portfolios.
Management focuses on delinquencies as well as the progression
of loans from early to late stage delinquency. The Consumer
Lending segment’s charge-off rate was 2.8 percent of loans in
repayment in 2013 compared with 3.4 percent of loans in
repayment in 2012. Delinquencies are a very important indicator
of potential future credit performance. Private Education Loan
delinquencies as a percentage of Private Education Loans in
repayment decreased from 9.3 percent at December 31, 2012 to 8.3
percent at December 31, 2013.6
In connection with Sallie Mae’s April 16, 2014 press release announcing its financial
results for the first quarter 2014, Defendants further emphasized the strength of Navient’s Private
Education Load Portfolio. Specifically, Defendant Remondi underscored that the “quarter set a
six-year-record low in delinquencies, reflecting [Navient’s] strong underwriting and customer
support.” 7 Additionally, the press release highlighted several credit metrics that improved in
the first quarter 2014 versus first quarter 2013:
“Delinquencies of 90 days or more of 3.4 percent of loans in
repayment [were] down from 3.9 percent.”
“Total delinquencies of 6.9 percent of loans in repayment [were]
down from 7.8 percent.”
“Annualized charge-off rate of 2.8 percent of average loans in
repayment [was] down from 3.0 percent.”
“Provision for private education loan losses of $175 million [was]
down from $225 million.”8
6 Id.
7 Navient Corporation, Form 8-K filed April 16, 2014.
8 Id. During the accompanying investor conference call held on April 17, 2014, Defendant Remondi further
explained that the Company “saw 90 day delinquencies falls to 3.4% from 4.1% at year end and 3.9% a year ago.
And as [Executive Vice President of Banking and Finance] Joe [DePaulo] said, charge-offs fell to an annualized rate
at 2.8%. As a result, we were able to lower our provision for future loan losses to $175 million, down from $225
million in the year-ago quarter.” Q1 2014 SLM Corporation Earnings Conference Call – Final, FD (FAIR
DISCLOSURE) WIRE, April 17, 2014.
4
Defendants also noted that the maximum additional capacity under the Company’s
secured credit facilities continued to expand, and averaged $12.3 billion in first quarter 2014
versus $10.8 billion in the first quarter 2013. 9
On May 9, 2014, Navient filed its initial quarterly results (for the first quarter 2014) as a
standalone company and reiterated the credit metrics for delinquencies, charge-offs, and loan
loss provisions that had been previously provided to investors on April 16, 2014.10
Additionally, the Company affirmatively stated that it “believe[s] that the allowance for loan
losses is appropriate to cover probable losses incurred in the loan portfolios.”11 Separately,
Navient touted its “superior default prevention performance and industry leading asset
recovery services” and claimed that “[f]ederal loan customers with loans serviced by Navient
default at a rate 30 percent lower than the national average.”12 Furthermore, the Company
assured investors that it “prides itself in a robust compliance culture driven by a ‘customer
first’ approach.”13
In subsequent quarters, Navient continued to tout strong delinquency and charge-off
metrics that were driving progressively declining loan loss provisions for the Company’s Private
Education Loan Portfolio:
Delinquencies
(90+ Days) Delinquencies (Total) Annualized Charge‐
Off Rate
Loan Loss Provision
for Private Education
Loan Portfolio
First Quarter 201414 3.4% 6.9% 2.8% $175 million
Second Quarter 201415 3.2% 7.1% 2.5% $145 million
Third Quarter 201416 3.4% 7.9% 2.3% $130 million
Fourth Quarter 201417 3.8% 8.1% 2.5% $128 million
First Quarter 201518 3.6% 6.9% 2.9% $120 million
9 Navient Corporation, Form 8-K filed April 16, 2014.
10 Navient Corporation, Form 8-K filed May 9, 2014.
11 Navient Corporation, Form 10-Q filed May 9, 2014.
12 Id.
13 Id.
14 See Navient Corporation, Form 8-K filed April 16, 2014; Navient Corporation, Form 8-K filed May 9,
2014.
15 See Navient Corporation, Form 8-K filed July 16, 2014.
16 See Navient Corporation, Form 8-K filed October 15, 2014.
17 See Navient Corporation, Form 8-K filed January 21, 2015.
18 See Navient Corporation, Form 8-K filed April 21, 2015.
5
To this end, Defendants repeatedly referenced improvements in the student lending
environment. For example, in connection with the release of the Company’s second quarter
2014 financial results on July 16, 2014, Navient emphasized the “continued improvement in
student loan portfolio credit quality” while Defendant Remondi explained that the Company’s
“approach to loan servicing continues to help more customers successfully manage their
student loan payments and avoid the consequences of default, as reflected in the improving
credit quality of the loans we service.”19
Defendants made similar statement regarding improving credit conditions and the
strength of the Company’s servicing practices when reporting Navient’s third quarter 2014,
fourth quarter 2014, and first quarter 2015 financial results:
Third quarter 2014: “This quarter again demonstrated improved
credit performance” as Navient saw “continued improvements in
delinquencies and defaults since a year ago.”20
Fourth quarter 2014: “We continued to meet our commitment to
create shareholder value as we . . . realized year-over-year
improvements in credit quality.”21
First quarter 2015: “On the credit front, we continue to see
delinquency rates and our outlook for future expected charge-offs
on our private portfolio improve. . . . More importantly, for the
federal loans we service, we continue to see significant
improvement in recent graduates’ ability to successfully manage
their loans. For example, the class of 2014, which recently
entered repayment, is showing the best performance of any recent
graduating class.”22
19 Navient Corporation, Form 8-K filed July 16, 2014; see also 2014 Navient Corp Earnings Call – Final, FD
(FAIR DISCLOSURE) WIRE, July 17, 2014 (“Our private loan segment continues to benefit from improving credit
metrics, delinquencies and defaults continue to fall hitting six year lows, and driving down credit costs. Our loan
servicing associates work closely with borrowers to find repayment solutions that not only keep borrowers out of
default, but help them make real progress in repaying their debt balances.”).
20 Navient Corporation, Form 8-K filed October 15, 2014; see also Q3 2014 Navient Corp Earnings Call –
Final, FD (FAIR DISCLOSURE) WIRE, October 16, 2014 (“Credit performance also continues to improve. Our
repayment programs, along with an improving economy and increased portfolio seasoning, are all contributing to a
strong and improving outlook.”).
21 Navient Corporation, Form 8-K filed January 21, 2015; see also Q4 2014 Navient Corp Earnings Call –
Final, FD (FAIR DISCLOSURE) WIRE, January 22, 2015 (“The improving economy and growth in employment to
young workers is helping student loan performance. We also see borrowers making better decisions, allowing them
to successfully manage their student loan payments. The fact is that nationally, delinquencies and defaults are
declining, and Navient is leading the way with more customers enrolled in affordable repayment programs, and
dramatically lower default rates, compared to the national average.”).
22 Q1 2015 Navient Corp Earnings Call - Final, FD (FAIR DISCLOSURE) WIRE, April 22, 2015; see also
Navient Corporation, Form 8-K filed April 21, 2015 (“We’re pleased to begin our first full year as Navient by
helping more recent college graduates successfully transition into repayment. ”); id. (“Private credit quality also
continued to improve, leading to a lower loan loss provision.”).
6
Against the backdrop of the purportedly improving credit climate, Defendants informed
investors during Navient’s January 22, 2015 conference call that the Company anticipated “core”
earnings per share of $2.20 in 2015.23 On April 22, 2015, Defendant Remondi confirmed that
he “continue[s] to remain confident in [Navient’s] ability to generate core earnings per share of
$2.20 for the year and [Navient’s] ability to lead the industry in helping customers successfully
manage their loans and to execute on [its] growth initiatives.”24
III. Navient Capitalizes on Positive Outlook; Sells $1.5 billion in Company Bonds
Seeking to capitalize on the positive outlook surrounding the Company and its credit
metrics, Navient sold $1.5 billion in senior notes to investors through public offerings during the
Class Period. First, on November 5, 2014, Navient conducted a public offering of $500 million
in 5% Senior Notes due 2020 and $500 million in 5.875% Senior Notes due 2024—generating
more than $982 million in proceeds post-underwriting discounts.25 Then, on March 26, 2015,
Navient conducted a public offering of $500 million in 5.875% Senior Notes due 2021—
generating more than $492 million in proceeds post-underwriting discounts. 26
IV. Navient Slashes Guidance; Significantly Increases Provisions for Loan Losses
Notwithstanding Defendants’ repeated assurances regarding improving credit conditions
and the Company’s ability to help students manage their loan payments, Navient preannounced
second quarter 2015 financial results on July 13, 2015 that fell well below its prior guidance.27
Specifically, Navient announced that it was cutting 2015 core earnings guidance from $2.20 per
share to just $1.85 per share—a reduction of nearly 16%.28
According to the Company, the reduction was the result of, among other things,
unfavorable credit trends in its Private Education Loan Portfolio. Navient explained that
“[w]hile the majority of the private loan portfolio continues to perform as expected and is
experiencing positive credit trends, a segment of higher risk private education loan borrowers
who returned to school during the recession deferred repayment on their existing loans and
exited deferment status in 2014 [and] [t]hese loans are experiencing unfavorable credit trends
23 Q4 2014 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, January 22, 2015. “Core”
earnings excludes certain items including expenses in connection with Navient’s spin-off from Sallie Mae and
unrealized gains and losses caused my mark-to-market valuations of derivatives. See Navient Corporation, Form 8-
K filed January 21, 2015.
24 Q1 2015 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, April 22, 2015.
25 See Navient Corporation, Form 424b2 filed November 5, 2014. The 5% Senior Notes due 2020 and the
5.875% Senior Notes due 2024 were underwritten by Credit Suisse Securities (USA) LLC, Deutsche Bank
Securities Inc., J.P. Morgan Securities LLC, RBC Capital Markets, LLC, Barclays Capital Inc., Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and RBS Securities Inc.
26 See Navient Corporation, Form 424b2 filed March 26, 2015. The 5.865% Senior Notes due 2021 were
underwritten by Barclays Capital Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Goldman, Sachs & Co., RBC Capital
Markets, LLC, and Wells Fargo Securities, LLC.
27 See Navient Corporation, Form 8-K filed July 13, 2015.
28 See id.
7
compared to loans that exited deferment in prior years.”29 Given these credit trends, Navient
was forced to “increase[] its provision for these loans and now projects a private education loan
loss provision of $191 million for the quarter and $575 to $600 million for the year”—a 59%
increase from the first quarter 2015 loan loss provision of $120 million.30
In response to the Company’s announcements, analysts from Barclays, Janney, Credit
Suisse, and Buckingham all cut their stock price targets on Navient.31 On this news, the price of
Navient common stock declined $1.94 per share, or approximately 11%, from a close of $18.36
per share on July 13, 2015, to close at $16.42 per share on July 14, 2015. This single trading-day
decline eliminated approximately $755 million from the Company’s market capitalization value.
V. Navient Comes Under Pressure from the ED, the CFPB, and Politicians
Questions surrounding the propriety of Navient’s student loan servicing practices began
to surface on February 27, 2015 when the ED announced that it was not renewing its student loan
debt collection contract with Navient’s Pioneer subsidiary after the ED discovered that Pioneer
and four other private collection agencies “were providing inaccurate information to
borrowers.”32 Specifically, the ED found that Pioneer “ha[d] given inaccurate information at
unacceptably high rates about [loan rehabilitation] benefits [and] gave borrowers misleading
information about the benefits to the borrowers’ credit report and about the waiver of certain
collection fees.”33
Navient also disclosed in its 2014 Annual Report filed that same day that, in November
2014, Pioneer “received a [Civil Investigative Demand (“CID”)] from the CFPB as part of the
CFPB’s investigation into Pioneer’s activities relating to rehabilitation loans and collection of
defaulted student debt.”34 Moreover, Navient disclosed that it had “received a subpoena from
the New York Department of Financial Services [(the “NY DFS”)]” in December 2014.35 These
investigations followed a previously disclosed CID from the CFPB “regarding allegations
relating to Navient’s disclosures and assessment of late fees and other matters.”36
29 Id.
30 Id.
31 See Barclays Capital Inc., Disappointing Guidance, but Sell-off Overdone; Upgrading to Overweight, July
15, 2015; Janney Montgomery Scott LLC, NAVI’s 2Q Earnings Pre-announcement Disappoints; Lowering
Estimates, July 14, 2015; Credit Suisse Securities, Lowers’15 Guidance on Higher Interest Exp and Provision, July
13, 2015; Buckingham Research Group, Lowering Estimates Following 2Q Preannouncement, July 14, 2015.
