Law360 Features Partner George Aguilar in Q&A Series

Q&A With Robbins Arroyo’s George Aguilar

GCA

As featured on Law360 on May 28, 2013:

George C. Aguilar is a partner in Robbins Arroyo LLP’s San Diego office. He focuses his practice on the litigation of shareholder derivative actions, securities class actions and antitrust actions. Prior to joining the firm, Aguilar was an Assistant United States Attorney with the U.S. Attorney’s Office in San Diego for 17 years as a trial lawyer and supervisor, trying more than 40 federal criminal cases to verdict.

Q: What is the most challenging case you have worked on and what made it challenging?

A: In the shareholder derivative arena, where Robbins Arroyo practices extensively, the Brocade Communications Systems Inc. backdating stock option derivative litigation posed a number of difficult and almost daily hurdles. The case presented the constant need for an evolving and limber strategy to preserve the company’s claims for what became one of the more notorious backdating option cases from that time period. With my partner Marc Umeda and co-counsel leading the fight in pursuing the derivative claims, I was asked to organize and develop our firm’s involvement in the dispositive motion practice and to prepare the case for trial shortly after joining the firm from my days as a federal prosecutor.

The numerous strategy calls, shifts in tone and vigor of prosecution were affected by multiple factors, including a fight to prevent the approval of a previously reached inadequate settlement of the derivative claims, forceful opposition by prominent and expert defense firms regarding issues of standing and discovery, and the organization, consolidation and review of massive document productions with the assistance of numerous attorneys on the plaintiffs’ side. In addition, the positioning of the case for trial was complicated by the parallel criminal prosecution of company executives, and their eventual conviction, the untimely death of our client and subsequent probate and successor issues, and the company’s formation of a special litigation committee and its investigation. Through it all, we were able to reach a conclusion with the special litigation committee that enabled smart resolutions of the company’s claims and allowed Brocade to put that crippling episode behind and move forward.

Q: What aspects of your practice area are in need of reform and why?

A: Aside from the broader concepts of tougher financial regulation (and where aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act legislation are a step in the right direction), the sometimes circus tent process of determining lead counsel in derivative actions bears some review. In circumstances where there are numerous firms vying for leadership roles in the case, courts outside of Delaware at times take a superficial view of the issue and choose to force compromise pairings of firms or do not adequately consider the quality of and investigation put into the claims by the competing firms.

Q: What is an important issue or case relevant to your practice area and why?

A: There’s a fascinating circumstance coming out of the Ninth Circuit in the area of post-merger derivative plaintiff standing and the reach of the “fraud exception” to Delaware’s continuous ownership rule. On Jan. 10, 2013, a panel of the Ninth Circuit certified a question to the Delaware Supreme Court that asks simply whether the “fraud exception” allows shareholder plaintiffs, who would ordinarily lose standing as a result of a merger, can maintain their derivative suit by alleging that the merger was necessitated and inseparable from the alleged fraud that is the subject of the underlying derivative claims. The Ninth Circuit case is Arkansas Teacher Retirement System v. Mozilo, No. 10-56340, and arises from breach of fiduciary duty claims made on behalf of Countrywide Financial Corporation against former Countrywide officers and directors for the collapse of the company.

During the pendency of the suit, Countrywide merged with Bank of America and plaintiffs were divested of their Countrywide stock. The district court granted the defendants’ motion to dismiss, finding that the plaintiffs were no longer continuous owners of Countrywide stock. The Delaware Supreme Court in Arkansas Teacher Retirement System v. Caifa, 996 A.2d 321 (Del. 2010) breathed life into post-merger standing by explaining that fiduciaries who damage a company to such an extent that it has to be acquired cannot later claim they no longer face liability for their actions. The Ninth Circuit noted that several courts that have applied Delaware’s Arkansas Teacher precedent have reached divergent results, including one case where I, along with co-counsel, represented shareholders on behalf of Bear Stearns Cos. Inc., in derivative litigation in the Southern District of New York. In that case, a district court also granted the defendants’ motion to dismiss on the grounds that J.P. Morgan Chase & Co.’s buy-out of Bear Stearns shareholders divested our clients of standing despite the meltdown at Bear Stearns having placed the company in need of a merger. In re Bear Stearns Cos., Inc. Sec., Derivative & ERISA Litig., 763 F. Supp. 2d 423 (S.D.N.Y. 2011). We have a pending appeal with the Second Circuit Court of Appeals and further guidance from the Delaware Supreme Court will help decide the issue.

Q: Outside your own firm, name an attorney in your field who has impressed you and explain why.

A: Let me start with the cliché but so very true statement that there are too many outstanding litigators in the bar defending shareholder class and derivative actions. The quality of the strategic decision-making and their advocacy before judges and mediators makes for difficult days for me in the courtroom and office. One group in particular though comes to mind first as I witnessed their work through the years frustrate a great many of my efforts. Ralph Ferrara and his team, particularly Ann Ashton and Jonathan Richman, now at Proskauer Rose LLP and previously Dewey LeBeouf LLP, show a persistence and poise that makes you re-examine your position constantly. There’s not much Ralph and his team don’t have an answer for. And Ralph, after all, did literally write the book on shareholder derivative litigation.

Q: What is a mistake you made early in your career and what did you learn from it?

A: Isolation as a young lawyer. By that I mean I wish I had made the most of the access, though somewhat limited, to the great minds and skills of the more experienced and expert lawyers all around me. My own professionalism, skill set and sense of what the legal profession stood for and meant would have shaped much more quickly had I spent more time tugging at the sleeves of the men and women who had achieved superior standing.

I was fortunate to have been hired out of law school by Morrison & Forester in San Francisco as an associate and shortly thereafter became an Assistant U.S. Attorney in the Southern District of California — two places where there were heavyweight practitioners in their fields. I had excellent mentors in those offices. But partly because of my upbringing (being the first to attend college in my family), and mostly from a stubbornness that I could make it work because that was how I achieved to that point, I was initially reticent to demand and push myself into more opportunities for contact and discussion. I see now the missed chances. I see it now more clearly having witnessed some of the same isolation from junior lawyers who later followed me in the U.S. Attorneys’ Office. Isolation may be what is imposed upon you late in your career but it shouldn’t be what you impose on yourself in your early years.

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