Securities Litigation

HealthSouth Derivative Litigation

Edward Haber, a partner of Shapiro Haber & Urmy LLP, is one of the Court appointed lead counsel in the consolidated derivative action brought on behalf of the HealthSouth Corporation against its former CEO, Richard Scrushy, its other former officers and directors, its auditors, investment bankers and others. This action coordinates derivative actions brought on behalf of HealthSouth in the Delaware Chancery Court, the Federal District Court in Alabama and the state court in Birmingham, Alabama. The legal team, on which Shapiro Haber & Urmy  LLP serves as one of the lead counsel, has obtained the following recoveries for HealthSouth: (i) summary judgment in the Delaware Chancery Court, for over $17 million, against Scrushy, In re HealthSouth Corp. Shareholders Litig., 845 A.2d 1096 (Del. Ch. 2003), aff'd, 847 A.2d 1121 (Del. 2004); (ii) summary judgment in the Circuit Court of Jefferson County, Alabama against Scrushy for over $47 million, see Tucker v. Scrushy, 2006 WL 37028 (Ala. Cir. Ct. Jan. 3, 2006), aff'd, 2006 WL 2458818 (Ala. Aug. 25, 2006); (iii) a settlement of the derivative claims against some of the officers and directors of HealthSouth (not including Scrushy) for $100 million, to be paid by those defendants' insurers; and (iv) a $133 million settlement of the derivative claims against HealthSouth’s former investment advisor, UBS.  The legal team also has obtained at $2.8 billion dollar judgment against Mr. Scrushy after a bench trial in the Circuit Court of Jefferson Court, Alabama.  The legal team is also pursuing claims against HealthSouth’s auditors, Ernst & Young, which are being arbitrated.

Staples, Inc. Stock Option Backdating

Shapiro Haber & Urmy LLP filed a shareholder derivative action on behalf of Staples, Inc. against certain current and former directors and officers of the company on December 15, 2006 in the Delaware Court of Chancery.

This action was brought to recover damages caused to Staples as a result of the Defendants' alleged systematic backdating of Staples stock options issued to the Defendants and others, in violation of Staples's stock option plans. The amended complaint also alleges that Defendants caused Staples to misrepresent Staples's stock option granting processes in its SEC filings .

In this case, our firm obtained an important opinion allowing the case to proceed and clarifying Delaware law involving backdated stock options and derivative cases in general.

On April 16, 2010, the parties executed and filed a Stipulation of Compromise and Settlement that would, if approved by the Court, resolve this litigation. The Stipulation provides for a $7,250,000.00 cash payment to Staples from its directors and officers insurance carrier, value to Staples from the re-pricing of certain stock option awards, and the adoption of certain additional corporate governance and therapeutic reforms governing the process by which stock options are awarded as compensation at Staples.

On July 20, 2010, the Delaware Chancery Court approved a settlement of the case for $8.2 million and governance reforms of Staples' option granting practices.  As reported by Bloomberg News, the Court commented that this was a good settlement with meaningful relief obtained.

Linear Technology Corporation Stock Option Spring-Loading and Bullet-Dodging

Shapiro Haber & Urmy LLP has filed a shareholder derivative action on behalf of Linear Technology Corporation against certain current and former directors and officers of the company.  The complaint was filed on March 23, 2007 in the Delaware Court of Chancery.  The Defendants in this case include Linear founder and Executive Chairman Robert H. Swanson, Jr., Linear CEO Lothar Maier, and Linear's then directors.

This action is brought to recover damages caused to Linear as a result of the Defendants’ alleged systematic spring-loading and bullet-dodging of Linear’s stock options issued to the Defendants and others.  The Amended Complaint alleges that options were generally issued shortly before favorable quarterly earnings announcements and shortly after unfavorable quarterly earnings announcements.  This practice allowed the option recipients to unjustly profit on the basis of non-public material information.

In this novel case involving allegations of spring-loaded and bullet-dodged options at Linear Technology Corporation, our firm obtained an important decision allowing the case to proceed and clarifying Delaware law involving stock option manipulation and derivative cases in general.

Fiserv Litigation

Shapiro Haber & Urmy LLP commenced a class action suit on behalf of a class of all persons who, as of December 11, 2008, had self-directed IRAs at Fiserv, for which Fiserv or its subsidiaries or affiliates, including First Trust Corporation, Retirement Accounts, Inc., Fiserv Trust Company, Trust Industrial Bank, Lincoln Trust Company, or NTC & Co., LLC served as the IRA trustee or custodian, and which were invested with Bernard Madoff or Bernard Madoff Investment Securities, LLC (“BMIS”).

The class action maintains that Fiserv and its subsidiaries and affiliates had custody of the funds in the IRA accounts invested with Madoff, but allowed Mr. Madoff, through his Ponzi scheme, to convert, commingle and abscond with Plaintiffs’ and Class members’ retirement savings.  Plaintiffs allege that Fiserv and its subsidiaries and affiliates failed to take physical custody of the assets in the Madoff IRAs, or to take any rudimentary steps to verify that the assets entrusted to Madoff even existed.  Fiserv and its subsidiaries and affiliates violated their duties despite warnings by Fiserv’s own sub-advisor, Rogercasey, Inc., “about the integrity of the Madoff structure,” and many other “red flags” about Madoff’s investment strategies and operations, including discrepancies on account statements Fiserv received from BMIS.  Prior to the time Mr. Madoff’s scheme was revealed, Fiserv had entanglements with Madoff promoters Avellino & Bienes who were shut down by the SEC and Fiserv knew that it had facilitated similar massive Ponzi schemes perpetrated by other fraudsters, yet Fiserv did nothing to change its operational procedures to prevent another catastrophe.  