32 U.S. Department of Education, U.S. Department of Education to End Contracts with Several Private
Collection Agencies, February 27, 2015, available at: http://www.ed.gov/news/press-releases/us-department-
education-end-contracts-several-private-collection-agencies.
33 Id.
34 Navient Corporation, Form 10-K filed February 27, 2015; see also id. (“Since 1997, Navient has provided
asset recovery services on defaulted student loans to ED. This contract expired by its terms on February 21, 2015
and our Pioneer Credit Recovery subsidiary received no new account placements under the contract.”).
35 Id.
36 Id.
8
Analysts expressed significant concern regarding the regulatory action and the looming
investigations into the Company’s practices. Barclays, for example, downgraded the Company
on the news and noted that “The Loss of the Department of Ed Collections Contract along with
Potential Regulatory Risk Stemming from the CIDs issued by the CFPB and Several State AGs
as well a Subpoena from the NY DFS around [Navient]’s Collections Business make
Risk/Reward Unattractive at These Levels[.]”37 Similarly, analysts from Janney lowered their
2015 and 2016 earnings estimates for Navient in response to what they called “A Negative
Surprise.”38 In response, Navient’s common stock declined $1.89 per share, or nearly 9%, from
a close of $21.40 per share on February 27, 2015 to close at $19.51 per share on March 2, 2015.
This single trading-day decline eliminated approximately $760 million from the Company’s
market capitalization value.
On August 24, 2015, Navient announced that it had “received a letter from the CFPB [on
August 19, 2015] notifying [the Company] that . . . the CFPB’s Office of Enforcement is
considering recommending that the CFPB take legal action against [Navient]” in connection
with the “previously disclosed investigation into [Navient]’s disclosures and assessment of late
fees.”39 Navient’s stock price responded by falling $1.85 per share, or approximately 13% from
a close of $13.89 per share on August 23, 2015, to close at $12.04 per share on August 25, 2015.
This two trading-day decline eliminated more than $380 million from the Company’s market
capitalization value.
Then, on September 29, 2015, the CFPB issued a report discussing inappropriate
practices employed by several student loan servicers, including Navient.40 As noted by The
Wall Street Journal, “[a]mong the biggest issues being raised by the CFPB is that some servicers
aren’t providing struggling borrowers with adequate information about affordable repayment
options—in particular income-driven repayment plans—and those borrowers can end up in
default as a result.”41 Similarly, The Washington Post explained that the CFPB’s “blistering
report” concluded that “[t]he sloppy, haphazard work of student loan servicers, the middlemen
who collect and apply payments, is creating obstacles to repayment, raising costs and driving
borrowers into default.”42
On this news, the price of Navient common stock declined $1.20 per share, or
approximately 10%, from a close of $12.16 per share on September 28, 2015, to close at $10.96
37 Barclays Capital Inc., Risk/Reward No Longer Attractive; Downgrading to Equal Weight, March 2, 2015.
38 Janney Montgomery Scott LLC, Navient Loses DoE’s Student Loan Collections Contract - A Negative
Surprise, March 2, 2015.
39 Navient Corporation, Form 8-K filed August 24, 2015.
40 See Consumer Financial Protection Bureau, Student Loan Servicing: Analysis of Public Input and
Recommendations for Reform, September 29, 2015, available at:
http://files.consumerfinance.gov/f/201509_cfpb_student-loan-servicing-report.pdf.
41 Annamarie Andriotis, Consumer Regulator Hits the Books on Student-Loan Problems, THE WALL STREET
JOURNAL, September 29, 2015.
42 Danielle Douglas-Gabriel, The Surprisingly High Number of People Who Are Behind on Their Student
Loans, THE WASHINGTON POST, September 29, 2015.
9
per share on October 1, 2015. This three trading-day decline eliminated an additional $450
million from the Company’s market capitalization value.
Navient’s dubious servicing practices also directly impacted the Company’s financial
position. On December 28, 2015, Navient informed investors that the Federal Home Loan Bank
of Des Moines (“FHLB-DM”) was significantly reducing Navient’s maximum borrowing
capacity under its credit facilities with the FHLB-DM from $10.7 billion (as of December 1,
2015) to $5.0 billion (between December 22, 2015 and October 31, 2016)43 and to $3.9 billion
(after October 31, 2016). While Navient explained that it “believes this change was made due to
an internal policy change in the formula the FHLB-DM uses to set a borrower’s maximum
borrowing limit,” the FHLB-DM’s decision followed U.S. Senator Elizabeth Warren’s demands
to know why a government-sponsored bank was lending on favorable terms to student lenders
that are not passing the savings on to borrowers.44
On this news, the price of Navient common stock declined $1.15 per share, or
approximately 9%, from a close of $12.61 per share on December 24, 2015, to close at $11.46
per share on December 28, 2015. This single trading-day decline eliminated an additional $415
million from the Company’s market capitalization value.
Navient’s conduct also drew the ire of presidential-hopeful and former U.S. Secretary of
State Hillary Clinton. During a town hall campaign event in New Hampshire on February 6,
2016, Secretary Clinton told the audience that Navient’s “behavior is outrageous” and that she
was “totally appalled” by the Company’s actions. Secretary Clinton further remarked that
Navient has been “misleading” borrowers and has been “doing some really terrible things.”45
The price of Navient common stock declined $0.57 per share, or more than 6%, in
response to Secretary Clinton’s comments, falling from a close of $9.51 per share on February 5,
2016, to close at $8.94 per share on February 8, 2016. This decline eliminated another $205
million from the Company’s market capitalization value.
LEGAL ANALYSIS
The foregoing facts, supported by our ongoing investigation, may be sufficient to plead
claims under Sections 10(b) and 20(a) of the Exchange Act against Navient and the Officer
Defendants. These facts may also be sufficient to plead claims against Navient, the Officer
Defendants, certain of Navient directors, and certain underwriters under Sections 11, 12(a)(2),
and 15 of the Securities Act in connection with Navient debt securities sold pursuant to the
Offerings.
43 Navient Corporation, Form 8-K filed December 28, 2015.
44 Id.; see also Shahien Nasiripour, How Elizabeth Warren Beat a Student Loan Giant, THE HUFFINGTON
POST, December 31, 2015.
45 See Shahien Nasiripour, Hillary Clinton ‘Totally Appalled’ by Student Loan Giant Navient, THE
HUFFINGTON POST, February 7, 2016; Amanda Becker, Clinton Slams Student Loan Servicer Navient as Misleading,
Reuters, February 8, 2016; Jennifer Epstein, Clinton: Student Loan Servicer Navient ‘Misleading People’,
Bloomberg, February 6, 2016.
10
I. Section 10(b)
In order to plead a claim under Section 10(b) of the Exchange Act, which prohibits fraud
or deceit in connection with the purchase or sale of securities, plaintiffs must establish: “(1) a
material misrepresentation (or omission); (2) scienter, i.e., a wrongful state of mind; (3) a
connection with the purchase or sale of a security; (4) reliance, often referred to in cases
involving public securities markets (fraud-on-the-market cases) as ‘transaction causation;’ (5)
economic loss; and (6) ‘loss causation,’ i.e., a causal connection between the material
misrepresentation and the loss.” Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 341
(2005) (citations omitted).
A. Materiality and Falsity
False statements or omissions form the basis of liability under Section 10(b) only if they
are material. Information is material if there is a “substantial likelihood [that] the disclosure of
the [omitted] fact would have been viewed by the reasonable [investor] as having significantly
altered the ‘total mix’ of information made available.” Opengate Capital Group LLC v. Thermo
Fisher Sci. Inc., 2014 U.S. Dist. LEXIS 92256 (D. Del. July 8, 2014) (Sleet, J.) (quoting Basic
Inc. v. Levinson, 485 U.S. 224, 231-32 (1988)).
Here, the following general categories of omissions and statements would form the basis
of investors’ claims under Section 10(b):
Defendants’ representations regarding the health of the Company’s Private
Education Loan Portfolio and credit metrics;46
Defendants’ representations regarding the sufficiency of the Company’s
provisions for loan losses;47
46 See, e.g., Navient Corporation, Form 8-K filed July 16, 2014 (“continued improvement in student loan
portfolio credit quality”); id. (“approach to loan servicing continues to help more customers successfully manage
their student loan payments and avoid the consequences of default, as reflected in the improving credit quality of the
loans we service”); 2014 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, July 17, 2014 (“Our
private loan segment continues to benefit from improving credit metrics, delinquencies and defaults continue to fall
hitting six year lows, and driving down credit costs.”); Q3 2014 Navient Corp Earnings Call – Final, FD (FAIR
DISCLOSURE) WIRE, October 16, 2014 (“Credit performance also continues to improve. Our repayment programs,
along with an improving economy and increased portfolio seasoning, are all contributing to a strong and improving
outlook.”); Q4 2014 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, January 22, 2015 (“The
improving economy and growth in employment to young workers is helping student loan performance. We also see
borrowers making better decisions, allowing them to successfully manage their student loan payments.”); Q1 2015
Navient Corp Earnings Call - Final, FD (FAIR DISCLOSURE) WIRE, April 22, 2015 (“More importantly, for the
federal loans we service, we continue to see significant improvement in recent graduates’ ability to successfully
manage their loans. For example, the class of 2014, which recently entered repayment, is showing the best
performance of any recent graduating class.”).
47 See, e.g., Navient Corporation, Form 10-Q filed May 9, 2014 ( “the allowance for loan losses is appropriate
to cover probable losses incurred in the loan portfolios”); Navient Corporation, Form 10-Q filed August 1, 2014
(same); Navient Corporation, Form 10-Q filed October 30, 2014 (same); Navient Corporation, Form 10-K filed
February 27, 2015 (same); Navient Corporation, Form 10-Q filed April 30, 2015 (same).
11
The Company’s 2015 core earnings guidance;48 and
Defendants’ representations regarding the Company’s commitment to
compliance and proper servicing practices.49
Navient’s Private Education Loan Portfolio, Loan Loss Provisions, and Core Earnings Guidance
Defendants’ repeated representations regarding the health of the Company’s Private
Education Loan Portfolio (including assurances regarding improving credit quality), the
sufficiency of the Company’s loan loss provisions, and the Company’s 2015 core earnings
guidance were proven false when the Company was forced to slash core earnings guidance by
nearly 16% and significantly increase its provisions for loan losses on July 13, 2015.
While Defendants may argue that their representations were accurate at the time they
were made—and only became inaccurate as the result of changed circumstances—we believe
such arguments are belied by the Company’s own admissions.50 Critically, the Company’s
explanation that elevated default rates for loans that had entered repayment status in 2014 would
require significantly increased provisions for loan losses demonstrates that the Company’s
previously issued (and reaffirmed) guidance and assurances regarding improving credit quality
falsely concealed that the overall credit quality of the Company’s Private Education Loan
Portfolio was already declining. Indeed, the fact that credit quality had been declining—not
improving—is further confirmed by the Company’s acknowledgement that the “segment of
higher risk private education loan borrowers who returned to school during the recession
deferred repayment on their existing loans and exited deferment status in 2014” were
“experiencing unfavorable credit trends compared to loans that exited deferment in prior years”
and represented an outsized portion of the Company’s portfolio (“$2.5 billion in 2014, as
compared to $1.8 billion in 2013”). Such admissions directly contradict Defendants’ statements
48 See, e.g., Q4 2014 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, January 22, 2015
(“We are confident in our ability to generate core earnings per share of $2.20 in 2015, and to generate ongoing EPS
growth in the years beyond.”); Q1 2015 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, April
22, 2015 (“I continue to remain confident in our ability to generate core earnings per share of $2.20 for the year and
our ability to lead the industry in helping customers successfully manage their loans and to execute on our growth
initiatives.”).
49 See, e.g., Navient Corporation, Form 10-Q filed May 9, 2014 (“Navient prides itself in a robust compliance
culture driven by a ‘customer first’ approach.”); 2014 Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE)
WIRE, July 17, 2014 (“Our loan servicing associates work closely with borrowers to find repayment solutions that
not only keep borrowers out of default, but help them make real progress in repaying their debt balances.”); Q4 2014
Navient Corp Earnings Call – Final, FD (FAIR DISCLOSURE) WIRE, January 22, 2015 (“. . . Navient is leading the
way with more customers enrolled in affordable repayment programs, and dramatically lower default rates,
compared to the national average.”); Navient Corporation, Form 8-K filed April 21, 2015 (“We’re pleased to begin
our first full year as Navient by helping more recent college graduates successfully transition into repayment.”).
