Shearman & Sterling LLP | Securities Litigation

Shearman Litigation:  Need-to-Know Litigation Weekly

Welcome to Shearman & Sterling LLP’s Need-To-Know Litigation Weekly, which analyzes notable U.S. decisions, orders and developments each week in areas of Securities Litigation, M&A litigation, and Government/Regulatory Enforcement.  This weekly newsletter is intended to supplement our various publications and thought leadership concerning these important substantive areas.

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Recent Developments


SECURITIES LITIGATION

Southern District Of New York Allows Putative Securities Fraud Class Action To Proceed Against Company That Pleaded Guilty To FCPA Violations

On September 19, 2017, Judge Andrew L. Carter, Jr. of the United States District Court for the Southern District of New York allowed a putative securities fraud class action to proceed against VEON Ltd. (“VEON”), a telecommunications company formerly known as VimpelCom, and several of its current and former executives, denying in large part the company’s motion to dismiss. In re VEON Ltd. Sec. Litig., 15-cv-08672 (ALC) (S.D.N.Y. Sept. 19, 2017). Plaintiffs brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) asserting that VEON’s failure to disclose in its SEC filings its admitted bribery scheme in Uzbekistan made the company’s statements about its growth materially misleading. While VEON argued that plaintiffs’ claims were an impermissible attempt to enforce the Foreign Corrupt Practices Act (“FCPA”), for which there is no private right of action, the Court disagreed, holding that plaintiffs’ allegations were sufficiently distinct and sufficient to plead violations of Sections 10(b) and 20(a) of the Exchange Act.

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Northern District Of California Dismisses Securities Fraud Suit Against Dynavax, Finding That Allegations Regarding Disclosure Concerning Clinical Trial Results Were Insufficient To Plead False Or Misleading Statements

On September 12, 2017, United States District Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California dismissed without prejudice a consolidated putative class action against Dynavax Technologies Corporation and certain of its officers. In re Dynavax Securities Litigation, No. 4:16-cv-06690-YGR (N.D. Cal. Sept. 12, 2017). Plaintiff alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, by knowingly or recklessly disseminating false and misleading statements about Dynavax’s developments and efforts to earn FDA approval of its proprietary hepatitis B vaccine. The Court dismissed the consolidated complaint without prejudice, finding that plaintiff had not met the heightened pleading standards for securities fraud under the PSLRA.

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M&A LITIGATION

New Jersey Federal Court Extends Coverage of Merged Bank’s D&O Liability Insurance Policy To Surviving Bank

On September 18, 2017, Judge John Michael Vazquez of the U.S. District Court of New Jersey granted summary judgment in favor of plaintiffs BCB Bancorp, Inc. (“BCB”) and the former directors and officers of Pamrapo Bancorp, Inc. (“Pamrapo”), finding that insurer Progressive Casualty Insurance Co. (“Progressive”) was obligated to indemnify BCB for the legal expenses incurred in defending the Pamrapo directors and officers in shareholder litigation arising from the merger of BCB and Pamrapo. In so holding, the Court agreed with plaintiffs that the surviving bank, BCB, had inherited Pamrapo’s D&O policy following the merger in accordance with the New Jersey Business Corporation Act (“NJBCA”).

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GOVERNMENT/REGULATORY ENFORCEMENT

DOJ And SEC Bring Major FCPA Enforcement Actions Against Swedish Telecom Firm, Imposing One Of Largest FCPA Penalties In History

On September 21, 2017, the Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) announced significant enforcement actions against Telia Company AB, a Swedish telecommunications firm, for alleged violations of the Foreign Corrupt Practices Act (“FCPA”). United States v. Telia Company AB, No. 1:17-cr-00581 (S.D.N.Y. 2017); In the Matter of Telia Company AB, Admin. Proc. No. 3-18195 (September 21, 2017) (“Order”). Specifically, the DOJ charged Telia and its Uzbek subsidiary, Coscom, with conspiring to violate the anti-bribery provisions of the FCPA by offering and paying at least $330 million in bribes to a shell company in Uzbekistan under the guise of payments for lobbying and consulting services that never actually occurred, while the SEC alleged that Telia violated the anti-bribery and internal accounting controls provisions of the FCPA through the same conduct. Telia’s subsidiary Coscom pleaded guilty in U.S. District Court for the Southern District of New York; meanwhile, Telia entered into a three-year deferred prosecution agreement (“DPA”) with the DOJ, and the SEC instituted settled administrative proceedings against the company. In aggregate, Telia agreed to pay criminal penalties of approximately $548 million to resolve the DOJ charges and related charges filed by the Public Prosecution Service of the Netherlands, and agreed to pay approximately $457 million in disgorgement to settle the SEC allegations. Because of certain offsets, Telia’s total payments to the DOJ, SEC, and foreign regulators will be approximately $965 million. However, Telia was not required to engage a compliance monitor, in light of the company’s remediation and the state of its compliance program.

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