Brocade Communications Systems, Inc.
Served as co-lead counsel in one of the most prominent stock option backdating scandals in the nation and helped prosecute claims against corporate insiders responsible for orchestrating the backdating scheme.
Robbins Arroyo LLP filed a shareholder derivative action against officers and directors of Brocade Communications Systems, Inc., an industry leader in data center networking solutions, following the announcement that Brocade would have to restate two fiscal years of financial statements to correct its improper accounting for stock-based compensation expenses. Brocade’s insiders had for years engaged in a secret stock option backdating scheme designed to reward executives and recruit engineers with stock options priced below their fair market value as of the date of the grants. Robbins Arroyo LLP successfully petitioned the court to proceed with litigation to prevent an inadequate settlement of a related federal action, which would have released the officers, directors, and agents of the company responsible for the criminal backdating scheme for no money to the company or a payment of attorney’s fees, even as the U.S. Government pursued and ultimately won criminal convictions against the responsible executives.
After almost three years of diligently prosecuting the case, during which Robbins Arroyo LLP engaged in extensive motion practice, reviewed approximately 3 million pages of documents, and marshaled evidence from related cases involving the conduct at Brocade, Robbins Arroyo LLP was retained to serve as co-counsel to Brocade’s Special Litigation Committee, which, after presentations from Robbins Arroyo LLP, authorized the continued prosecution of claims against Brocade’s officers and directors and on behalf of the shareholders.
In re Brocade Communications Systems, Inc. Derivative Litigation, No. 1:05CV041683 (Cal. Super. Ct.-Santa Clara County).
Cardinal Health, Inc.
Obtained $70 million for the company and negotiated the implementation of significant corporate governance and internal accounting controls to improve the oversight and accountability of Cardinal’s senior management.
Robbins Arroyo LLP served as lead counsel in derivative litigation on behalf of the plaintiff who brought claims against certain Cardinal Health officers and directors arising out of Cardinal’s proposed stock-for-stock acquisition of Syncor International Corp., which was at the time being investigated by the U.S. Securities and Exchange Commission for violations of the Foreign Corrupt Practices Act. The action sought to enjoin the acquisition if Cardinal did not renegotiate the price, which was artificially high due to Syncor’s accounting improprieties. The action forced Cardinal to reduce the previously negotiated acquisition price for Syncor, saving the company millions of dollars.
During the course of its work on the Syncor transaction, Robbins Arroyo LLP and other firms discovered that Cardinal insiders had engaged in a massive revenue inflation scheme to fraudulently overstate the company’s financial performance. Robbins Arroyo LLP filed an amended complaint against several of Cardinal’s officers and directors, defeated multiple motions to dismiss, and pursued and reviewed millions of pages of documents in discovery. After five years of litigation, the firm ultimately negotiated and resolved the matter by obtaining $70 million for the company, among the largest monetary recoveries ever in a shareholder derivative action. The settlement also required Cardinal’s board of directors to implement significant corporate governance and internal accounting controls designed to improve the board’s oversight of Cardinal’s senior management and to prevent recurrence of the alleged accounting manipulations.
Staehr v. Walter, No. 02-CVG-11-0639 (Ohio Ct. C.P.-Del. Cnty. Dec. 17, 2007)
Career Education Corp.
Helped secure a $20 million recovery and comprehensive board and management-level corporate governance and oversight reforms for Career Education.
Robbins Arroyo LLP served as co-lead counsel in shareholder derivative litigation arising out of Career Education Corp.’s alleged publication of false statements regarding job placement and student loan repayment rates, and failure to ensure compliance with Title IV regulations. The firm played a leading role in negotiating the global resolution of a series of actions brought against and on behalf of the company, and helped secure a $20 million recovery and comprehensive board and management-level corporate governance and oversight reforms for Career Education, including enhanced compliance and whistleblower policies, new director independence standards, improved executive compensation claw-back provisions, a comprehensive director education and employee training program, and an improved regulatory risk management and disclosure regime.
Cook v. McCullough, No. 1:11-cv-09119 (N.D. Ill. Jan. 28, 2014)
Community Health Systems, Inc.
Instrumental in obtaining a $60 million cash payment to the company and the implementation of extensive corporate governance reforms in a case alleging that Community Health's fiduciaries systematically steered patients into medically unnecessary inpatient admissions.