50 Defendants’ potential challenge will likely rely upon the general principle that “[t]o be actionable, a
statement or omission must have been misleading at the time it was made [and] liability cannot be imposed on the
basis of subsequent events.” OFI Risk Arbitrages v. Cooper Tire & Rubber Co., 2015 U.S. Dist. LEXIS 85510 (D.
Del. July 1, 2015) (Andrews, J.) (quoting In re NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir. 2002)).
12
throughout 2014 and 2015 touting improving credit trends—most jarringly, Defendants’ April
22, 2015 assurance that “the class of 2014, which recently entered repayment, is showing the
best performance of any recent graduating class.”
Similarly, Defendants may argue that representations regarding the sufficiency of
Navient’s loan loss provisions are “soft” statements of “opinion” that are actionable “[only] if the
speaker does not genuinely and reasonably believe them.” In re Wilmington Trust Sec. Litig., 29
F. Supp. 3d 432, 452 (D. Del. 2014) (quoting In re Donald J. Trump Casino Sec. Litig., 7 F.3d
357, 368-69 (3d Cir. 1993)). While assurances regarding the adequacy of loan loss reserves
likely qualify as opinion, we believe that these assurances “were both false and not honestly
believed when they were made,” and thus, are actionable. Id. (quoting Fait v. Regions Fin.
Corp., 655 F.3d 105 (2d Cir. 2011)). As explained in more detail below, we believe the
Company was aware that student loans entering repayment status in 2014 were performing
poorly versus prior loans, and were resulting in significantly increasing credit risk that warranted
additional loan loss provisions. Accordingly, Defendants representations regarding the
sufficiency of its loan loss provisions are likely actionable.
Separately, Defendants may attempt to argue that the Company’s 2015 core earnings
guidance is inactionable pursuant to the PSLRA’s “safe harbor” protecting forward-looking
statements. See Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242, 253-54 (3d Cir. 2009).
In order to successfully apply the safe harbor, Defendants must establish that the earnings
guidance was “accompanied by meaningful cautionary statements” that were ‘extensive, specific,
and directly related to the alleged misrepresentation.” In re Aetna Sec. Litig., 617 F.3d 272, 282
(3d Cir. 2010). While such a defense is possible here, we believe safe harbor arguments are not
persuasive given that the safe harbor is not applicable to statements that are knowingly false
when made. See In re SeeBeyond Techs. Corp. Sec. Litig., 266 F. Supp. 2d 1150, 1165 (C.D.
Cal. 2003) (“If the forward-looking statement is made with actual knowledge that it is false or
misleading, the accompanying cautionary language can only be meaningful if it either states the
belief of the speaker that it is false or misleading or, at the very least, clearly articulates the
reasons why it is false or misleading.”); Rombach v. Chang, 355 F.3d 164, 173 (2d Cir. 2004).
Indeed, the Company’s generic warnings that it may not be able to meet its earnings guidance if
student loan servicing trends deteriorate is inadequate given that the negative servicing trends
had already materialized when the “higher risk” loans began to exit deferment status in 2014.
See Rombach, 355 F.3d at 173 (“Cautionary words about future risk cannot insulate from
liability the failure to disclose that the risk has transpired”).
Improper Student Loan Servicing Practices
Separately, Defendants repeated assurances that the Company “prides itself in a robust
compliance culture driven by a ‘customer first’ approach” and “work[s] closely with borrowers
to find repayment solutions that not only keep borrowers out of default, but help them make real
progress in repaying their debt balances” have been proven false by the February 27, 2015,
August 24, 2015, September 29, 2015, December 28, 2015, and February 6, 2016 disclosures.
Collectively these disclosures alerted investors to the fact that the Company’s use of improper
and questionable servicing practices would have a significant impact on the Company’s
operations—namely, the Company’s Pioneer subsidiary would lose its debt collection contract
with the ED, Navient would face significant scrutiny and potential legal action from the CFPB,
13
the Company would lose access to a significant portion of its existing credit facilities with the
FHLB-DM due to political pressure, and Secretary Clinton would publicly scold the Company
for its “misleading” and “outrageous” conduct.
Notwithstanding these disclosures, Defendants may argue that statements regarding the
Company’s commitment to their borrowers and compliance are not material because they
constitute inactionable “puffery.” As recognized by the Third Circuit, certain categories of
statements are not considered material because they would not be relied upon by reasonable
investors. See Aetna, 617 F.3d at 283. Specifically, statements of subjective analysis, opinion,
optimism, motive, intent, and statements may be found to be “too vague” to be actionable. Id.
Defendants are likely to assert that assurances regarding the propriety of the Company’s
servicing practices were too vague to be actionable. See In re Wachovia Sec. Litig., 753 F. Supp.
2d 326 (S.D.N.Y. 2011) (finding that assertions of “conservative” underwriting standards were
vague puffery). While, in the abstract, representations that the Company puts “customer[s] first”
and employs servicing practices that benefit borrowers may lack sufficient meaning to be relied
upon by investors, “[t]he puffery rule does have an outer boundary” where puffery “becomes an
actionable, ‘factual’ misstatement … when ‘(1) the statement is not actually believed, (2) there is
no reasonable basis for the belief, or (3) the speaker is aware of undisclosed facts tending
seriously to undermine the statement’s accuracy.’” CornerStone Propane Partners, L.P. Sec.
Litig., 355 F. Supp. 2d 1069, 1087 (N.D. Cal. 2005) (citations omitted); see also Shapiro v. UJB
Fin. Corp., 964 F.2d 272, 282 (3d Cir. 1992) (“[I]f a defendant represents that its lending
practices are “conservative” . . . the securities laws are clearly implicated if it nevertheless
intentionally or recklessly omits certain facts contradicting these representations.”). Taken in the
context of the ultimate disclosures that the Company’s conduct rose to the level of prompting the
CFPB to propose regulatory changes and contemplate legal action, the ED’s decision to not
renew Pioneer’s contract, and the FHLB-DM’s decision to drastically reduce Navient’s credit
facilities, Defendants’ statements gave investors the materially false impression that the
Company’s servicing practices actually went beyond the minimum requirements. See F.T.C. v.
Trudeau, 579 F.3d 754, 766 (7th Cir. 2009) (“In determining whether a statement is puffery, the
context matters.”). For these reasons, we do not believe Defendants would be successful in
making a puffery defense.
Separately, Defendants may also rely on the “truth on the market” defense to argue that,
even if they failed to adequately disclose material information regarding the Company’s use of
improper servicing practices, the market had already been sufficiently informed of such facts by
third-party sources. Under the “truth on the market” defense, “a misrepresentation is immaterial
if the information is already known to the market because the misrepresentation cannot then
defraud the market.” Ganino v. Citizens Utilities Co., 228 F.3d 154, 167 (2d Cir. 2000); see also
Allstate Ins. Co. v. Countrywide Financial Corp., 824 F. Supp. 2d 1164, at 1184 n.25 (C.D. Cal.
2011) (“The ‘truth on the market’ defense can fairly be characterized as a defense to materiality,
reliance, or loss causation, or as a separate affirmative defense.”). To this end, Defendants will
likely assert that concerns regarding Navient’s servicing practices were already in the public
domain in the form of media reports covering borrower complaints, government concerns, and
the prior disclosure of the CFPB investigation.
However, “[w]hether . . . problems were adequately disclosed to the market is a fact-
intensive query that cannot be disposed of on a motion to dismiss.” Hall v. The Children’s Place
14
Retail Stores, Inc., 580 F. Supp. 2d 212, 229 (S.D.N.Y. 2008). Given the fact intensive nature of
the truth on the market defense, courts are hesitant to apply this doctrine at early stages of
litigation. See In re Bank of Am. Corp. Sec., Derivative, & ERISA Litig., 757 F. Supp. 2d 260
(S.D.N.Y. 2010) (“A truth-on-the-market defense is intensely fact-specific and is rarely an
appropriate basis for dismissing a § 10(b) complaint for failure to plead materiality.”); see also
Allstate., 824 F. Supp. 2d at 1184-85 (“falsity and materiality (and particularly the truth-on-the-
market defense to materiality) are mixed questions of law and fact that are more appropriately
considered at summary judgment”). Moreover, courts have recognized that “[t]here are serious
limitations on a corporation’s ability to charge its stockholders with knowledge of information
omitted from a document . . . on the basis that the information is public knowledge and otherwise
available to them.” Kronfeld v. Trans World Airlines, Inc., 832 F.2d 726, 736 (2d Cir. 1987).
Indeed, the Company’s statements in its SEC filings served to directly rebut any belief that the
Company’s practices were improper. Accordingly, it is unlikely that the truth on the market
defense would provide Defendants with a strong basis to dismiss investors’ claims.
B. Scienter
In order to satisfy the scienter element, a plaintiff must “state with particularity facts
giving rise to a strong inference that the defendant acted with the required state of mind.” 15
U.S.C. § 78u-4(b)(2); see also Tellabs v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319 (2007)
(noting that scienter is defined as “a mental state embracing intent to deceive, manipulate or
defraud”). Scienter is defined in the Third Circuit as “a mental state embracing intent to deceive,
manipulate, or defraud, and requires a knowing or reckless state of mind.” City of Roseville
Emps.’ Ret. Sys. v. Horizon Lines, Inc., 442 F. App’x 672, 674 (3d Cir. 2011); see also Tellabs v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 319 (2007) (defining scienter as “a mental state
embracing intent to deceive, manipulate or defraud”). A “reckless statement” involves “not
merely simple, or even inexcusable negligence, but an extreme departure from the standards of
ordinary care, and which presents a danger of misleading buyers or sellers that is either known to
the defendant or is so obvious that the actor must have been aware of it.” Institutional Investors
Group v. Avaya, Inc., 564 F.3d 242, 267 (3d Cir. 2009); see also In re Advanta Corp. Sec. Litig.,
180 F.3d 525, 535 (3d Cir. 1999). One way to establish scienter is to demonstrate that the
speaker making the statement was aware of information that contradicted the statement at the
time the statement was made. See Winer Family Trust v. Queen, 503 F.3d 319, 332-33 (3d Cir.
2007).
Assuming that the alleged misstatements are found to be false and misleading, we believe
the presently known facts may collectively support allegations of scienter. See Tellabs, 551 U.S.
at 322 (the inquiry “is whether all of the facts alleged, taken collectively, give rise to a strong
inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that
standard”). “In most cases, the most straightforward way to raise [an inference of scienter] for a
corporate defendant will be to plead it for an individual defendant.” Teamsters Local 445
Freight Division Pension Fund v. Dynex Capital, Inc., 531 F.3d 190, 195 (2d Cir. 2008). As
such, if plaintiffs can establish scienter as to the Officer Defendants, scienter would be imputed
to Navient.
Here, our analysis suggests that the Officer Defendants acted with scienter by misleading
investors regarding the strength of Navient’s business prospects and student loan portfolios, the
15
sufficiency of Navient’s loan loss reserves, and the propriety of Navient’s student loan servicing
practices. As Navient’s Chief Executive Officer and Chief Financial Officer, the Officer
Defendants would have been critically involved in overseeing the Company’s business model
and would have had personal knowledge that the Company was experiencing negative credit
trends pertaining to loans entering repayment in 2014 and was exposed to significant regulatory
and political risks due to the use of improper servicing practices. See Wachovia Equity Sec.
Litig., 753 F. Supp. 2d 326, 353 (S.D.N.Y. 2011) (“the Court considers ‘core operations’
allegations to constitute supplementary but not independently sufficient means to plead
scienter”); South Ferry LP v. Killinger, 542 F.3d 776, 785-86 (9th Cir. 2008) (“allegations
regarding management’s role in a company may be relevant and help to satisfy the PSLRA
scienter requirement”). Moreover, the fact that Defendants repeatedly discussed the purportedly
improving credit climate—and made it a focus of each quarterly discussion of Navient’s
financial results—further demonstrates that the Officer Defendants were aware or should have
been aware of the fact that significant credit risks were undermining the Company’s earnings and
rendered existing loan loss provisions insufficient to cover expected student loan defaults. See
In re Longtop Fin. Techs. Ltd. Sec. Litig., 910 F. Supp. 2d 561, 578 (S.D.N.Y. 2012) (“failing to
detect a fraud of large magnitude provides some circumstantial evidence of scienter, just as
failing to detect a large boulder in front of your face qualifies as circumstantial evidence of
blindness”).
