Practice Areas: Class Action

Securities Class Actions

The past decade has seen a significant increase in public awareness and governmental scrutiny of the financial practices of publicly held companies. At best, the threat of high-profile securities class actions and other litigation can have a chilling effect on business growth; at worst, administrative actions, lawsuits and criminal proceedings can result in the downfall of an entire company.

The securities class action team at McGuireWoods represents clients in jurisdictions across the United States. We advise publicly traded and closely held corporations, officers and directors of these businesses, and their outside advisors and service providers such as accounting firms, hedge funds and investment banking firms. We regularly represent clients before federal and state courts and the Judicial Panel for Multidistrict Litigation in matters involving multimillion-dollar claims. For example, we recently advised a petroleum corporation in a $100,000,000 securities class action alleging violations of the Securities Exchange Act of 1934 and state fiduciary duty law; our motion to dismiss the federal case was granted, as were the state law claims.

We also explore alternative resolution options, including mediation, arbitration, early neutral evaluation, summary jury trials and settlement conferences when such strategies can help clients achieve their objectives, reduce costs and administrative burdens, and offer creative solutions not typically offered through the courts. McGuireWoods is a member of the Center for Public Resources, a non-profit alliance of corporations, law firms and academics dedicated to promoting efficient alternatives to litigation. Our practice also includes partners who teach alternative dispute resolution methods at law schools and who have authored textbooks on the subject.

Securities class actions and shareholder derivative suits often involve criminal and civil proceedings that run parallel to the core litigation. We work closely with the firm’s white-collar criminal defense team and related practices to defend clients in grand jury investigations and criminal matters pursued by the U.S. Department of Justice and arising out of SEC enforcement activity. As counselors, we draw on our knowledge of SEC and law-enforcement priorities to help clients structure new products, activities and sales practices to help ensure compliance with existing and emerging regulations.

We represent clients in the full range of shareholder derivative suits and securities class actions, including serving as counsel to director and officer defendants, accounting defendants and broker-dealer defendants.

Accounting Defendants

With the enactment of the Sarbanes-Oxley Act of 2002, accounting firms joined the list of the most highly regulated service professions. This development was not lost on plaintiffs in securities class actions; today, many of these lawsuits allege accounting fraud and name accounting firms as primary defendants.
The situation is further complicated by the need for accountants to navigate the compliance standards of two distinct regulatory bodies — the U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) — both of which can investigate and discipline accounting firms for alleged violations. Defendants may also face parallel criminal investigations and proceedings of the U.S. Department of Justice, state attorneys general and other law-enforcement officials.

The 45-member accountants’ defense team at McGuireWoods understands the complex issues facing accounting firms when defending class actions. Our lawyers are well versed in federal and state securities laws, as well as the professional rules that govern the accounting industry, including Generally Accepted Accounting Practices (GAAP), Generally Accepted Accounting Standards (GAAS) and the requirements of state Certified Public Accountant (CPA) licensing boards. This extensive background, combined with our lengthy record of defending individuals and entities in large-scale securities class actions, enables us to develop defense and negotiation strategies that aid in the resolution of these complex matters.

Among our team members are former regulators and law-enforcement officials, including the first attorney in the PCAOB’s Division of Enforcement and Investigations, attorneys from the SEC’s Enforcement Division and a former U.S. Attorney.

We have successfully represented clients in connection with numerous high-profile cases, including litigation relating to the major financial scandals of the early 2000s and matters stemming from the financial-services crisis of 2008. For example, we recently represented a top accounting firm in an action filed by regional bank shareholders to recover stock losses that had arisen following its merger with a national, money-center bank. The court granted our motion to dismiss, agreeing with our argument that the claims of the shareholders were speculative and derivative and effectively removing our client from the broader litigation

Broker-Dealer Defendants

With the Dodd-Frank Act requiring greater oversight of financial services companies, broker-dealers, investment advisors, banks and issuers face an even broader range of regulatory and law-enforcement actions — and an increased likelihood that they will be named in related securities class action lawsuits.

McGuireWoods’ broker-dealer defense team represents clients in the full spectrum of shareholder- and investor-driven class actions. We also advise clients in parallel proceedings and testimony before government agencies such as the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ); industry organizations, including the Financial Industry Regulatory Authority (FINRA) and the New York Stock Exchange (NYSE); and federal and state legislative bodies and committees.