Robbins Arroyo LLP served as co-lead counsel in this shareholder derivative litigation on behalf of Community Health Systems, Inc. and obtained what is believed to be the largest shareholder derivative recovery in the Sixth Circuit to date. The firm’s client alleged that the officers and directors of Community Health systematically steered patients into medically unnecessary inpatient admissions when they should have been treated as outpatients. The allegations included claims that the defendants’ wrongful conduct resulted in the company being forced to pay millions of dollars to resolve federal and state investigations into its Medicare compliance practices.
After five years of contentious litigation and discovery, defendants agreed to settle the case, which included a $60 million cash payment to Community Health and the implementation of extensive corporate governance reforms, including board modifications to ensure director independence, improved internal disclosure policies to allow for the confidential reporting of suspected violations of healthcare laws, and the establishment of a Trading Compliance Committee to ensure compliance with Community Health’s insider stock trading policy, among others.
In re Community Health Systems, Inc. Shareholder Derivative Litig., No. 3:11-cv-00489 (M.D. Tenn. Jan. 20, 2017)
Fifth Street Finance Corp.
Secured advisory fee reductions worth at least $30 million to Fifth Street Finance Corp. and comprehensive corporate governance, oversight, and conflicts management enhancements on allegations of breaches of fiduciary duty and other violations of law arising out of Fifth Street's relationship with its investment advisor.
Robbins Arroyo LLP served as lead counsel in shareholder derivative litigation on behalf of Fifth Street Finance Corp., which alleged breaches of fiduciary duty and other violations of the law arising out of Fifth Street’s relationship with its investment advisor, FSAM. Specifically, plaintiffs asserted that certain Fifth Street and FSAM officers and directors caused Fifth Street to pursue reckless asset growth strategies, employ aggressive accounting and financial reporting practices, and pay excessive fees to its investment advisor to inflate the perceived value of FSAM prior to FSAM’s initial public filing. Following extensive factual investigation, the exchange of enormous amounts of information, and protracted settlement negotiations and mediations, the firm negotiated an outstanding result for Fifth Street and its stockholders, which included advisory fee reductions worth at least $30 million to the company, and comprehensive corporate governance, oversight, and conflicts management enhancements to substantially improve the compliance control environment at Fifth Street and reduce the likelihood of a recurrence of similar wrongdoing in the future.
In re Fifth Street Finance Corp. Shareholder Derivative Litigation, Lead Case No. 3:15-cv-01795-RNC (D. Conn. Dec. 13, 2016)
Hanover Compressor Company (now Exterran Holdings, Inc.)
Helped secure a $26.5 million payment to the company and the return of 2.5 million shares valued at approximately $30.9 million, for a total of $54.7 million, as well as "groundbreaking" and "unprecedented" corporate governance benefits for Hanover.
Shareholders of Hanover Compressor Company, a provider of natural gas compression services operating in the United States and select international markets, brought claims on behalf of the company against company officers and directors for breach of fiduciary duty, waste of corporate assets, abuse of control, and gross mismanagement. The claims arose out of an off-balance-sheet joint venture to build and operate a natural gas processing plant on barges off the coast of Nigeria. Robbins Arroyo LLP attorneys, serving as lead negotiators for derivative plaintiffs, secured extraordinary results for Hanover. First, Robbins Arroyo LLP achieved for the company approximately $57.4 million in compensation – consisting of a $26.5 million payment and the return of 2.5 million shares valued at approximately $30.9 million by an entity controlled by certain of the individual defendants. Second, Robbins Arroyo LLP helped secure corporate governance changes at the company that have been noted as “groundbreaking” and “unprecedented” benefits for Hanover, including the appointment of two shareholder-nominated directors and becoming one of the first companies in the United States to commit to implementing a five-year rotation rule for its outside audit firms.
Pirelli Armstrong Tire Corp. Ret. Med. Benefits Trust v. Hanover Compressor Co., No. H-02-0410 (S.D. Tex. Feb. 6, 2004)
Helped recover more than $590 million in an antitrust class action against private equity firms alleged to have rigged bids, restricted the supply of private equity financing, fixed transaction prices, and divided the market for private equity services for leveraged buyouts.
The Firm served as part of a team of plaintiff firms in a high profile, antitrust class action against several private equity firms. The case involved allegations of conspiracy among defendants to rig bids, restrict the supply of private equity financing, fix transaction prices, and divide up the market for private equity services for leveraged buyouts. Robbins Arroyo LLP played a prominent role in this litigation that settled for more than $590 million, bearing the responsibility for building the case against a principal defendant, one of the largest private equity firms in the world.