Furthermore, Defendants’ desire to maximize capital generated through the three Senior
Notes offerings—collectively raising nearly $1.5 billion in proceeds for Navient—further
supports an inference of scienter. See In re Twinlab Corp. Sec. Litig., 103 F. Supp. 2d 193, 206
(E.D.N.Y. 2000) (“to inflate the stock price to maximize revenue from the secondary offering, so
as to provide it capital” is a sufficient allegation of motive); In re MicroStrategy Inc. Sec. Litig.,
115 F. Supp. 2d 620, 648 (E.D. Va. 2000) (finding defendants’ desire to raise capital through
public offerings, combined with other allegations, probative of scienter).
Nevertheless, we note that Defendants will be permitted to provide non-culpable
explanations to rebut plaintiffs’ scienter allegations. See Winer Family Trust v. Queen, 503 F.3d
319, 328-33 (3d Cir. 2007) (relying on non-culpable explanations to dismiss claims). Here,
Defendants’ arguments will likely track their defenses to falsity. As noted above, Defendants
will likely argue that at the time they were touting the improving credit climate and the
sufficiency of Navient’s loan loss provisions, and were putting forth core earnings guidance of
$2.20 per share, issues surrounding loans entering repayment in 2014 had not yet manifest—or if
issues had started to materialize the Officer Defendants were not aware of such issues.
Moreover, Defendants may also attempt to argue that even if certain Navient employees were
engaged in improper servicing practices, the Officer Defendants were not aware of such conduct.
While such explanations are plausible, we believe there is more likely that such defenses
will fail. Here, Defendants’ own admissions regarding the poor performance of loans entering
repayment in 2014 suggest that it is highly unlikely that the Officer Defendants were unaware of
these issues both throughout 2014 and as recently as April 2015 when the Company reaffirmed
its core earnings guidance for 2015. Indeed, the timing and magnitude of the loan loss provision
strongly suggests that, to the extent the Officer Defendants were unaware of the negative trends
impacting loans entering repayment in 2014, such obliviousness would have been reckless and
sufficient to raise an inference of scienter. See Novak v. Kasaks, 216 F.3d 300, 308 (2d Cir.
16
2000) (“we have found allegations of recklessness to be sufficient where plaintiffs alleged facts
demonstrating that defendants failed to review or check information that they had a duty to
monitor, or ignored obvious signs of fraud”). Similarly, given the intense scrutiny on loan
servicers, including an ongoing investigation into Navient prior to the spin-off strongly suggests
that the Officer Defendants would have been aware of the Company’s use of certain improper
and questionable servicing practices. Accordingly, it is unlikely that Defendants will be able to
successfully defeat plaintiffs’ complaint based on a failure to plead scienter.
Ultimately, we believe the presently known facts may provide a basis for pleading
scienter. Moreover, if selected as lead counsel, Kessler Topaz will attempt to supplement these
facts through additional investigation.
C. Loss Causation
To plead loss causation in the Third Circuit, a plaintiff must allege that the price of a
security was inflated due to a fraudulent misrepresentation, and “the drop in the value of [that]
security is related to the alleged misrepresentation.” Berckeley Inv. Grp., Ltd. v. Colkitt, 455
F.3d 195, 222 (3d Cir. 2006); see also McCabe v. Ernst & Young, LLP, 494 F.3d 418, 425 (3d
Cir. 2007) (differentiating between transaction causation and loss causation). No single
disclosure revealing all aspects of a fraud is needed to plead loss causation. See, e.g., Freeland
v. Iridium World Commc’ns, Ltd., 233 F.R.D. 40, 47 (D.D.C. 2006). Moreover, unlike other
elements of Section 10(b) that must be pled with particularity, the loss causation element is met
so long as a plausible connection is pled between the disclosure, the defendants’ misconduct, and
a decline in the price of security. See Dura, 544 U.S. at 346.
Here, as detailed above, the price of the Company’s common stock declined on the
following dates in response to news correcting Defendants’ Class Period misstatements and
omissions:
$1.89 per share, or approximately 9%, from a close of $21.40 per share on
February 27, 2015 to close at $19.51 per share on March 2, 2015;
$1.94 per share, or approximately 11%, from a close of $18.36 per share
on July 13, 2015, to close at $16.42 per share on July 14, 2015;
$1.85 per share, or approximately 13%, from a close of $13.89 per share
on August 23, 2015, to close at $12.04 per share on August 25, 2015;
$1.20 per share, or approximately 10%, from a close of $12.16 per share
on September 28, 2015, to close at $10.96 per share on October 1, 2015;
$1.15 per share, or approximately 9%, from a close of $12.61 per share on
December 24, 2015, to close at $11.46 per share on December 28, 2015;
and
$0.57 per share, or more than 6% from a close of $9.51 per share on
February 5, 2016, to close at $8.94 per share on February 8, 2016.
17
Given these declines, and the lower standard for pleading loss causation, we do not
expect pleading loss causation will be an issue at the motion to dismiss stage of litigation.51
II. Section 20(a)
We believe plaintiffs can plead Section 20(a) claims against the Officer Defendants as
control persons of the Company. Plaintiffs seeking to prove a Section 20(a) claim must allege:
“(1) one person controlled another person or entity; (2) that the controlled person or entity
committed a primary violation of the securities laws; and (3) that the defendant was a culpable
participant in the fraud.” Belmont v. MB Inv. Partners, Inc., 2010 U.S. Dist. LEXIS 57822 (E.D.
Pa. June 10, 2010). Here, the Officer Defendants would be liable under Section 20(a) if claims
against Navient under Section 10(b) are sustained.
III. Securities Act Claims
Investors who purchased Navient debt securities pursuant to the Offerings may also be
able to recover under Sections 11, 12(a)(2), and 15 of the Securities Act.52 While purchase in
51 While Defendants may argue that the full extent of the declines is not attributable to revelations of fraud,
courts have frequently held that such arguments are improper at the early stages of litigation. See Hill v. State St.
Corp., 2011 U.S. Dist. LEXIS 85128, at *64 (D. Mass. Aug. 3, 2011) (“At [the motion to dismiss] stage in the
litigation, it is premature to unravel all of the factors that triggered the market’s reaction.”); In re Daou Sys., 411
F.3d 1006, 1025 (9th Cir. 2005) (“A plaintiff is not required to show ‘that a misrepresentation was the sole reason
for the investment’s decline in value’ in order to establish loss causation.”).
52 Based on our review of ABC Employees Retirement System’s trading, it does not appear that ABC
Employees’ Retirement System acquired any Navient debt securities pursuant to the Offerings. Nevertheless, ABC
Employees’ Retirement System would be permitted to serve as lead plaintiff on behalf of investors asserting
Securities Act claims.
2/27/15: ED cancels contract
with Navient subsidiary (-9%)
7/13/15: Navient slashes 2015 earnings guidance;
increases loan loss provisions (-11%)
8/24/15: CFPB threatens
legal action (-13%)
9/29/15: CFPB publishes report on
student loan servicers (-10%)
12/28/15: FHLB-DM reduces
Navient’s credit facilities (-9%)
2/6/16: Hillary Clinton attacks Navient’s practices (-6%)
18
the Offerings allows pleading both Securities Act and Exchange Act claims in connection with
those purchases, double recovery is prohibited.
Section 11 imposes liability for issuing false and misleading statements and omitting
material information from a registration statement. To state a claim under Section 11, plaintiffs
must allege that “the registration statement … contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make the statements
therein not misleading.” 15 U.S.C. § 77k(a). A claim under Section 11 may be asserted against
every person who signed the registration statement and the directors of the issuer at the time of
the offering. 15 U.S.C. § 77k(a)(l)-(2). Similarly, Section 12(a)(2) creates liability for a seller of
a security based on statements contained in a prospectus. Accordingly, Section 11 and 12(a)(2)
claims could be asserted against Navient, the Officer Defendants, certain Navient directors, and
the underwriters of the Navient debt securities sold in the Offerings.
Establishing liability under Section 11 and 12(a)(2) is generally easier than establishing
liability under Section 10(b) of the Exchange Act. While the issuer of securities is strictly liable
under Section 11 (here, Navient), Sections 11 and 12(a)(2) provide an affirmative defense of
“due diligence” to defendants other than the issuer of the security—the defendants, however,
carry the burden of establishing this defense. See Herman & MacLean v. Huddleston, 459 U.S.
375, 382 (1983) (“Liability against the issuer of a security is virtually absolute, even for innocent
misstatements. Other defendants bear the burden of demonstrating due diligence.”); Ernst &
Ernst v. Hochfelder, 425 U.S. 185, 208 (1976). Moreover, unlike claims under Section 10(b),
plaintiffs asserting liability under Section 11 and 12(a)(2) are not required to plead scienter,
reliance, or loss causation, nor must the allegations satisfy the heightened pleading standard of
Rule 9(b) of the Federal Rules of Civil Procedure. See Rafton v. Rydex Series Funds, 2011 U.S.
Dist. LEXIS 707, at *17-18 (N.D. Cal. Jan. 5, 2011). Nevertheless, establishing falsity and
materiality will largely track the arguments discussed above regarding liability under Section
10(b) of the Exchange Act.
Furthermore, Section 15 of the Securities Act, like Section 20(a) of the Exchange Act,
creates control person liability. Plaintiffs seeking to prove a Section 15 claim must establish: (1)
a primary violation of the Sections 11 or 12(a)(2); and (2) that the defendant exercised actual
power or control over the primary violator. Here, the Officer Defendants and certain Navient
directors would be liable under Section 15 if claims against Navient under Section 11 are
sustained.
IV. ABC Employees’ Retirement System ‐Specific Considerations
A. Potential Standing Challenges
As ABC Employees’ Retirement System is aware, asset managers that invest in securities
through multiple funds and sub-funds—like ABC Employees’ Retirement System —have been
challenged by competing movants at the lead plaintiff stage of litigation for lacking standing to
assert claims in connection with securities held by their respective funds and sub-funds. While a
competing movant may lob such challenges against ABC Employees’ Retirement System in this
litigation, we believe such arguments will not be successful. As an initial matter, ABC
Employees’ Retirement System has been previously found to have standing to assert claims in
19
connection with investments by its funds.53 More importantly, in OFI Risk Arbitrages v. Cooper
Tire & Rubber Co., the Honorable Richard G. Andrews of the District of Delaware dismissed
such standing attacks as “rely[ing] on mere speculation” and, in a thorough opinion, appointed a
European asset manager as lead plaintiff. 63 F. Supp. 3d 394, 403-05 (D. Del. 2014). As such,
we believe the court in the Navient litigation will reject any attacks on ABC Employees’
Retirement System’s standing.
B. ABC Employees’ Retirement System’s Trading History and Recoverable Losses
Based on our analysis of ABC Employees’ Retirement System’s trading history in
Navient common stock, ABC Employees’ Retirement System sold an overwhelming majority of
its Navient holdings prior to the August 24, 2015 corrective disclosure (concerning the CFPB’s
threatened legal action) but after the February 27, 2015 corrective disclosure (the ED’s
announcement to not renew the Pioneer contract) and the July 13, 2015 corrective disclosure
(revealing that Navient’s credit condition was worse than represented, Navient’s loan loss
provisions were insufficient, and Navient’s earnings guidance would be reduced by
approximately 16%). Accordingly, ABC Employees’ Retirement System’s ability to recover
losses will be largely tied to its ability to establish the sufficiency of the February 2015 and July
2015 corrective disclosures. Nevertheless, ABC Employees’ Retirement System appears to have
retained a portion of its investment through the end of the Class Period, and thus, has an interest
in establishing the sufficiency of the August 2015, September 2015, December 2015, and
February 2016 corrective disclosures. See Foley v. Transocean Ltd., 272 F.R.D. 126, 132
(S.D.N.Y. 2011) (appointing lead plaintiff whose “shares were sold after partial corrective
disclosures” and noting that “loss causation ‘does not require full disclosure, and can be
established by partial disclosure during the class period which causes the price of shares to
decline’”); Juliar v. SunOpta, Inc., 2009 WL 1955237, at *2 (S.D.N.Y. Jan. 30, 2009) (“where a
putative lead plaintiff sold all its shares after a partial disclosure of misconduct by the defendant
but before the final disclosure that led to the lawsuit, that putative lead plaintiff does not face the
unique defense of having to show loss causation to the extent that it cannot serve as lead
plaintiff.”).
CONCLUSION
Although our analysis is ongoing, we believe the publicly available facts are likely
sufficient to plead actionable claims under Sections 10(b) and 20(a) of the Exchange Act and
Sections 11, 12(a)(2), and 15 of the Securities Act. Accordingly, we recommend that ABC
Employees’ Retirement System consider seeking appointment as lead plaintiff by the April 11,
2016 deadline.