Our lawyers have extensive experience in complex litigation, including multidistrict litigation and arbitrations and mediations of the American Arbitration Association. Our team includes a number of former regulators and law-enforcement officials, including the first attorney in the PCAOB’s Division of Enforcement and Investigations, attorneys from the SEC’s Enforcement Division and a former U.S. Attorney.

We have successfully represented clients in class action litigation across the country relating to the ever-expanding range of services provided by financial institutions, including cases involving safe practice violations, ERISA investment standards, failed asset securitizations and defaulted syndicated loans. Among recent class action cases, we have defended broker-dealers in complaints alleging intentional misrepresentation, breach of fiduciary duty, violations of state statutes, negligence, violations of the Securities Exchange Act of 1934 and Rule 10(b)5, and common-law fraud.

Director and Officer Defendants

In the face of recent, highly publicized corporate accounting and securities-related scandals, shareholders, regulators and law-enforcement officials are expanding their focus beyond corporations and other entities. In response to consumer and legislative pressure, they are stepping up investigations into the conduct of individual directors, officers and executives.

Whether allegations involve specific, potential acts of misconduct or a broader failure to detect or prevent some form of securities fraud, the threat to individual business leaders is very real. Under such circumstances, clients require legal advisors who understand the broad landscape of securities class action litigation, and have specific knowledge of insurance liability coverage, civil and criminal statutes, and the role of executives within an organization.

McGuireWoods’ securities class action team has the experience and resources to mount an aggressive, comprehensive defense on behalf of individuals named or involved, directly or peripherally, in a range of complaints. We have advised clients in proceedings and courtrooms around the country, and before the U.S. Securities and Exchange Commission (SEC), the U.S. Department of Justice (DOJ), and other federal and state law enforcement agencies. No matter the venue, we draw on our deep knowledge of securities regulations and criminal law to determine the optimal course of action.

As an example of this multifaceted approach, we recently defended the directors of a bank against claims filed under federal securities law and state law by a putative class of shareholders. Frustrated with the lower court’s rejection of class certification, the plaintiffs pursued other legal options, which also failed and eventually appealed the U.S. Supreme Court. The Supreme Court dismissed part of the plaintiffs’ claims and the remaining portion of the case was remanded before ultimately being settled on terms favorable to our client.

We recognize that, in the court of public opinion, allegations often hold as much water as an actual court verdict and thus have enduring consequences. We work closely with experienced public relations and other media professionals — through our full-service public affairs subsidiary McGuireWoods Consulting — to give our clients the best opportunity to make their case, particularly in situations when publicity is inevitable.

Shareholder Derivative Suits

In the wake of recent financial crises and accounting scandals, and emboldened by increased legislative and regulatory scrutiny of fiscal and fiduciary practices, shareholders are taking matters into their own hands. Shareholder derivative suits are on the rise, brought by individuals and groups of investors against parties — including directors and officers — that have allegedly caused harm to the organization.

The lawyers of McGuireWoods’ securities class action practice provide strategic legal counsel to defendants named in shareholder derivative suits. We fully understand the ramifications of these disputes, within the organization itself and in the public eye, and help clients determine the optimal course of action. This strategy necessarily helps preserve individual professional reputations, as well as the ongoing viability of corporations and business concerns.

As seasoned litigators, we have represented clients at every step of the investigative and trial processes, from pretrial discovery, witness deposition and serving as first-chair and national coordinating counsel to negotiating out-of-court settlements. From our offices across the United States and in Europe, we regularly defend senior corporate management, boards of directors and corporations against allegations involving breach of fiduciary duty, nonpayment of dividends and redemptions, excessive compensation, auditor activities and preparation of financial statements, disputed mergers and acquisitions, and backdating of stock option grants.

Among other recent successes, we won dismissal of a triple derivative action, with prejudice, in a matter alleging the diversion of more than $100 million in funds for the personal use of a senior corporate officer. Although the corporation was based outside of the United States, the shareholder who brought the complaint filed the lawsuit in Florida state court. The court agreed with our motion to dismiss, in which we argued that the laws of the corporation’s home country, which did not allow for a triple derivative action, should apply.

Because shareholder derivative suits often arise in conjunction with other investigations into the conduct of corporations and individuals, we work closely with other firm teams — white-collar criminal defense, directors and officers liability and accountants liability, for example. We regularly serve as counsel in grand jury investigations, agency investigations and law-enforcement actions implemented by the U.S. Securities and Exchange Commission (SEC), Department of Justice (DOJ) and other federal and state agencies.