Dahl v. Bain Capital Partners, LLC, No. 1:07-cv-12388(WGY) (D. Mass. Mar. 17, 2015)
Saba Software, Inc.
Obtained a $19.5 million settlement fund to increase the price per share obtained by stockholders during an allegedly flawed sales process.
Robbins Arroyo LLP served as lead counsel in this shareholder class action in the Delaware Chancery Court against the officers and directors of Saba Software for breaches of fiduciary duties related to the buyout of Saba by Vector Capital Management. Plaintiffs alleged that because the company was facing mounting financial concerns, including delisting by the Securities and Exchange Commission and a failure to complete its internal review of the accounting treatment of certain international transactions, defendants chose to sell the company in a flawed and self-serving sales process in exchange for inadequate merger consideration for Saba shareholders.
After three and half years of litigation, including extensive discovery, mediation, and a lengthy settlement negotiation process, defendants agreed to pay Saba’s former shareholders $19.5 million. In approving the settlement, Vice Chancellor Slights called Robbins Arroyo’s representation of the class “exemplary” and touted the settlement as a “strong recovery for the class.”
In re Saba Software, Inc. Stockholder Litig. C.A. No. 10697-VCS (Sept. 24, 2018)
Star Scientific, Inc.
Secured a $5.9 million settlement fund on behalf of stockholders who purchased company stock based on defendants' materially false and misleading statements.
Robbins Arroyo LLP served as lead counsel in this securities fraud class action against Star Scientific, Inc. alleging that the defendants made materially false and misleading statements regarding Johns Hopkins University School of Medicine’s purported involvement in the clinical development and testing of Star Scientific’s main product —Anatabloc®—to increase Star Scientific’s stock price to the detriment of stockholders and to secure the equity financing the company needed to stay in business. The firm successfully defeated defendants’ motion to dismiss, engaged in extensive settlement discussions, and ultimately secured a $5.9 million settlement fund on behalf of stockholders who purchased their shares of Star Scientific stock based on the misrepresentations.
In re Star Scientific, Inc. Securities Litig., No. 3:13-CV-00183-JAG (E.D. Va. July 6, 2015)
Tenet Healthcare Corporation
Helped secure a $51.5 million cash contribution to the company and sweeping corporate governance changes.
The firm served as co-lead counsel for the plaintiffs, who alleged that Tenet Healthcare Corporation’s top executives breached their fiduciary duties to the company by failing to monitor, investigate, and oversee Tenet’s patient procedures, Medicare billing, and accounting practices. After prosecuting the case for over three years, Robbins Arroyo LLP’s attorneys negotiated a comprehensive settlement, which included $51.5 million in cash contributions to Tenet and sweeping corporate governance reforms and other remedial measures designed to ensure the independence and accountability of the company’s board of directors. The new governance regime included separation of the positions of chief executive officer and chairman of the board of directors, strict internal financial controls, enhanced guidelines for stock ownership and stock retention, and a comprehensive insider trading policy. The settlement was upheld on appeal.
In re Tenet Healthcare Corp. Derivative Litigation, No. 01098905 (Cal. Super Ct.–Santa Barbara County May 5, 2006), aff’d, No. B192252 (Cal. App. Sept. 20, 2007)
Titan Corporation (now L-3 Communications Titan Group)
Helped recover $61.5 million for Titan’s shareholders following officers’ and directors’ alleged misrepresentations of the company’s financial condition and compliance with the Foreign Corrupt Practices Act.
Robbins Arroyo LLP served as co-lead counsel in this securities fraud class action against The Titan Corporation and certain of its officers and directors for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and for breach of fiduciary duty. The lead plaintiff alleged that Titan made false and misleading statements regarding the company’s compliance with the Foreign Corrupt Practices Act and its financial condition, and filed false Sarbanes-Oxley Act §302 certifications. These misrepresentations were made as part of an ongoing effort by Titan’s management to manipulate Titan’s stock price and disclosures to effectuate a merger with Lockheed Martin Corporation. When Lockheed discovered Titan’s manipulations and internal issues (which became the subject of civil and criminal prosecutions by the U.S. Department of Justice and Securities and Exchange Commission), Lockheed reduced its bid and eventually called off the merger altogether.