53 See City of Taylor Police & Fire Ret. Sys. v. Western Union Co., 2014 U.S. Dist. LEXIS 136101 (D. Colo.
Sept. 26, 2014) (concluding that “concerns about ABC Employees’ Retirement System’s standing are unfounded”).
EXHIBIT
C
TO ABC Employees’ Retirement System
FROM Darren J. Check, Esquire
DATE April 26, 2016
RE Brixmor Property Group Inc. Class Action
MEMORANDUM: PRIVILEGED
ATTORNEY/CLIENT COMMUNICATION
DATE CASE FILED March 31, 2016
LEAD PLAINTIFF
DEADLINE May 31, 2016
CLASS PERIOD October 27, 2014 –
February 5, 2016
JURISDICTION
United States District
Court, Southern
District of New York
JUDGE The Honorable
Analisa Torres
THE CASE AGAINST BRIXMOR PROPERTY GROUP INC.1:
The Complaint charges the Company and certain of its former
officers (the “Individual Defendants”) with violations of the Securities
Exchange Act of 1934 (the “Exchange Act”).2 Brixmor, a Maryland
corporation headquartered in New York, New York, is a real estate
finance company that owns and rents commercial real estate for
grocery stores and is organized as a real estate investment trust.
The Complaint alleges that throughout the Class Period,
Defendants made false and misleading statements and failed to
disclose material adverse facts about the Company’s business and
operations. Specifically, Defendants falsely assured investors that: (1)
same property net operating income (“NOI”) had shown consistent
growth in prior financial reporting periods; and (2) the Company
maintained adequate internal controls over financial reporting.
As set forth in the Complaint, on February 8, 2016, Brixmor
disclosed that the Company’s “accounting and financial reporting
personnel” were directly involved in “smoothing income items
between reporting periods in a manner contrary to GAAP in an
effort to achieve consistent quarterly same property net operating
income growth.” Brixmor also announced the immediate resignations
of Defendants Carroll, Pappagallo, and Splain. On this news, the price
of Company shares declined $5.32 per share, or more than 20%, from
a close of $26.42 per share on February 5, 2016, to close at $21.10 per
share on February 8, 2016.
The following summarizes the securities class action litigation filed against Brixmor Property Group Inc.
(“Brixmor” or the “Company”) (NYSE: BRX):
LOSSES SUFFERED
by ABC Employees’ Retirement System
TOTAL LOSS
$156,240.00
1 The basis for this analysis comes from, inter alia, the allegations pled in Westchester Putnam Counties Heavy and Highway Laborers Local 60 Benefit
Funds v. Brixmor Property Group, Inc. et al., No. 16-cv-02400 (S.D.N.Y. filed March 31, 2016).
2 The Individual Defendants named in the Complaint include: Michael A. Carroll (the Company’s Chief Executive Officer until February 7, 2016);
Michael V. Pappagallo (the Company’s President and Chief Financial Officer until February 5, 2016); and Steven A. Splain (the Company’s Chief
Accounting Officer until February 7, 2016).
As an initial matter, falsity is established by the Company’s admission that its
accounting and financial reporting personnel intentionally misstated NOI in
previously issued financial results. Additionally, materiality may be supported as
accurate financial reporting, and effective internal controls over financial reporting,
are likely to be considered by investors when determining whether to purchase
Company shares and assessing the risk of doing so. Loss causation may also be
supported by the decline in the price of Company shares following the February 8,
2016 disclosure. Lastly, the resignations of the Individual Defendants may support
an inference of scienter.
As a primary challenge to liability, the Individual Defendants are likely to claim
that the Company’s previously reported NOI misstatements were not material
to the Company’s financial statements. Separately, certain investors may not have
recoverable losses as the Company’s stock price has recovered a substantial portion
of the February 8, 2016 decline.
INITIAL ESTIMATE OF CLASS DAMAGES: $330M
KESSLER TOPAZ RECOMMENDATION: Remain a Passive Class Member
STRENGTHS
WEAKNESSES
EXHIBIT
D
ABC Employees’ Retirement System
QUARTERLY SECURITIESQUARTERLY SECURITIES
LITIGATION UPDATE
QUARTER ENDING
MARCH 31, 2016
INTRODUCTION
The following is an update of the portfolio monitoring services provided by Kessler Topaz
Meltzer & Check, LLP (“Kessler Topaz”) for ABC Employees’ Retirement System. The report
includes an overview of U.S. and Non-U.S. financial market performance during the past quarter
and securities class action information for securities relevant to ABC Employees’ Retirement
System’s portfolio.
Depending on the securities relevant to ABC Employees’ Retirement System portfolio, the report
may contain sections for monetary and non-monetary settled litigation, and new and ongoing
litigation for both U.S. and Non- U.S. litigation. Information regarding ABC Employees’
Retirement System’s financial interest during the Class Period provided for new litigation may
vary from information previously reported by Kessler Topaz if the Class Period has changed or
additional transaction records have since become available.
If you have any questions regarding this report please contact Darren J. Check, Esq. at
610.822.2235 or dcheck@ktmc.com.
Q1 2016
2
U.S. MARKET OVERVIEW
The first quarter of 2016 proved to be volatile but two of the three major U.S. indices ending the
quarter about where they began. This was relatively good news, as the first quarter began in a
very negative manner and moved down, to a low in mid-February. Market sentiment was
affected throughout most of the quarter by continued falling oil prices and the effect the low
prices have had on all oil companies, particularly on smaller companies in the oil and gas sector
with levered balance sheets—even extending to the banks in the U.S. that have provided this
leverage. However, in March, investors began to gauge excess supply in the oil market was
eroding and bid up the commodity, which had a positive effect on the markets at large. The
NASDAQ was the worst performer over the quarter; this included a slowed market for initial
public offerings significantly—down 73% year-over-year. The Federal Reserve’s commentary,
which is a market-driver, was viewed by many as inconsistent throughout the quarter: initially
three to four interest rate increases in 2016 were expected, but the Fed turned more “dovish”
from mid-March through the end of the quarter. The Fed did not choose to raise interest rates at
its March meeting, as was expected, but signaled that there may only be two rate increases in all
of 2016.
COMPARISON OF US STOCK INDICES
PRICE CHANGE
Close at 12/31/2015 Close at 3/31/2016 % Change
DOW Jones 17,425.0 17,685.1 1.5 %
S & P 500 2,043.9 2,059.7 0.8 %
NASDAQ 5,007.4 4,869.9 ‐2.7 %
Q1 2016
3
NON‐U.S. MARKET OVERVIEW
The European markets experienced a slowdown in the first quarter and continued the quarterly
drop from the fourth quarter of 2015. Investors, including many mutual funds, have been selling
out of European companies due to concerns about economic growth in the region. Central
Bankers in Europe and Asia have continued to try to avoid deflationary scenarios in their
economies. The Bank of Japan dropped interest rates into the negative territory in January,
surprising both European and U.S. markets, with a rate of -0.1% to current accounts held at the
bank. The European Central Bank (ECB) further cut rates on March 10, charging banks 0.4% to
hold their cash overnight. At the same time, it offered a premium to banks that borrow in order to
extend more loans and drive growth in the region. The DAX in Germany took the largest hit due
to the proportion of financial firms and automakers (notably Volkswagen AG) that comprise the
index. Meanwhile, the FTSE 100 was nominally down over the quarter, but has contended with
the concern of the possibility of ‘Brexit’ for the three month period.
COMPARISON OF NON‐U.S. STOCK INDICES
PRICE CHANGE
Close at 12/31/2015 Close at 3/31/2016 % Change
DAX 10,743.0 9,965.5 ‐7.2 %
FTSE 100 6,242.3 6,174.9 ‐1.1 %
Stoxx Europe 600 365.8 337.5 ‐7.7 %
Q1 2016
4
SETTLED LITIGATION (Eligible to file claims)
Based on a preliminary analysis of the transactions provided to Kessler Topaz, ABC Employees’
Retirement System is eligible to file proof(s) of claim in the following securities class action
settlement(s) that have been announced this Quarter. Kessler Topaz is responsible for submitting
proof(s) of claim on behalf of ABC Employees’ Retirement System and has filed or is in the
process of preparing proof(s) of claim to file in the below settlement(s). Please be advised that
meeting the eligibility requirements to file a claim does not guarantee that the claim will be
eligible to receive a recovery under the Court-approved plan of allocation.
CLASS PERIOD TRANSACTIONS IDENTIFIED FOR
SETTLEMENT CLAIMS DEADLINE CLASS PERIOD SETTLEMENT AMOUNT
BIOSCRIP, INC. (2013) 6/12/2016 11/09/12 ‐ 11/06/13 $10,900,000
GENERAL MOTORS COMPANY
(2014) 4/27/2016 11/17/10 ‐ 07/24/14 $300,000,000
HCA HOLDINGS, INC. (2011) 4/26/2016 03/09/11 ‐ 10/28/11 $215,000,000
IXIA (2013) 6/23/2016 02/04/11 ‐ 04/03/13 $3,500,000
JPMORGAN CHASE & CO. (2012) 6/13/2016 04/13/12 ‐ 05/21/12 $150,000,000
MERCK & CO., INC. (2003) 9/12/2016 05/21/99 ‐ 10/29/04 $830,000,000
SPECTRUM PHARMACEUTICALS,
INC. (2013) 6/9/2013 08/08/12 ‐ 03/12/13 $7,000,000
Q1 2016
5
NON‐MONETARY SETTLEMENTS
During the past quarter, non-monetary settlements were reached in the following cases in which
ABC Employees’ Retirement System currently has a financial interest:
COMPANY: AmREIT, Inc.
CLASS PERIOD: 07/10/14 ‐ 02/20/15
SETTLEMENT DESCRIPTION:
CASE SUMMARY
The Complaint alleges that AmREIT's Board of Directors (the "Board") breached their fiduciary
duties to AmREIT shareholders by engaging in an unfair process and self-interested conduct that
led to the decision to sell AmREIT to Edens at an inferior price that did not reflect the market
value for AmREIT. This conduct included failing to adequately consider a proposal by Regency
Centers Corporation ("Regency"), a competitor of AmREIT, to purchase AmREIT for $22 in
cash and/or stock. Instead, Plaintiffs alleged that the Board took actions to stop the Regency
offer and took further actions to conduct a sales process for the Company that would enable the
Board to select a preferred buyer for AmREIT that would provide its management and directors
with financial benefits. For instance, Plaintiffs allege that the Board required all parties that were
interested in buying AmREIT to enter into standstill agreements that prevented an interested
party from buying AmREIT, outside of the sales process dictated by the Company. According to
the Complaint, the standstill agreements did not allow for a potential buyer of the Company to
make a higher bid for AmREIT than what was ultimately paid by Eden.
In addition, the proxy materials filed with the Securities and Exchange Commission which
explained the sale of AmREIT to Eden misrepresented and concealed material information that
prevented AmREIT shareholders from making an informed decision whether to vote their shares
in favor of the sale of AmREIT to Edens.
SETTLEMENT PROVISIONS
In consideration for the Settlement of this Action, AmREIT: (i) agreed to the waiver of standstill
agreements that it had entered into with any interested party since July 10, 2014 in connection
with the review of strategic alternatives conducted by AmREIT's Board and was publicly
announced on July 16, 2014, solely to the extent necessary to permit any such interested party to
bring a fully funded tender offer for all of the shares of AmREIT; and (ii) made additional
disclosures in a Schedule 14A dated January 12, 2015 and filed with the Securities and Exchange
Commission.
Q1 2016
6
COMPANY: Exelis, Inc.
CLASS PERIOD: 09/17/14 ‐ 05/29/15
SETTLEMENT DESCRIPTION
CASE SUMMARY
The Claim arises out for Breach of fiduciary duties in connection with Harris Corporation's
("Harris") proposed acquisition of all the outstanding stock of Exelis.
On February 5, 2015, Exelis and Harris announced that they had entered into a definitive
Agreement and Plan of Merger (the "Merger Agreement") under which Harris will acquire all
outstanding shares of Exelis (the "Proposed Transaction"). Pursuant to the Merger Agreement,
Exelis shareholders will receive consideration equal to $16.625 in cash and 0.1025 Harris
common shares (the "Merger Consideration") for each share of the Company's common stock
they own. The Merger Consideration represents a value of $23.75 per share for Exelis common
stock. The Proposed Transaction has an enterprise value of $4.75 billion and is expected to close
in June, 2015. Upon closing, Harris shareholders will own approximately 85 percent of the
combined company, and Exelis shareholders will own approximately 15 percent.
