Financial Recovery Technologies Fast Five provides you with the top news in shareholder class actions. Stay up-to-date on the latest developments in settled (U.S./Canada) claims filing opportunities, Antitrust settlements, Global Group Litigation matters and more. For more information, contact your Financial Recovery Technologies representative or email us.

1. High Court Refuses Tesco’s Strikeout Application in s.90A FSMA Group Shareholder Action

In an important decision for securities litigation in the UK, the High Court has dismissed a strike out application made by Tesco plc in the group litigation brought by its shareholders under section 90A Financial Services and Markets Act 2000 (“FSMA”), relating to the false and misleading statements made by Tesco regarding its commercial income and trading profits in 2014: SL Claimants v Tesco plc [2019] EWHC 2858 (Ch). Click here to read the full article.

2. Trading Models Underestimate Securities Class Damages

Increasing anecdotal evidence suggests that trading models used to estimate damages in securities class actions are underestimating the number of damaged shares and the associated monetary damages. This phenomenon becomes apparent after these cases are settled and class members submit their claims for compensatory payouts. Claims administrators have reported that the estimated number of damaged shares based on commonly used trading models oftentimes significantly underestimates the actual number of valid damaged shares submitted in the claims process. This discrepancy has also been documented in academic research but has failed to result in any significant changes in the models practitioners rely on to estimate the number of damaged shares. Practitioners need to address the question of what, if anything, can be done to adjust the trading models to account for the divergence between the estimated damaged shares and the actual valid claims submitted. Click here to read the full article (subscription may be needed).

3. As Landmark as It Gets: Why the Myer Class Action Has Everyone Talking

In the annals of Australian commercial law, the Myer class action judgment handed down this week was about as landmark as it gets. It was the first class action brought by shareholders in a listed company in this country to go to judgment. The first not to be settled by a rattled company convinced that when push came to shove the court would find their alleged misdeeds came with a hefty price. So it is little wonder that on Thursday all eyes in corporate Australia and in legal circles were on the findings of Justice Jonathan Beach in the Federal Court. Myer was sued by its shareholders who alleged the now frail grand dame of department stores misled investors in 2014 when then-boss Bernie Brookes told investors in November that year that Myer’s full-year profit result for 2015 would be higher than its 2014 profit of $98.5 million, only for the company to reduce that forecast five months later on March 19 to between $75 million and $80 million a few weeks after Brookes’ resignation. Click here to read the full article.

4. Australian Court of Appeal Endorses Stay of Competing Class Actions

The competing class actions, particularly in relation to shareholder claims, have increased in Australia due to the incentives in the Australian legal market, namely minimal regulation of litigation funding and high rates of return for lawyers and funders. Consequently, methods for dealing with competing class actions have become urgent. In Wigmans v AMP Ltd [2019] NSWCA 243, a five-judge Court of Appeal endorsed the use of a stay to address competing class actions and provide guidance on how a court should employ a multifactorial approach to determine which class action(s) to stay. This is the second Australian appeal court to endorse the use of a stay. However, competing class actions may be addressed in a number of ways. Other approaches, such as consolidation, may also be employed. Click here to read the full article.

5. Securities Class Period Selection Deserves Greater Scrutiny

The class period interval in securities class actions that allege violations of the federal securities laws under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 is the second most fundamental determinant of the magnitude of potential aggregate — or classwide — damages. Undoubtedly, the first is the number of shares of common stock sold by participants in the market in response to an alleged corrective disclosure that is alleged to be related to a specific misstatement or omission disseminated by directors and officers. The length of the class period not only affects the magnitude of potential aggregate damages but is also a key factor affecting the selection of the proposed lead plaintiff that may represent a purported class of defrauded shareholders. Click here to read the full article (subscription may be needed).

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