Bernstein Shur Business and Commercial Litigation Newsletter #39
April 2014 | Issue 39
We are pleased to present the 39th edition of the Bernstein Shur Business and Commercial Litigation Newsletter. This month, we highlight developments related to securities fraud, class actions, and other news that will have an impact on business and litigation. We hope you enjoy the newsletter.
In the News:
A high-ranking executive at a company recently acquired by eBay has been charged with insider trading by the SEC. The executive, Chris Saridakis, was in charge of marketing solutions at GSI Commerce, Inc., which recently was purchased by eBay for nearly $2 billion. Saridakis allegedly tipped off relatives and friends to the buyout, resulting in $300,000 in illegal profits after the stock price of GSI Commerce rose 51 percent following eBay’s announcement of the purchase. The civil enforcement action by the SEC was notable because the agency entered into a non-prosecution agreement with a defendant who provided “extraordinary cooperation.” In a press release, the SEC stated that the civil enforcement action marked the “agency’s first non-prosecution agreement with an individual.” Saridakis also faces separate criminal charges in relation to his disclosure of material nonpublic information.
The SEC successfully obtained injunctive relief against a Canadian individual accused of defrauding purchasers of a penny stock that he promoted. The individual, John Babikian, was charged with reaping nearly $2 million in illegal profits after selling 1.4 million shares in a coal company that witnessed a sharp spike in price after he sent promotional emails to some 700,000 recipients. Within ninety minutes of the mass email, the price of America West Resources, Inc. rose fourfold in value. At this time, Babikian promptly liquidated his position and took profits. The practice, known as front running or “scalping,” violates numerous securities laws, including the anti-fraud provisions of Investment Advisors Act of 1940. The injunction obtained by the SEC maintained a freeze of Babikian’s assets and ordered an accounting. Babikian apparently owns homes in Los Angeles, Oregon, and Laval, Quebec.
Read more about this development here.
The chief judge of the Ninth Circuit Court of Appeals, as an individual member of a class of Nissan Leaf owners, filed a stern individual objection to a proposed settlement of a class action. Judge Alex Kozinski and his spouse, Marcy Tiffany, purchased the all-electric Nissan Leaf with the understanding that car’s battery could last up to 100 miles before recharge. In practice, the couple’s vehicle had difficulty completing the 80-mile trip to their home. Following the commencement of a class action addressed to defects related to the Leaf’s electric batteries, class counsel sought approval of a proposed settlement that would extend the existing warranty for Leaf owners, while awarding significant attorney fees to class counsel. Kozinski and Tiffany voiced strong concerns over the fact that the class settlement with Nissan was negotiated before discovery was provided by the carmaker. Although class counsel appeared to conduct “confirmatory discovery” after terms of the deal were concluded, the couple noted that class counsel no longer had any incentive to discover and develop evidence establishing liability and instead was focused on a hasty settlement.
Read more about this development here.
The Commonwealth of Massachusetts has unveiled a pilot program for e-filing in three state trial courts and in its appellate courts. The system is expected to track the functionality of the electronic filing system in federal district courts, which has been in place since 2002. The pilot project is scheduled to commence this summer and could be expanded to additional courts if it is successful. The State of ME also has taken early steps toward implementing an e-filing system in its state courts. In March, the Legislature’s Judiciary Committee unanimously approved a bill for a bond issue that would help fund a case management and electronic filing system. If implemented, the initiative would enhance efficiency, while also improving public access to court records.