The complaint alleges that both the Merger Consideration that Exelis shareholders stand to
receive and the process by which Defendants propose to consummate the Proposed Transaction
are fundamentally unfair to Plaintiff and all other public shareholders of the Company.
SETTLEMENT PROVISIONS
In consideration for the Settlement and the release of all Released Claims, Exelis made the
Supplemental Disclosures in the Form 8K filed with the SEC on or about May 11, 2015.
Q1 2016
7
NEW U.S. LITIGATION
NOBILIS HEALTH CORP. (2016)
Ticker NHC
Date Case Filed: 03/30/2015
Lead Plaintiff Deadline 05/29/2015
Class Period 10/16/14 – 03/25/15
Losses Suffered by ABC
Employees’ Retirement System
$443,924.81
The Complaint charges the Company and certain of its officers (the “Individual Defendants”) with
violations of the Securities Exchange Act of 1934 (the “Exchange Act”)1. Nobilis, a Canadian corporation
headquartered in Houston, Texas, owns and manages healthcare facilities including ambulatory surgical
centers and other medical service centers.
The Complaint alleges that throughout the Class Period, Defendants made false and misleading
statements and failed to disclose material adverse facts about the Company’s business and operations.
Specifically, Defendants issued false and misleading financial results for the Company’s 2014 fiscal year
and the first and second quarters of fiscal year 2015, and falsely assured investors that the Company
maintained adequate internal controls over financial reporting.
As set forth in the Complaint, on October 9, 2015, Seeking Alpha published an article asserting, inter alia,
that the Company’s acquisition strategy, complex structure, and accounting methods raised questions
about its continued viability. The article also claimed that the Company was manipulating its reporting of
certain subsidiaries’ revenues in order to inflate its overall revenues and revenue growth. On this news,
the price of Company shares declined $1.42 per share, or more than 27%, from a close of $5.24 per share
on October 8, 2015, to close at $3.82 per share on October 9, 2015.
Then, on November 11, 2015, the Company announced that it would not timely file its quarterly report
for the third quarter of fiscal 2015 due to the discovery of discrepancies in the Company’s accounting of
certain non-cash assets. On this news, the price of Company shares declined $0.65 per share, or more than
18%, from a close of $3.60 per share on November 11, 2015, to close at $2.95 per share on
November 12, 2015.
On January 5, 2016, after the close of markets, the Company announced that it needed to restate its
financial results for fiscal 2014 and for the first and second quarters of fiscal 2015, and that investors
should no longer rely upon its previous reports for those periods. The Company explained that several
accounting errors had been discovered regarding, inter alia, the accounting of warrants and options issued
in certain private placements, the accounting of certain business combinations, and the reclassification of
certain non-controlling interests in Company subsidiaries. Lastly, on January 7, 2016, the Company
announced the resignation of Defendant Lloyd from his role as the Company’s Chief Executive Officer.
On this news, the price of Company shares declined $0.63 per share, or more than 20%, from a close of
$3.10 per share on January 6, 2016, to close at $2.47 per share on January 7, 2016.
1 The Individual Defendants named in the Complaint include: Christopher H. Lloyd (the Company’s Chief
Executive Officer until January 6, 2016) and Kenneth J. Klein (the Company’s Chief Financial Officer since July
2015 and its Chief Accounting Officer since April 2015).
Q1 2016
8
IMPRIVATA, INC. (2016)
Ticker IMPR
Date Case Filed 02/02/2016
Lead Plaintiff Deadline 04/02/2016
Class Period 07/30/15 – 11/02/15
Losses Suffered by ABC
Employees’ Retirement System
$29,824
The Complaint charges the Company, certain of its officers (the “Individual Defendants”)1, and certain of
its controlling shareholders2[2] with violations of the Securities Exchange Act of 1934 (the “Exchange
Act”). Imprivata, a Delaware corporation headquartered in Lexington, Massachusetts, provides
information technology security solutions primarily to the healthcare industry, including authentication
products and access-management technology.
The Complaint alleges that throughout the Class Period, Defendants made false and misleading
statements and failed to disclose material adverse facts about the Company’s business and operations.
Specifically, Defendants issued false and misleading financial guidance.
As set forth in the Complaint, on October 14, 2015, the Company announced disappointing preliminary
financial results for the third quarter of fiscal 2015 which fell short of the Company’s previous revenue
and earnings guidance. The Company explained that delays on certain customer deals, declines in product
sales to non-healthcare clients, and weaker than expected sales to smaller hospitals were the primary
causes of the weak results. On this news, the price of Company shares declined $5.31 per share, or nearly
31%, from a close of $17.31 per share on October 14, 2015, to close at $12.00 per share on October 15,
2015.
Then, on November 2, 2015, the Company confirmed the preliminary third quarter fiscal 2015 financial
results issued on October 14, 2015, and also downgraded its guidance for the remainder of the fiscal year.
During an accompanying conference call with analysts and investors, Defendant Kalowski revealed that
the Company’s revenue downturn may extend into fiscal year 2016. On this news, the price of Company
shares declined $0.97 per share, or more than 9%, from a close of $10.39 per share on November 2, 2015,
to close at $9.42 per share on November 3, 2015.
1 The Individual Defendants named in the Complaint include: Omar Hussain (the Company’s President and Chief
Executive Officer); and Jeffrey Kalowski (the Company’s Chief Financial Officer).
2 The controlling shareholders named in the Complaint include: General Catalyst Group II, L.P.; Highland Capital
Partners VI Limited Partnership; and Polaris Venture Partners III, L.P.
Q1 2016
9
COMSCORE. (2016)
Ticker SCOR
Date Case Filed 03/10/2016
Lead Plaintiff Deadline 05/09/2016
Class Period 05/05/15 – 03/07/16
Losses Suffered by ABC
Employees’ Retirement System
$2,320,827
The Complaint charges the Company and certain of its officers (the “Individual Defendants”) with
violations of the Securities Exchange Act of 1934 (the “Exchange Act”)1. The Company, a Delaware
corporation headquartered in Reston, Virginia, provides digital media marketing services to businesses,
including analytics that measure consumer interactions with digital media.
The Complaint alleges that, throughout the Class Period, Defendants made false and misleading
statements and failed to disclose material adverse facts about the Company’s business and operations.
Specifically, Defendants made false and misleading statements and failed to disclose that comScore
lacked adequate internal controls over its financial reporting, and, as a result, the Company would not be
able to timely file its 2015 fiscal year-end annual report (“2015 Annual Report”).
As set forth in the Complaint, on February 29, 2016, comScore informed the Securities and Exchange
Commission (“SEC”) that it would not be able to file the 2015 Annual Report by the prescribed due date
of February 29, 2016 because external audits of the 2015 Annual Report financial statements were still
ongoing. The Company explained that “potential accounting matters” required further review of the
financial statements but that it expected to file the required 2015 Annual Report by March 15, 2016,
within the permitted 15-day extension from February 29, 2016. On this news, the price of Company
shares declined $1.15 per share, or nearly 3%, from a close of $41.15 per share on February 29, 2016 to
close at $40.00 per share on March 1, 2016.
Then, on March 7, 2016, comScore disclosed that it did not anticipate filing the 2015 Annual Report
before the March 15, 2016 extended deadline due to comScore’s continuing internal review and the
additional assessment of that review required by the Company’s independent public accountants prior to
filing financial reports with the SEC2. Additionally, comScore revealed that it would suspend a previously
announced share repurchase program because of the uncertainty surrounding the Company’s filing of the
2015 Annual Report. On this news, the price of Company shares declined $13.67 per share, or 33.5%,
from a close of $40.71 per share on March 4, 2016 to close at $27.04 per share on March 7, 2016.
1 The Individual Defendants named in the Complaint include: Serge Matta (the Company’s Chief Executive Officer
and President); and Melvin Wesley III (the Company’s Chief Financial Officer).
2 After the Class Period, on March 18, 2016, comScore disclosed that NASDAQ had notified comScore that the
Company was not in compliance with NASDAQ Listing Rule 5250(c)(1), which requires timely filing of financial
reports with the SEC.
Q1 2016
10
PRECISION CASTPARTS CORP. (2016)
Ticker PCP
Date Case Filed 03/25/2016
Lead Plaintiff Deadline 05/27/2016
Class Period 05/09/13 – 01/15/15
Losses Suffered by ABC Employees’
Retirement System
$630,376
The Complaint charges the Company and certain of its officers (the “Individual Defendants”) with
violations of the Securities Exchange Act of 1934 (the “Exchange Act”)1. Precision, an Oregon
corporation headquartered in Portland, Oregon, manufactures and sells complex metal components such
as structural investment castings, forged products, and specialty fasteners for use in the aerospace
industry.
The Complaint alleges that throughout the Class Period, Defendants made false and misleading
statements and failed to disclose material adverse facts about the Company’s business and operations.
Specifically, Defendants made false and misleading statements concerning the market conditions for the
Company’s products and failed to disclose the impact of weakening market demand on the Company’s
financial projections.
As set forth in the Complaint, on July 24, 2014, Precision announced first-quarter fiscal 2015 financial
results2, which included a 1% sales growth in the Company’s investment cast segment over the first-
quarter fiscal 2014 and a 2.8% sales growth in the Company’s forged products segment over the first-
quarter fiscal 2014. According to the Complaint, first-quarter 2015 financial results missed consensus
estimates. On this news, the price of Company shares declined $13.82 per share, or approximately 5.5%,
from a close of $250.03 per share on July 23, 2014 to close at $236.21 per share on July 24, 2014.
Then, on October 23, 2014, Precision announced its second-quarter fiscal 2015 financial results, which
included a 4% sales growth in the Company’s investment cast segment over the second-quarter fiscal
2014 and a 3% sales growth in the Company’s forged products segment over the second quarter of fiscal
2014. According to the Complaint, the Company’s second-quarter 2015 financial results missed
consensus estimates. On this news, the price of Company shares declined $6.88 per share over two
trading days, or nearly 3%, from a close of $230.94 per share on October 21, 2014, to close at $224.06 per
share on October 23, 2014.
Finally, on January 15, 2015, Precision disclosed that third-quarter fiscal 2015 sales and earnings results
would be “negatively impacted” by a combination of three primary factors that included: (1) lower
customer demand; (2) “inventory management” by certain customers; and (3) “aerospace engine
destocking” by a specific customer. On this news, the price of Company shares declined $20.09 per share,
or more than 9%, from a close of $219.72 per share on January 15, 2015, to close at $199.63 per share on
January 16, 2015.
1 The Individual Defendants named in the Complaint include: Mark Donegan (the Company’s Chairman and Chief
Executive Officer); and Shawn Hagel (the Company’s Executive Vice President and Chief Financial Officer)
2 Precision’s 2015 fiscal year began on April 1, 2014.
Q1 2016
11
UPDATES FOR ONGOING U.S. LITIGATION
The following list of ongoing litigation contains current updates for the past quarter. Please note:
if there has been no new activity for this litigation during the quarter, the most recent status
update is listed. Recently settled and dismissed cases are included in this section.
A10 Networks, Inc. (2015)
Plaintiff filed a First Amended Consolidated Complaint on November 23, 2015. Mediation was scheduled for March
of 2016.
Accretive Health, Inc. (2013)
The court granted Preliminary Settlement Approval on March 8, 2016.
Baxter International Inc. (2010)
The court granted Final Settlement Approval on January 22, 2016.
Biogen Inc. (2015)
Lead Plaintiff filed an Amended Complaint on January 19, 2016, and on March 1, 2016, Defendants filed a Motion
to Dismiss.
ChannelAdvisor Corporation (2015)
On April 6, 2016, the court granted the Motion to Dismiss.
Cobalt International Energy, Inc. (2014)
On January 19, 2016, the court granted in part and denied in part Defendants’ Motion to Dismiss.
Corinthian Colleges, Inc. (2010)
On July 17, 2015, the court granted the dismissal of the appeal as to Corinthian Colleges only. The appeals shall
continue as to the remaining parties.
Covisint Corporation (2014)
The court granted Plaintiff's Motion to Certify Class on February 22, 2016.
CVS Caremark Corp. (2009)
The court granted Final Settlement Approval on February 17, 2016.
Cyan, Inc. (2014)
The parties have scheduled mediation to occur prior to June 15, 2016.
Diodes, Inc. (2013)
The USCA affirmed the Judgment of the District Court on February 4, 2016.
First Solar, Inc. (2012)
Defendants have filed an interlocutory appeal as to the loss causation issue in the Summary Judgment order.
General Motors Company (2014)
Lead Plaintiff filed for Final Settlement Approval on March 9, 2016.
