The Amsterdam Court of Appeal approved settlement agreements of a securities fraud action for non-US exchange purchasers because the settlements are reasonable in all aspects, are in the best interests of all non-US shareholders, and fully satisfy the requirements under Dutch law for approval. A US federal judge had earlier approved a settlement agreement with US exchange purchasers. (SCOR Holding (Switzerland) AG Securities Litigation, Amsterdam Court of Appeal, Jan. 17, 2012)
During the period of 7 January 2002 through and including 2 September 2004, Converium Holding AG, which is now known as SCOR Holding (Switzerland) AG) announced reserve increases in its North American business of approximately USD 526 million, including a 20 July 2004 announcement that it would take a charge of up to USD 400 million to increase reserves in its North American business. The price of the company’s common stock declined after the 20 July 2004 announcement. The action alleged that the company and certain of its officers allegedly disseminated false and misleading statements during this period of time regarding the company’s financial condition, including the adequacy of loss reserves in its North American business, which alleged misstatements and omissions purportedly had the effect of artificially inflating the price of the company’s securities.
The total amount that is available under the agreements for the non-US exchange purchasers is (before deduction of costs and fees) USD 58,400,000. That sum is proportionally considerably lower than the settlement payment for the smaller group of US exchange purchasers (USD 84,600,000), who found themselves in a comparable position to the non-US exchange purchasers insofar as it concerns their alleged loss. According to petitioners, the justification for this difference may be found in the fact that the US federal district court (SDNY) excluded the non-US exchange purchasers from participation in the class, so that they have no effective course of justice for validating their potential legal claims.
The Amsterdam panel noted that the events to which the compensation pertains took place in the period 2002-2004 and, since then, outside of the United States no litigation has been brought to obtain compensation. Petitioners, submitting reports by experts, have pointed to the various factual and legal circumstances that impede obtaining such compensation in court proceedings outside of the United States. Leaving aside whether and to what extent those circumstances render the acquiring of compensation impossible, the appeals court found it plausible that they will form a real obstacle for many non-US exchange purchasers to
have their potential claims awarded in court outside of the United States.
In view of their being excluded from participation in the US class, continued the panel,it is not plausible that they would still have effective remedies to this end in the United States. It may thus be assumed that the legal position of the non-US exchange purchasers is essentially different to that of the US exchange purchasers. This also means that there is no unacceptable difference in the treatment of equal cases.
The appeals court also pointed out that non-US exchange purchasers who still want to bring their claims to court have the possibility of opting out of the binding nature of the agreements by issuing an opt-out statement, so that they are at liberty to bring individual litigation. However, it is more plausible that in view of the time and the costs and the risks that are associated with conducting individual litigation many of the non-US exchange purchasers will not bring litigation and therefore would not receive any compensation at all if the settlement agreements are not approved. Moreover, the non-US exchange purchasers will in relative terms, certainly in comparison with conducting individual litigation, receive the awarded compensation with ease and speed and against no or very mincosts.