During the pendency of this litigation, Robbins Arroyo LLP reviewed hundreds of thousands of documents produced by the defendants and took depositions of key witnesses. Robbins Arroyo LLP’s efforts resulted in a recovery of $61.5 million to Titan’s shareholders, one of the largest recoveries for a securities fraud class action in San Diego history.
In re Titan, Inc. Securities Litigation, No. 04-CV-0676-LAB (S.D. Cal. Dec. 20, 2005)
Toll Brothers, Inc.
Alleging insider trading and material misstatements, helped secure a $16.25 million cash payment to the luxury homebuilding company, including a $6.45 million payment from the executive directors, an unprecedented result in shareholder litigation of this type.
Robbins Arroyo LLP represented shareholders in the Toll Brothers, Inc. shareholder derivative litigation in which plaintiffs alleged that certain company officers and directors, including the co-founders, traded on inside information and grossly misled investors about company earnings projections during a housing market downturn. After four years of contentious litigation, the firm helped secure one of the largest Brophy (Brophy v. Cities Serv. Co., 70 A.2d 5 (Del. Ch. 1949)) settlements ever, a $16.25 million cash payment to the luxury homebuilding company. The settlement included a $6.45 million payment from the executive directors, an unprecedented result in shareholder litigation of this type.
Martinez v. Toll (Toll Bros., Inc.), No. 2:09-cv-00937-CDJ (E.D. Pa. Mar. 27, 2013); Pfeiffer v. Toll, No. 4140-VCL (Del. Ch. Mar. 15, 2013)
Achieved a settlement fund of $19 million, amounting to a 5.2% increase in the consideration received by the shareholders – an increase greater than recent settlements of this type – in spite of the company's imminent demise.
Robbins Arroyo LLP served as co-lead counsel to the public shareholders of Venoco, Inc. in this class action arising out of a scheme by the energy company’s Chief Executive Officer to buy out Venoco’s minority shareholders at an inadequate share price. Robbins Arroyo LLP conducted extensive fact and expert discovery for two years after the closing of the acquisition. During this time, Venoco foundered due to a decline in the price of oil, a burst pipeline, and additional debt from the acquisition, which ultimately led the company to file for bankruptcy. Amidst the company’s demise, the firm achieved a settlement fund of $19 million for shareholders—a significant recovery in light of Venoco’s dire financial circumstances. The court noted that this settlement represented a 5.2% increase in the consideration received by the shareholders over the $12.50 share price in the merger consideration, an increase greater than recent settlements of this type. At the final approval hearing, the Honorable Sam Glasscock III, Vice Chancellor, in the Court of Chancery of the State of Delaware touted the settlement as a “good result for all” and “very fortunate for the class,” and noted Robbins Arroyo LLP as “excellent counsel.” Transcript of Proceeding at 19, 22, In re Venoco, Inc. S’holder Litig., C.A. No. 6825-VCG (Del. Ch. Oct. 5, 2016).
In re Venoco, Inc. S’holder Litig., C.A. No. 6825-VCG (Del. Ch. Oct. 5, 2016)
Achieved a settlement that saved the $158 million market cap company from bankruptcy and persuaded NASDAQ to lift its trading moratorium to provide the company and its shareholders access to capital markets.
Robbins Arroyo LLP worked with the parties to derivative litigation filed on behalf of the Internet’s leading vitamin and supplement retailer, Vitacost.com, Inc., to save the $158 million market cap company from bankruptcy and to preserve the equity interests of its shareholders. Robbins Arroyo LLP was instrumental in achieving a settlement that enabled the company to bring its financial statements and SEC filings current; allowed Vitacost to hold a long overdue shareholder meeting to address fundamental defects in the corporation’s formation, board composition, and past stock issuances; and helped the company to persuade NASDAQ to lift its trading moratorium and provide the company and its shareholders access to the capital markets. The firm worked with the company’s new board of directors to implement a series of corporate governance best practices, including a robust insider trading policy. Vitacost hired Robbins Arroyo LLP to evaluate and potentially to prosecute the company’s claims against other parties relating to the defects in its formation, stock issuances, and other pre-IPO issues.
Kloss v. Kerker, No. 50-2010-CA-018594-XXXX-MB (Fla. Cir. Ct.-Palm Beach Cnty. May 27, 2011)