Securities & Shareholder Class Action Litigation
Sonnenschein has broad experience representing corporate and individual clients in federal and state securities and shareholder litigation matters and SEC investigations, including successfully defending a significant number of publicly held companies in cases alleging fraud and corporate misconduct.
Clients turn to us for assistance with a wide range of matters, including fraud and corporate misconduct allegations, enforcement proceedings of the Securities and Exchange Commission (SEC), investigations conducted by various state and federal regulatory bodies, cases alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), and arbitration proceedings and related litigation under the rules of the Financial Industry Regulatory Authority (FINRA) and its predecessors, the New York Stock Exchange, the Chicago Board Options Exchange, the American Arbitration Association and CME Group. We also have extensive experience handling grand jury motion practice, negotiations with government authorities and parallel criminal and civil investigations, frequently involving securities fraud charges. Following is a small sampling of that experience.
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Sears Holdings Corporation/Sears, Roebuck & Co.
We have represented Sears and certain of its officers in a number of class actions filed in the U.S. District Court for the Northern District of Illinois and state courts, including the following:
An action in federal court under Section 10(b) of the Securities Exchange Act of 1934 (the 1934 Act) and Rule 10b-5 on behalf of persons who sold Sears stock during the ten weeks prior to the announcement of Kmart’s merger with Sears. Plaintiffs alleged the defendants were required to disclose the merger negotiations sooner.
An action by shareholders alleging that the merger price was too low. Sears won dismissal in the circuit court and the case is on appeal to the Illinois Appellate Court.
An action by common stock shareholders under Section 10(b) of the 1934 Act and Rule 10b-5 alleging that Sears made misleading statements about the amount of subprime loans in its credit card portfolio, the disclosure of which caused a significant drop in the price of Sears stock. This case has been settled.
An action by participants in Sears’ profit sharing plans alleging that the defendants violated the Employee Retirement Income Security Act (ERISA) by investing in Sears stock. The case was settled.
An action by holders of Sears Roebuck Acceptance Corporation debt securities alleging violations of Section 11 of the Securities Act of 1933 (the 1933 Act), Section 10(b) of the 1934 Act and Rule 10b-5 relating to the adequacy of disclosures about subprime loans in Sears’ credit card portfolio. The parties have agreed in principle to settle this matter.
In re Medis Securities Litigation
We represent Medis and certain of its officers in an action pending in the U.S. District Court for the Southern District of New York alleging misleading statements concerning sales of Medis power source products in violation of Section 10(b) of the 1934 Act and Rule 10b-5. Medis’ motion to dismiss the amended complaint is pending.
In re Spiegel Securities Litigation
We represented four directors of Spiegel in a class action filed in the U.S. District Court for the Northern District of Illinois alleging violation of Section 10(b) of the 1934 Act and Rule 10b-5. The case was settled.
Molex Securities Litigation
We represented Molex in a class action consolidated in the U.S. District Court for the Northern District of Illinois alleging violation of Section 10(b) of the 1934 Act and Rule 10b-5. Molex was accused of failing to disclose accounting adjustments and sales by insiders who knew that such adjustments were necessary as well as false statements regarding the impact of raw materials costs on profitability. The case settled.
Salton/Maxim Litigation
We represented Salton/Maxim and most of its directors in plaintiffs’ and defendants’ class actions in the U.S. District Court for the Northern District of Illinois and in Delaware Chancery Court alleging, among other things, that the prospectus issued in connection with the initial public offering of Salton/Maxim stock was misleading, in violation of Section 11 of the 1933 Act. We secured a favorable settlement on behalf of our clients.
Specialty Equipment Companies, Inc.
Sonnenschein represented the directors of Specialty Equipment in a case involving allegations of self-dealing and breaches of fiduciary duty. The matter included class allegations on behalf of the company’s shareholders and allegations that the proxy statement by which shareholder approval was obtained was false and misleading. This matter settled.
The Interpublic Group of Companies, Inc. (IPG)
We represented IPG and certain of its current and former officers in two class actions filed in the Circuit Court of Cook County (Ill.) under Section 11 of the 1933 Act. We secured a stay of the Illinois litigation to facilitate the defense of the main litigation pending in New York.
Sara Lee Corporation
We represented the Earthgrains Company, now a subsidiary of Sara Lee, and some of Earthgrains’ current and former directors in a Delaware Chancery Court class action alleging breach of disclosure in connection with a non-sponsored fractional share stock repurchase program. The plaintiff alleged that preliminary merger discussions should have been disclosed in connection with the repurchase program. We successfully negotiated a settlement of this action.
Goldman Sachs & Co./Salomon Brothers Inc.
Sonnenschein represented Salomon Brothers Inc. and Goldman Sachs & Co., as underwriters of the initial public offering of Gaylord Container Corporation stock, in two class actions filed by Gaylord shareholders under the federal securities laws. In the first case, the district court decertified the class upon our motion. In the subsequent class action, we won a ruling so narrowing the class that the plaintiff voluntarily dismissed the action. We also handled litigation involving claims filed in state court relating to that offering, obtaining an order of dismissal that was affirmed by the Illinois Appellate Court, which held, among other things, that the “fraud on the market” doctrine does not apply under the Illinois common law of fraud. The Illinois Supreme Court denied review.
F&M Distributors, Inc.
We represented the independent directors of F&M Distributors, Inc., in a class action pending in the U.S. District Court for the Eastern District of Michigan alleging, among other things, that the prospectus and registration statement issued in connection with F&M’s offering of subordinated notes were false and misleading in violation of the 1933 Act and the 1934 Act. F&M filed for bankruptcy protection in December 1994 and was liquidated. This case settled without personal contributions from the directors.
Nanophase Technologies Corporation
We represented certain outside directors in In re Nanophase Technologies Corporation Securities Litigation, pending in the U.S. District Court for the Northern District of Illinois. The case was brought as a class action and alleges violations of Sections 11, 12 and 15 of the 1933 Act. Plaintiffs claimed that sales figures in the prospectus were misleading because the prospectus failed to disclose that a substantial percentage of the reported revenue allegedly came from a one-time development fee for a single customer that was not likely to recur. This case settled.
Lumenis Ltd.
Sonnenschein is defending Lumenis Ltd. and its officers and directors in nine securities fraud class actions brought on behalf of investors that are pending in U.S. District Court for the Southern District of New York.