Q1 2016
12
HCA Holdings, Inc. (2011)
Lead Plaintiff filed a Motion for Final Settlement Approval on March 7, 2016.
Imperva, Inc. (2014)
Plaintiff filed a Third Amended complaint on January 13, 2016, and on February 10, 2016, the Defendants filed a
Motion to Dismiss the Third Amended Complaint.
ITT Educational Services, Inc. (2013)
The court granted Final Settlement Approval on March 8, 2016.
JPMorgan Chase & Co. (2012)
The court granted Preliminary Settlement Approval on January 19, 2016.
Kohl's Corporation (2013)
Defendants' Motion to Dismiss, filed on June 12, 2015, is pending.
Medtronic, Inc. (2013)
Defendants filed a Motion to Dismiss the Amended Complaint on February 9, 2016.
Merck & Co., Inc. (2003)
The case is on appeal.
Microsoft Corporation (2013)
The case is on appeal.
NII Holdings, Inc. (2014)
On January 21, 2016, the parties notified the court that they have reached an agreement in principle to settle the
litigation. In light of this development, the court has stayed all pending litigation deadlines.
Orthofix International, N.V. (2013)
Lead Plaintiff filed a Motion for Final Settlement Approval on March 24, 2016.
Overseas Shipholding Group, Inc.
Lead Plaintiff filed a Motion for Final Settlement Approval and Plan of Allocation on November 3, 2015.
Petroleo Brasileiro S.A. (2014)
The case is in discovery.
PowerSecure International, Inc. (2014)
Defendants' Motion to Dismiss, filed on November 23, 2015, is pending.
Prudential Financial, Inc. (2012)
In February 2016, the parties engaged in court ordered mediation and reached an agreement to settle the
litigation.
Qualcomm Incorporated (2015)
The court appointed a Lead Plaintiff and Lead Counsel on February 19, 2016.
Rocket Fuel, Inc. (2014)
On February 1, 2016, Defendants filed an Answer to the Amended Complaint.
Q1 2016
13
ONGOING NON‐U.S. LITIGATION
Opt‐in (active participant)
The following chart contains non-U.S. opt-in litigation you are already registered for. This chart
only reflects those cases that Kessler Topaz assisted you in registering for. No action is currently
required at this time. Kessler Topaz will notify you if there is any change to the status of the
case, if any action is required on your part, or in the event the case reaches a resolution.
AGEAS S.A./N.V. AND AGEAS N.V. (FKA FORTIS S.A./N.V. & FORTIS N.V.) (2011)
Netherlands
CLASS
DEFINITION
Investors who (1) relied on information published by Fortis when purchasing shares
from May 29, 2007 through Oct. 14, 2008; (2) participated in the Company's
September 2007 Rights Issue; or, (3) participated in Fortis' June 2008 Accelerated
Book-Building Offer.
STATUS In March 2016, a settlement of 1.2 billion Euros was announced. The settlement is
currently pending approval by the court in Amsterdam. After the settlement is
approved, investors will be able to file proof of claims and obtain a portion of the
settlement proceeds.
VOLKSWAGEN AG (EMISSIONS SCANDAL)
Germany
CLASS
DEFINITION
The securities of Volkswagen AG including common or preferred shares, and Porsche
AG preferred shares, purchased or otherwise acquired during the period from June 6,
2008 through September 22, 2015.
STATUS A complaint was filed in Braunschweig, Germany on March 14, 2016 on behalf of
278 institutional investors and alleging 3.2 billion Euros in investor damages.
Volkswagen has not yet answered the complaint. We anticipate that the court will
initiate model case proceedings under the KapMuG and appoint a model claimant
before the fall of 2016.
Given the interest in the case, Kessler Topaz and its partners are preparing to file a
second complaint on behalf of institutional investors who were unable to join in time
for the March 14th complaint. We are also looking to file claims for losses due to VW
Bonds, derivatives, and Audi shares on behalf of investors who are part of the March
14th complaint.
Q1 2016
14
ONGOING NON‐U.S. LITIGATION
Opt‐in (registration open)
The following chart contains active non-U.S. opt-in litigation for the last quarter. Registration is
still open for these cases, and if you wish to share in the proceeds of any settlement or favorable
judgment (should one result from these actions) you are required to affirmatively register and
participate in the case before the listed deadline. Some of these actions are in the initial stages of
being organized and given their preliminary stage, some of the currently advertised registration
deadlines may be extended in the future. Kessler Topaz will continue to monitor these cases and
will inform you of any changes to the registration deadline. Although some deadlines may be
extended in the future, if you are interested in joining the action you should do so as soon as
possible. If you have any questions or need any assistance with the registration process, please
contact either Darren Check, Esquire: 610.822.2235 or Emily Christiansen, Esquire:
484.654.2890.
TESCO PLC
(Kessler Topaz Meltzer & Check, LLP, Grant & Eisenhofer P.A., DRRT)
United Kingdom
CLASS
DEFINITION
On behalf of all shareholders who acquired shares in Tesco between January 1, 2012
and October 22, 2014 and who had not sold all of those securities prior to the
announcement made by Tesco before the market opened on 29 August, 22 September
or 23 October.
STATUS There are currently multiple potential actions being investigated in the UK against
Tesco. This particular action is being pursued by Kessler Topaz and its partners.
Kessler Topaz and its partners have decided to hold off on litigation while facts
develop. There is a long statue of limitations (6 years) in the UK and given the
burden of proof and the fact that the UK authorities are still investigating, Kessler
Topaz does not think it makes sense to immediately file litigation. Instead, Kessler
Topaz and its partners have created a Dutch Foundation and will first attempt to
resolve the case without litigation. The Foundation has also hired UK lawyers and is
prepared to act immediately if and when the time comes. Kessler Topaz recommends
all interested investors hold off on litigation for the time being and instead join this
Foundation approach. Please contact Darren Check, Esquire or Emily Christiansen,
Esquire to discuss this case and your options.
ILUKA RESOURCES LTD. (2014)
Australia
CLASS
DEFINITION
On behalf of all persons who acquired shares of Iluka Resources Ltd. (“Iluka”)
between April 12, 2012 to July 8, 2012.
STATUS This class action has not been filed yet but is anticipated that it will be filed soon. The
lawyers for the plaintiffs sought pre-litigation discovery from Iluka but their
application was denied. They appealed the decision denying their discovery request
Q1 2016
15
and the appeals court will hear the discovery issue on February 25, 2016. At this time,
investors may still register to join the action.
SAIPEM (2014)
(Kessler Topaz Meltzer & Check, LLP, Grant & Eisenhofer P.A., DRRT)
Italy
CLASS
DEFINITION
On behalf of all persons who acquired Saipem SpA (“Saipem”) common stock
between January 2, 2007 and December 31, 2013.
STATUS The group has filed three separate mediation requests with the Italian court. The third
mediation request was filed on March 18, 2016 for a third group of institutional
investors. A mediation hearing was scheduled for April 21, 2016 but it is likely that
the hearing will be a mere formality in order to comply with requirements of Italian
law because Saipem’s counsel made it clear at two previous mediation requests that
they have no interest in mediating.
If the hearing does not result in Saipem agreeing to mediation, the investor group will
commence litigation and file a complaint in April or May. The claimant group that
will be included in the group against Saipem in Italy will bring more than 200 Euros
in claims.
Q1 2016
16
ONGOING NON‐U.S. LITIGATION
(opt‐out)
The following chart contains active non-U.S. opt-out litigation for the last quarter. Similar to
U.S. class actions, you will be bound by the resolution of this case and will be eligible to share in
the proceeds of any settlement or favorable judgment (should one result from these actions)
unless you opt-out of the class. Those cases that were recently settled or dismissed are also
included in this section, as indicated below.
BARRICK GOLD CORPORATION (2014)
Canada
CLASS
DEFINITION
On behalf of all persons who acquired Barrick Gold Corporation ("Barrick") securities
from May, 7 2009 to May 23, 2013.
STATUS There are no developments to report.
MANULIFE FINANCIAL CORPORATION (2009)
Canada
CLASS
DEFINITION
All persons/entities who acquired Manulife Financial Corporation ("MFC") common
shares over the Toronto Stock Exchange or under a prospectus filed with a Canadian
securities regulator during the Class Period and held the shares on February 12, 2009.
STATUS This action is now in the discovery phase.
EXHIBIT
E
CLAIMS SUMMARY REPORT
ABC Employees’ Retirement System
December 31, 2015
$324,948.95
CLAIMS PAID IN 2015
SETTLEMENT CLASS PERIOD CLAIMS DEADLINE SETTLEMENT
CHECK NUMBER
DISTRIBUTION
DATE
SETTLEMENT CHECK
AMOUNT
Merck & Co., Inc. (2008)12/6/06 - 3/28/08 11/18/13 23266 1/30/15 $11,697.22
Schering-Plough Corp. (2008)1/3/07 - 3/28/08 11/18/13 33413 2/4/15 $6,230.80
VeriFone Holdings, Inc.8/31/06 - 4/1/08 1/29/14 105733 2/9/15 $175.71
Diamond Foods, Inc.10/5/10 - 2/8/12 1/9/14 26001065 3/12/15 $121.04
Toyota Motor Corporation 5/10/05 - 2/2/10 5/7/13 20043 3/17/15 $14.10
Medtronic, Inc. (2008)11/20/06 - 11/17/08 12/11/12 23697 4/10/15 $1,959.02
Enron (SEC)1/20/98 - 11/7/01 4/6/09 308529 4/28/15 $19.86
Internap Network Services Corp.5/3/07 - 8/5/08 12/4/13 2705 5/29/15 $421.56
Bain Capital Partners, LLC (Leveraged Buyout)Shares held at LBO date(s)12/29/14 001284 6/19/15 $79.17
Bank of America Corporation (2009) (Equity)9/18/08 - 1/21/09 4/25/13 373444 6/26/15 $4,044.06
Citigroup, Inc. (2007)2/26/07 - 4/18/08 2/7/13 192228 8/14/15 $203.79
Nomura Asset Acceptance Corp.7/22/05 - 1/31/08 12/26/13 300057 9/8/15 $355.52
Bain Capital Partners, LLC (Leveraged Buyout)Shares held at LBO date(s)12/29/14 40612 10/15/15 $19.73
Novatel Wireless, Inc.2/27/07 - 9/15/08 6/30/14 103460 12/2/15 $3,536.44
Recovery Awarded in 2015:$28,878.02
$353,826.97
PENDING CLAIMS
SETTLEMENT CLASS PERIOD CLAIMS DEADLINE STATUS*
Royal Dutch Shell US CLASS ACTION 4/8/99 - 6/15/04 11/18/08 TBD
SiRF Technology Inc.6/21/07 - 3/25/08 11/13/09 Approved
Carters Inc.3/16/2005 - 11/10/09 6/1/12 Approved
Countrywide Financial Corp. (2010) (MBS Settlement)3/12/04 - 8/7/13 12/15/13 Partial Rejection
Crocs, Inc.4/2/07 - 4/14/08 12/26/13 Approved
American Superconductor Corporation 7/29/10 - 7/11/11 4/7/14 TBD
Lehman Brothers Holdings, Inc. (Equity/Debt) (Ernst & Young)6/12/07 - 9/15/08 4/17/14 Partial Rejection
Ebix, Inc.5/6/09 - 6/30/11 6/4/14 TBD
Massey Energy Company (2010)2/1/08 - 7/27/10 7/3/14 Approved
Genoptix, Inc.7/31/09 - 6/16/10 7/7/14 TBD
Weatherford International Ltd.4/25/07 - 3/1/11 8/19/14 Approved
Hansen Natural Corp. (n.k.a. Monster Beverage Corporation) (2008)11/9/06 - 11/8/07 11/12/14 TBD
State Street Corp.10/17/06 - 10/21/09 12/16/14 TBD
AMAG Pharmaceuticals, Inc. (2010)1/21/10 IPO 12/30/14 TBD
Morgan Stanley Dean Witter Capital I (Morgan Stanley Issuing Trusts)
Certificates defined in
Settlement Notice 1/15/15 TBD
Body Central Corp.11/10/11 - 6/18/12 1/26/15 TBD
Total Recovery as of December 31, 2015:
Total Recovery as of December 31, 2014:
SETTLEMENT CLASS PERIOD CLAIMS DEADLINE STATUS*
Ignite Restaurant Group, Inc.5/11/12 - 10/30/12 4/15/15 TBD
WaMu Mortgage Pass-Through Certificates (2012)
Certificates defined in
Settlement Notice 4/20/15 TBD
Uni-Pixel, Inc.12/7/12 - 5/31/13 4/22/15 TBD
American International Group, Inc. (2008) 3/16/06 - 9/16/08 5/5/15 TBD
St. Jude Medical, Inc.4/22/09 - 10/6/09 6/24/15 TBD
Celera Corporation (2010)4/24/08 - 7/22/09 6/28/15 TBD
Knight Capital Group, Inc.5/10/11-8/1/12 6/29/15 TBD
RALI Mortgage (Asset-Backed Pass-Through Certificates) All Transactions 7/3/15 TBD
RALI Mortgage (Asset-Backed Pass-Through Certificates) All Transactions 7/3/15 TBD
Impax Laboratories, Inc. (2013)6/6/11 - 3/4/13 7/15/15 TBD
Sprint Nextel Corp.10/26/06 - 2/27/08 7/20/15 TBD
Allscripts Healthcare Solutions, Inc.11/8/10 - 4/26/12 7/22/15 TBD
Pfizer Inc.1/19/06 - 1/23/09 7/30/15 TBD
OmniVision Technologies, Inc.8/27/10 - 11/6/11 8/30/15 TBD
Regions Financial Corporation 2/27/08 - 1/19/09 9/9/15 TBD
PhotoMedex, Inc.11/6/12 - 11/5/13 9/10/15 TBD
Delcath Systems, Inc.4/21/10 - 5/2/13 11/6/15 TBD
IntraLinks Holdings, Inc. (2011)2/17/11 - 11/11/11 11/30/15 TBD
Weatherford International Ltd. (2012)3/2/11 - 7/24/12 12/9/15 TBD
The Bank of New York Mellon Corporation 2/28/08 - 10/4/11 12/11/15 TBD
Impax Laboratories, Inc. (2014) 3/6/13 - 8/1/14 12/19/15 TBD
Global Geophysical Services, Inc.2/22/12 - 3/26/14 12/21/15 TBD
Tower Group International, Ltd. (2013) (Tower Defendants)3/1/10 - 12/17/13 12/28/15 TBD
MGM Mirage 8/2/07 - 3/5/09 1/6/16 TBD
Baxter International Inc.6/10/09 - 5/3/10 1/7/16 TBD
Nortel Networks Corporation (SEC)10/24/00 - 4/27/04 3/16/12 Direct to Client
REJECTED CLAIMS
SETTLEMENT CLASS PERIOD CLAIMS DEADLINE STATUS
Huron Consulting Group, Inc.4/27/06-7/31/09 (10/30/09)5/5/11 No Loss
E*TRADE Financial Corp. (2007)4/19/06 - 11/9/07 10/31/12 No Loss
Carter's Inc. (PWC)3/16/05 - 11/10/09 10/3/13 No Loss
Johnson & Johnson (2010)10/14/08 - 7/21/10 12/24/13 No Loss
Olympus Corporation 5/8/07 - 11/7/11 5/24/14 No Loss
Textron Inc./Harman Fair Fund (SEC)4/9/09 and/or 7/20/09 6/30/14 No Loss
Hospira, Inc.2/4/10 - 10/17/11 7/21/14 No Loss
Hewlett-Packard Co. (2011)11/22/10 - 8/18/11 9/16/14 No Loss
Autoliv, Inc.10/26/10 - 7/21/11 12/3/14 No Loss
IndyMac Mortgage Pass-Through Certificates
Certificates defined in
Settlement Notice 1/28/15 Ineligible
*Claims marked with an “Approved" status are subject to change status pending a final determination by the claims administrator and must meet the minimum payment threshold that has
been approved by the Court to be eligible to receive a recovery.
