By Katrina Dewey | July 1, 2020 | Lawyer Limelights
Photo of Jeremy Lieberman and Jennifer Pafiti by Laura Barisonzi.
The times they are a-changin’ in the plaintiff securities litigation bar. From aging lions to cases that are increasingly global, there is a shift in the status quo – that for many spells opportunity.
Enter Pomerantz, the oldest and one of the most respected securities law practices in the U.S., which in 2018 nabbed a historic $3B settlement with Brazilian oil giant, Petrobras, that was the largest securities class action settlement in a decade, the largest ever in a class action involving a foreign issuer of U.S. shares, and the fifth-largest class action settlement in U.S. history overall.
The firm’s caseload stretches across the often thorny terrain where 21st century life and black-letter law have yet to fully connect - from the real-life damages of virtual intrusion by the augmented-reality celeb Pokémon to fallout from the Deepwater Horizon oil spill and C-suite upheaval fueled by #MeToo litigation.
The New York-based firm often finds itself on the side of the underdog in David-versus-Goliath confrontations with the era’s most influential corporations: energy giant BP; Match Group, the digital-dating empire cultivated by billionaire Barry Diller; and gaming standouts Niantic and Nintendo.
“You’re representing the underrepresented, lending a voice to those who don’t have one, doing your utmost best to give them their day in court,” says Jeremy Lieberman, the managing partner of the 44-attorney powerhouse.
“It’s thrilling to be in court and argue a motion to dismiss, or argue in the Court of Appeals where you’re up against the best defense attorneys and do well against them,” he says. “Obviously, winning is even better.”
The 80-year-old firm begun by the legendary Abraham Pomerantz is no stranger to winning, from the founder’s Depression-era victory in a shareholder suit against National City Bank – whose CEO had given himself and his lieutenants loans to cover stock market losses and waived repayment – to Lieberman’s negotiation of the record-setting $3B settlement from Brazilian oil company Petrobras.
“We overcame a formidable defense strategy to reach this blockbuster settlement,” says Emma Gilmore, one of the lead attorneys on the case who, during discovery, interviewed a whistleblowing executive who had been warned at gunpoint not to disclose the fraud.
“Petrobras painted itself as the ‘victim’ of the fraud perpetrated by corrupt executives and politicians,” she explains. “Petrobras’ victimhood argument was widely successful in Brazil with the Brazilian courts and the prosecutors,” but seeing the whistleblower’s bravery “inspired me even more to do my utmost to bring justice.”
Lieberman, who became managing partner in 2016, is building on the firm’s tradition of expanding the scope of securities laws to benefit investors, addressing conduct that lawmakers of the past may not have considered relevant to stockholders.
#MeToo cases are just one example. Pomerantz is lead counsel in a class-action securities case against Wynn Resorts, stemming from claims of sexual misconduct toward employees by casino mogul Steve Wynn, who stepped down as CEO in early 2018.
The case, filed in U.S. District Court in Nevada, argues that the company failed to disclose the allegations against its top executive to investors, misrepresenting its treatment of sexual harassment allegations at a time when such claims had begun to roil corporations and cost A-listers from news anchor Charlie Rose to former movie mogul Harvey Weinstein their careers.
When the claims against Wynn became public in a Wall Street Journal article in January 2018, the stock lost 10 percent of its value in a single day, or about $20 a share.
The company had led investors to “believe it was committed to enforcing legal and ethical conduct by its employees, when in fact, its executives were covering up a pattern of abuse,” says Murielle Steven Walsh, who focuses on corporate governance and securities class action cases while serving as the firm’s administrative partner.
“The actionability of a company’s statements about its Code of Conduct is a rather novel issue, although some courts recently have held that such statements can be actionable,” says Walsh, one of the firm’s 14 partners, of whom 36 percent are women.
“My stance is that these issues are very material to shareholders, as evidenced by the steep stock price decline when Wynn’s bad conduct was revealed,” she adds. “The wrongdoing was particularly flagrant and egregious, and I feel that if any case should proceed on these issues, this is the one.”
More broadly, the firm has positioned itself at the forefront of ferreting out sexual misconduct in the workplace, explains Gustavo Bruckner, who heads the corporate governance litigation team and holds a master’s degree in finance.
“We will pursue the board members who turn a blind eye to a ‘frat boys’ culture,” Bruckner says. “That toxic culture damages a company’s reputation and, more importantly, results in the loss of top female talent.”
Pomerantz attorneys pride themselves on creating ground-breaking laws that help shape the law to better protect investors. In a recent, closely watched securities fraud action against Fiat Chrysler related to its vehicles’ non-compliance with diesel emissions regulations, the firm obtained an $110M settlement for the class. Michael Wernke, who led the litigation, says, “The Fiat Chrysler settlement is between 8.5 and 11.8 times that of the median for settlements of similarly-sized securities class actions.
“In addition to creating precedent-setting case law in successfully defending the various motions to dismiss, Pomerantz also significantly advanced investors’ ability to obtain critically important discovery from regulators that are often at the center of securities actions,” he said.
During the course of the litigation, Pomerantz sought the deposition of a former employee of the National Highway Traffic Safety Administration (“NHTSA”). The United States Department of Transportation (“USDOT”), like most federal agencies, has regulations governing when its employees may be called by private parties to testify in court. On their face, USDOT’s regulations apply to both current and former employees. In response to Pomerantz’s request to depose a former NHTSA employee that interacted with Fiat Chrysler, NHTSA denied the request, citing its regulations. Despite the widespread application, and assumed appropriateness, of applying the regulations to former employees throughout case law, Pomerantz filed an action against USDOT and NHTSA, arguing that the statute pursuant to which the regulations were enacted speaks only of “employees,” which should be interpreted to apply only to current employees. The court granted summary judgment in favor of Pomerantz’s clients.
“This victory will greatly shift the discovery tools available, so that investor plaintiffs in securities class actions against highly-regulated entities – for example, companies subject to FDA regulations – will now be able to depose former employees of the regulators that interacted with the defendants during the class period to get critical testimony concerning the company’s violations and misdeeds,” Wernke says.
Anchoring the firm’s client services team is partner Jennifer Pafiti, who was a lynchpin of the Petrobras case and now is responsible for the firm’s $5.6T portfolio monitoring service, as well as her own roster of cases. Petrobras, however, will always stand out. “To be involved from the start in prosecuting a majority state-owned oil giant such as Petrobras and being part of the team responsible for one of the largest settlements in U.S. history, $3B, was personally satisfying and a fantastic achievement for investors.”
As corporate fraud cases mount and the related settlements and verdicts increase in size, they have begun to reshape the stance that investors take toward such issues, says Pafiti.
“Pension funds and asset managers have seen the benefit of working more closely with their attorneys before a corporate fraud issue arises with relation to an investment,” she says. “There has been a seismic shift from being reactive once an issue occurs, to being proactive and having systems in place so that when an issue arises, the fund is well-positioned to make informed decisions with a team they already know and trust. As attitudes and people’s appetite for what is acceptable changes, we are also seeing a lot more litigation resulting from environmental disasters, data breaches, and the #MeToo movement.”