Plaintiffs maintain that Fiserv and the Trustee Defendants violated their fiduciary, contractual and professional duties to Plaintiffs and the members of the Class, who lost their retirement savings.

Fidelity Management Research Company Excessive Fee Litigation

Shapiro Haber & Urmy LLP represents shareholders in five of Fidelity’s largest mutual funds – Fidelity Magellan Fund, Fidelity Contrafund, Fidelity Growth & Income Portfolio I Fund, Fidelity Blue Chip Growth Fund and Fidelity Low-Priced Stock Fund (the “Funds”) – in a lawsuit against Fidelity, claiming that Fidelity has charged the Funds excessive portfolio advisory fees in violation of under Section 36(b) of the Investment Company Act of 1940.

Fidelity is one of the largest investments advisors in the world and the Funds are five of the largest mutual funds in the country.  Fidelity charges fees to each of the Funds to the investment advisory services it provides.  Although in percentage terms, those fees may look modest, in dollar terms, or in comparison to fees charged to comparable institutional portfolios, they are staggering.  In the money management business, there are extraordinary “economies of scale” that can be realized as the size of assets under management grows.  Because of this, investment advisors such as Fidelity would be expected to offer their services to clients for lower fees as the size of the portfolios managed grows.  Although required by law to share these benefits with its mutual fund clients, including the Funds, the shareholders allege that Fidelity has failed to do so.  The advisory services that Fidelity provides to the also Funds are identical to the advisory services that Fidelity provides to other institutional clients. Unlike the advisory contracts with the Funds, however, the contracts negotiated with other Fidelity institutional clients are the product of arms' length negotiations and result in far lower fees even though those clients' portfolios are far smaller than those of the Funds

Discovery has now been completed in this case, and summary judgment motions are currently pending. 

Credit Suisse – AOL Litigation

Shapiro Haber & Urmy LLP is counsel in a class action suit against Credit Suisse First Boston Corporation (“Credit Suisse”) on behalf of all persons who purchased common stock of AOL Time Warner Inc. ("AOL") during the period from January 12, 2001 through September 3, 2002, arising out of allegedly misleading analyst reports.  The complaint alleges that the defendants violated section 10(b) of the Securities Exchange Act of 1934 ("the Exchange Act"), and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act, by issuing a series of favorable research reports on AOL that were materially false or misleading in that they did not reflect Credit Suisse’s true opinion of AOL and they did not disclose conflicts of interest of Credit Suisse.

Fidelity Ultra Short Term Bond Fund Litigation:

Shapiro Haber & Urmy LLP is serving as Local Counsel for the Plaintiff and the Class in this matter, which asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 on behalf of all persons and entities who purchased shares of the Fidelity Ultra-Short Bond Fund (the “Ultra-Short Fund” or “Fund”) between June 6, 2005 and June 5, 2008 (the “Class Period”).  The complaint alleges that Defendants offered shares of the Fund to the public through registration statements and prospectuses (collectively, the “Registration Statement”) that were materially false and misleading, by misrepresenting the characteristics and risks of the Fund; the true extent of its exposure to risky mortgage-related securities; its valuation procedures and capabilities; and the value of the securities held by the Fund as reflected in the NAV.  It is alleged that when the risks associated with these misrepresentations and omissions materialized, the Fund’s NAV plummeted, injuring Plaintiff and other Fund investors.

Aspen Technologies Litigation

Shapiro Haber & Urmy LLP is prosecuting an action for  common law fraud  and violation of the Massachusetts Consumer Protection Act (Ch. 93A) against Aspen Technology, Inc. (Aspen), and two of its former officers  on behalf of the seller of a  business to Aspen in exchange for, among other things, Aspen common stock.   The plaintiff relied on representations and warranties  that  Aspen’s financial statements  were truthful and complied with GAAP .  Subsequent to the sale, Aspen restated its financial statements for  a number of  years, including  financial statements that the plaintiff had relied upon, thereby admitting that its prior financial statements  had overstated revenue and net income.   A verdict was entered in favor of defendants following a three week nonjury trial, and the case is currently under appeal

Cooperative Bank Litigation

Shapiro Haber & Urmy LLP represents a Massachusetts bank in litigation against Merrill Lynch involving the sale of auction rate securities.  In an action originally filed in the United States District Court for the District of Massachusetts, but then transferred with other proceedings pursuant to the Judicial Panel of Multidistrict Litigation to the Southern District of New York, the bank claims that Merrill Lynch violated the Securities Act of 1933 by selling the bank unregistered auction rate securities even though the bank was not a “Qualified Institutional Buyer” under Securities and Exchange Commission Rule 144A, the rule under which Merrill Lynch purported to sell the securities.  The bank also claims that Merrill Lynch violated Massachusetts General Laws chapter 93A, both by illegally selling unregistered securities to the bank and by making misrepresentations in connection with the sale of such securities, given that Merrill Lynch was making a market in the securities in question and was aware of, but failed to disclose, the impending dissolution of the auction rate securities markets for those and other securities.

SEC Investigations

The firm is representing a securities broker and an investor who were subpoenaed to testify in two separate Securities and Exchange Commision investigations of possible insider trading.