ABC EMPLOYEES' RETIREMENT SYSTEMAudit of Securities Class Action Settlement Claims due March 2014 - March 2016SETTLEMENT CLAIMS DEADLINE CLASS PERIOD ACCOUNT(S) ELIGIBLE TO FILEAmerican International Group, Inc. (2008) May 5, 2015 Mar 16, 2006 to Sep 16, 2008 52601ZX32Anadarko Petroleum CorporationNovember 8, 2014 Jun 12, 2009 to Jun 9, 2010 52601ZX28Audience, Inc. (2012)March 30, 2016 May 9, 2012 to Sep 13, 2012 52601ZX27Avon Products, Inc.January 19, 2016 Jul 31, 2006 to Oct 26, 2011 52601ZX32Barclays PLCMarch 21, 2016 Jul 10, 2007 to Jun 27, 2012 52601ZX28Career Education Corporation (2012)March 22, 2014 Feb 19, 2009 to Nov 21, 2011 52601ZX27Celera Corporation June 28, 2015 Apr 24, 2008 to Jul 22, 2009 52601ZX27China Ceramics Co., Ltd.December 30, 2015 Mar 30, 2012 to May 1, 2014 52601ZX32CRM Holdings, Ltd.March 18, 2015 Dec 21, 2005 to Nov 5, 2008 52601ZX27The Custodian for ABC Employees' Retirement System has confirmed that it is responsible for submitting proof of claim forms for all settlements in which ABC Employees' Retirement System is eligible to file. Kessler Topaz has reviewed a report of the claims filed by ABC Employees' Retirement System's Custodian during the two year audit period and has confirmed that claims for all settlements in which ABC Employees' Retirement System is eligible to file have been submitted. Based on a review of the available transaction history, Kessler Topaz has identified the below securities class action settlements with claims deadlines between March 2014 and March 2016 (the "two year audit period") in which ABC Employees' Retirement System purchased the relevant securities during the Class Period and met the eligibility requirements to file a claim. Please be advised that meeting the eligibility requirements to file a claim does not guarantee that the claim will be eligible to receive a recovery under the Court approved plan of allocation.
SETTLEMENT CLAIMS DEADLINE CLASS PERIOD ACCOUNT(S) ELIGIBLE TO FILEDeer Consumer Products, Inc. (2013)January 18, 2016 Mar 31, 2009 to Aug 10, 2012 52601ZX32Global Geophysical Services, Inc.December 21, 2015 Feb 22, 2012 to Mar 26, 2014 52601ZX35iBio, Inc.March 7, 2016 Oct 6, 2014 to Oct 23, 201452601ZX2752601ZX32IntraLinks Holdings, Inc. November 30, 2015 Feb 17, 2011 to Nov 11, 2011 52601ZX28Kinder Morgan Energy Partners, L.P.December 26, 2015 Feb 5, 2011 to Nov 26, 2014 52601ZX27Metrologic Instruments, Inc.March 1, 2014 Sept 12, 2006 to Dec 21, 2006 52601ZX24MiMedx Group, Inc.January 18, 2016 Mar 29, 2012 to Sep 4, 2013 52601ZX32NeuStar, Inc.February 3, 2016 Apr 19, 2013 to Jun 6, 2014 52601ZX28OSI Systems, Inc.January 15, 2016 Jan 24, 2012 to Dec 6, 2013 52601ZX32Questcor Pharmaceuticals, Inc.September 2, 2015 Apr 4, 2011 to Sep 21, 2012 52601ZX28Silvercorp Metals, Inc.February 4, 2015 May 20, 2009 to Sep 13, 2011 52601ZX32Tibet Pharmaceuticals, Inc.January 11, 2016 Jan 24, 2011 to Apr 3, 2012 52601ZX28Triad Guaranty, Inc.March 21, 2016 Oct 26, 2006 to Apr 1, 2008 52601ZX28UniTek Global Services, Inc.July 11, 2014 May 18, 2011 to Apr 12, 2013 52601ZX27Yuhe International, Inc.July 31, 2014 Dec 31, 2009 to Jun 17, 2011 52601ZX25Zynga, Inc. (N.D.Cal)March 11, 2016 Dec 15, 2011 to Jul 25, 2012 52601ZX28
SUGARMAN & SUSSKIND
PROFESSIONAL ASSOCIATION
ATTORNEYS AT LAW
Robert A. Sugarman♦ 100 Miracle Mile
Howard S. Susskind Suite 300
Kenneth R. Harrison, Sr. Coral Gables, Florida 33134
D. Marcus Braswell, Jr. (305) 529-2801
Pedro A. Herrera Broward (954) 327-2878
Ivelisse Berio LeBeau Toll Free 1-800-329-2122
Dustin L. Watkins Facsimile (305) 447-8115
♦Board Certified Labor
& Employment Lawyer
LEGISLATIVE UPDATE
And
ACTION PLAN
June 2017
SENATE BILL 80 – AMENDMENTS TO THE PUBLIC RECORDS ACT
On May 23, 2017, Governor Rick Scott signed into law Senate Bill 80, a bill
intended to curb what some consider abuses of Florida’s broad public records law. This
law responds to the practice of filing so-called “gotcha” lawsuits in which members of the
public file frivolous public records requests intended primarily to cause a violation of the
law and result in an attorney fee award. This law applies to all public records requests
made on or after May 23, 2017.
The public records law states that when a member of the public sues a public
agency to obtain public records because those records were not produced accordingly,
the person suing the agency is entitled to an award of attorney fees and costs associated
with the lawsuit. Senate Bill 80 creates a new requirement that a member of the public
who seeks an award of attorney fees and costs must provide written notice to the agency’s
custodian of public records no less than five business days before filing the lawsuit. The
five-day notice is not required if the agency does not prominently post contact information
for the agency’s custodian of public records in the agency’s primary administrative
building and on the agency’s website. The new law also permits a court to award attorney
fees and costs to the public agency if the court determines that a public records lawsuit
was initiated for an “improper purpose.” An improper purpose is defined as a frivolous
request to inspect or copy a public record or a public record request initiated for the
purpose of causing a violation of the public records law.
As noted above, the new law provides a means of reducing the risk of an adverse
attorney fee award by prominently posting contact information for the custodian of public
records. This notice must be prominently posted both in the agency’s primary
administrative building and on the agency’s website, if the agency has a website. “Primary
administrative building” is defined as the place where public records are routinely created,
sent, received, maintained, and requested. For a local law retirement system, this will be
Legislative Update & Action Plan
June 2017
Page | 2
wherever most retirement system business is conducted, such as a pension fund office,
a municipal building, a special district office, or the offices of a third party administrator.
Action Plan
To take advantage of the five-day notice requirement, we recommend all clients
take the following actions:
1. Identify who will serve as the custodian of public records. This should be the person
who routinely deals with public records and regularly interfaces with plan
participants and the public, such as an administrator or a trustee.
2. Identify the “primary administrative building.” This may be the retirement system’s
own offices, if it has any. Otherwise, this will be wherever the retirement system
conducts most of its business, whether it be a municipal building, a special district
office, or the offices of a third party administrator.
3. Prepare a notice. The notice must describe how to contact the custodian of public
records. A sample notice is enclosed with this legislative update.
4. Post the notice. This notice should be posted in the primary administrative building
in a prominent place, such as a bulletin board. If the agency has a website, the
notice must be posted on the website as well. Some third party administrators
maintain websites for their clients. We recommend that the notice be posted on
those websites as well.
SENATE BILL 7022 – REVISIONS TO FLORIDA RETIREMENT SYSTEM
This legislative session also included several changes to FRS. Senate Bill 7022,
which passed on May 8, 2017, provides that new workers who join FRS will automatically
enter the FRS Investment Plan (i.e., the defined contribution plan) rather than the FRS
Pension Plan (i.e., the defined benefit plan). Although new workers automatically enroll
in the FRS Investment Plan, they may, within eight months of initial hire, make a one-time
irrevocable election to enter the FRS Pension Plan. New workers who are considered
“Special Risk Class members” will continue to automatically enroll in the FRS Pension
Plan. The new law also allows retirees of the FRS Investment Plan who are reemployed
in covered service to become renewed members of the FRS Investment Plan. Renewed
membership is not permitted, however, for a retiree of the FRS Pension Plan. The new
law also provides that a line-of-duty death survivor benefit is payable to the surviving child
of a Special Risk Class member who died in the line of duty on or after July 1, 2002.
These changes do not affect local law retirement systems.
[INSERT: NAME OF RETIREMENT SYSTEM]
ALL NOTICES AND REQUESTS UNDER THE
PUBLIC RECORDS LAW, CH. 119, FLA. STAT.,
SHOULD BE DIRECTED TO THE CUSTODIAN OF
PUBLIC RECORDS AS FOLLOWS.
BY MAIL:
Custodian of Public Records
[INSERT: NAME OF RETIREMENT SYSTEM]
[INSERT: ADDRESS]
[INSERT: CITY, STATE, ZIP]
BY EMAIL:
[INSERT: EMAIL ADDRESS]
FOR INQUIRIES, PLEASE CALL:
[INSERT: PHONE NUMBER]
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