Correction: This article originally contained a number of inaccuracies and omissions. The firm claims $1 billion in recoveries and other measures of values for investors and consumers. Felipe Arroyo argued the Hewlett-Packard Co. case and Marc Umeda helped lead the strategy. Co-counsel in the Vitacost.com Inc. case included Robert Weiser of The Weiser Law Firm, and in the Amerco case Travis Downs III and James Jaconette, partners at Robbins Geller Rudman & Dowd. The article has been updated to clarify these errors.
When it comes to shareholder derivative lawsuits, few firms are as committed as Robbins Umeda. The firm, founded in 2002 by Brian Robbins and Marc Umeda, has grown into one of the premiere firms in the realm of derivative litigation. It has done much to establish that particular practice area.
“We decided to use our youthful energy by filing a lot of shareholder derivative lawsuits, and we were able to cut a name for ourselves,” said Robbins, who was 28 at the time.
Since its inception, the firm has claimed more than $1 billion recoveries and other measures of value for clients including the shareholders of defense contractor Titan Corp. and Tenet Healthcare Corp. Located in San Diego, Robbins Umeda has tackled cases across the country. The firm has 23 attorneys, including seven partners.
Ultimately, the firm is committed to representing inverstors and consumers who otherwise might not have a voice against big business. “It’s rewarding because you feel like you’re fighting for people,” Robbins said. “It is risky because you don’t win every case.”
One notable case last year involved the departure of former Hewlett-Packard Co. Chief Executive Officer Mark Hurd, whom attorney Gloria Allred accused of sexually harassing her client, a former consultant to the company. Allred detailed the allegations in a letter to Hurd, who forwarded it to the board of directors.
The board hired Covington & Burling to conduct an investigation into the matter. The firm reportedly concluded in a confidential report that Hurd had not violated the company’s sexual harassment policy, but the board gave Hurd a reported $30 million in severance payments to resign.
“We were appalled on behalf of the shareholders,” said Robbins Umeda partner Felipe Arroyo. “It has no place in what we traditionally view as a market owned by shareholders.”
Finding out what had really happened was no easy matter, and the job still isn’t done. Arroyo and Umeda argued before the Delaware Court of Chancery in January 2011 and subsequently in the Delaware Supreme Court in October 2011 that the shareholders were entitled to know whether their money was being properly spent. Umeda led the design and follow-through of the litigation and appellate strategy. The court ultimately ordered the release of the Allred letter, but declined to make public the Covington report. But before the letter was officially released, it was leaked to the press.
Arroyo does not condone the leak and doesn’t consider the matter settled. “Any release of the document has been outside of the formal judicial process,” he said. “Even though some time has passed, the letter has not been unsealed.”
In another matter, the firm helped reach a settlement in April on behalf of shareholders with Vitacost.com Inc. The company, one of largest online health and wellness products retailers, went public in 2009. But soon thereafter, questions arose about the details of its incorporation in Delaware. The stockholders claimed that inaccuracies in the company’s initial incorporation documents cast doubt upon the legitimacy of its securities. The U.S. Securities and Exchange Commission halted trading of the stock.
It was a real mess, Robbins said. “Now you have thousands, if not tens of thousands, of shareholders who aren’t really shareholders.”
The firm prepared a complaint alleging that Vitacost executives had violated Delaware law through “breach of fiduciary duty, abuse of control, unjust enrichment, gross mismanagement and waste of corporate assets.”
Robbins and associate Gregory Del Gaizo, along with co-counsel including Robert Weiser of The Weiser Law Firm, ultimately negotiated a deal whereby Vitacost updated its financial statements and securities filings. A shareholder meeting was scheduled to address the corporation’s formation and unfreeze the stock. A new board of directors was seated and implemented reforms including a policy against insider trading.
Ultimately, “we all had the same interest at heart,” Robbins said. “We wanted to save the company for the shareholders.”
An ongoing matter involves the parent company of U-Haul, Amerco. The firm filed complaints in 2002, 2003 and 2006 alleging that current and former directors divested hundreds of self-storage properties to companies owned by their family members, at the shareholders’ expense. On Dec. 22, 2011, the litigation survived a third motion to dismiss and a second motion for summary judgment by defendants.
After surviving a third motion to dismiss and a second motion for summary judgment by the defendants, the case was headed for an evidentiary hearing.
In June 2011, the firm and co-counsel reached an $8.6 million dollar settlement for Fossil Inc. shareholders with the company’s current and former executives over alleged stock-options backdating. Robbins Umeda attorneys managed to declassify board elections, institute majority shareholder voting and set stock-option granting practices. Co-counsel on the case included Travis Downs III and James Jaconette, partners at Robbins Geller Rudman & Dowd.
Arroyo worked as a special counsel at O’Melveny & Myers for more than a decade before coming to Robbins Umeda. He found, he said, that representing underdog clients who go up against large corporations has been a rewarding career change.
“I think the opportunity for making a big difference in the capital markets and an indelible mark on how the capital markets function has been a great reward,” Arroyo said. “There are many more people at work on the defense side, doing everything they can to preserve the status quo.”
Matthew Huisman can be reached at email@example.com.