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Plaintiffs’ firms touted victories this year in public stockholder and bondholder class actions that they say helped investors get fairer � and richer � treatment in financial transactions, better compensation for corporate fraud and higher dealmaking standards in general. Bernstein Litowitz Berger & Grossmann, a firm with 47 attorneys and its largest office in New York, pointed to successes in cases against Refco Inc., Caremark Rx Inc. and CBOT Holdings Inc., among others. Berger & Montague of Philadelphia, with an attorney head count of about 70, cited victories against the Philadelphia Stock Exchange, Cigna Corp. and Sepracor Inc. Bernstein Litowitz represented RH Capital Associates LLC, a Refco stockholder, in suing Austria’s Bank F�r Arbeit und Wirtschaft, accused of working with the brokerage company’s chairman to hide debt from investors that later led to the company’s bankruptcy. Mazur v. Refco, No. 05-8626 (S.D.N.Y.). While the bank denied direct involvement in the fraud, it agreed in June to pay Refco bondholders and stockholders, including RH Capital, $140 million in a settlement that was part of a broader agreement with the U.S. Attorney’s Office for the Southern District of New York to avoid prosecution. The plaintiffs worked with federal prosecutors and unsecured Refco creditors to achieve the settlement, said Salvatore Graziano, a Bernstein Litowitz partner who was part of the firm’s team on the case. “It was very challenging to get the settlement done,” Graziano said. “There were times when we thought it was going to fall apart.” Along with Graziano, partner Sean Coffey and associates John Browne, David Webber and Jeremy Robinson were on the Bernstein Litowitz team. RH Capital was the lead shareholder, while Pacific Investment Management Co. and Wilmington, Del.-based Grant & Eisenhofer represented bondholders. In the lawsuit against Caremark filed in December 2006, Bernstein Litowitz represented the Louisiana Municipal Police Employees’ Retirement System in seeking an injunction to stop the sale of the company to CVS Corp. The plaintiffs argued that Caremark directors weren’t fulfilling their fiduciary responsibility to consider a competing bid. Louisiana Municipal Police Employees’ Retirement System v. Crawford, No. 2635-N (New Castle Co., Del., Ch.). In twice delaying a shareholder vote on the proposed CVS purchase, Bernstein Litowitz helped the pension fund reach a settlement that provided more money and benefits, Graziano said. CVS shareholders ultimately voted in March to approve the purchase of Caremark for about $24 billion, up from the initial $21 billion offer in November 2006. In addition to Graziano, partner Jerry Silk and associates Mark Lebovitch, Brett Middleton and Noam Mandel worked on the case for Bernstein Litowitz. The law firm also represented the Louisiana pension fund in pressing CBOT Holdings to find a better price in its sale to Chicago Mercantile Exchange Holdings Inc. following the emergence of a rival bid from Intercontinental Exchange Inc. Louisiana Municipal Police Employees’ Retirement System v. CBOT Holdings, No. 2803-VCN (New Castle Co., Del., Ch.). The plaintiff sought an injunction against the sale because of inadequate disclosure to shareholders, Graziano said. Ultimately, CBOT’s sale to the Chicago Mercantile Exchange was approved in July for nearly $12 billion, about $3 billion more than the initial October 2006 offer. Coffey and Graziano worked with associates Lebovitch, Niki Mendoza and Takeo Kellar on the case. Broader ramifications The repercussion of these cases can be broad, as demonstrated by the settlement Bernstein Litowitz reached with Ceridian Corp. On behalf of the Minneapolis firefighters’ pension fund, the firm objected that the proposed acquisition of the company by Thomas H. Lee Partners and Fidelity National Financial Inc. seemed to benefit managers at the expense of shareholders. After protracted talks, the plaintiffs forced the company to eliminate conditions that made it harder for the shareholders to find a better deal. In re Ceridian Shareholder Litig., nos. 2996-C and 3012-CC (New Castle Co., Del., Ch.). An “election walk-away” provision, for example, would have negated the offer if the shareholders voted out the sitting board of directors. That would punish the shareholders essentially for exercising their rights, Lebovitch said. The housekeeping done, the deal eventually got the green light � at the original $36 per share. “When you successfully challenge an undesirable practice in one deal, you’re going to create a benefit for shareholders across the whole [mergers and acquisitions] market,” Lebovich said. “You can improve the way mergers are negotiated, structured and protected. That pays dividend across your entire portfolio.” In other litigation, Berger & Montague attorneys achieved a $93 million cash stockholder settlement after four years of litigation against Cigna over the health care insurance company’s flawed computer system overhaul. The firm represented the lead plaintiff, the Pennsylvania State Employees Retirement System, and the settlement was approved by the court in March. Pennsylvania State Employees Retirement System v. Cigna, No. 02-8088 (E.D. Pa.). The firm reached the outcome without the benefit of evidence exposed by a federal government probe, financial restatements or a bankruptcy, said Sherrie Savett, who was a lead attorney on the case and who chairs the firm’s securities litigation practice. The Berger & Montague team included attorney Carole Broderick, Barbara Podell, Roslyn Pollack and Joshua Schumacher. Bernstein Leibhard & Lifshitz of New York was co-lead counsel. In a class action against Sepracor over the company’s failure to win Food and Drug Administration (FDA) approval to market a proposed antihistamine drug, Berger & Montague helped client Staro Asset Management LLC and other bondholders win a $52.5 million settlement after five years of litigation. Stockholders included in the settlement were represented by Wolf Haldenstein Adler Freeman & Herz of New York. Staro v. Sepracor, No. 02-12235 (D. Mass.). The plaintiffs argued that Sepracor knew about kidney and cardiac problems related to the drug candidate, called Soltara, based on animal testing, and didn’t disclose that information or provide it to the FDA, said Savett, who led the litigation team. They also alleged insider trading in connection with the matter. A June settlement was approved by the court last month. Berger & Montague attorneys Gary Cantor and Schumacher also worked on the case. Berger & Montague won additional compensation for a class of shareholders of the Philadelphia Stock Exchange last month after they brought a June 2006 lawsuit seeking to force the exchange to reconsider the 2005 sale of a 90% stake to six major investment banks. The settlement is pending final court approval. Ginsburg v. Philadelphia Stock Exchange Inc., No. 2202-CC, (New Castle Co., Del., Ch.). With a deal pending, the litigation team completed depositions, defeated summary judgment motions and achieved class certification in a mere six months, said Lawrence Deutsch, a lead attorney on the case. Robin Switzenbaum also led the team that included Podell, Pollack, Schumacher, Jacob Polakoff and Shoshanna Savett. The settlement was reached a day before the trial was to begin. The lawsuit was unusual in that the plaintiffs were seeking to hold the banks liable as “aiders and abetters” in the board’s breach of its fiduciary responsibility to the shareholders, Deutsch said. The banks are giving 14% of the shares they bought to the shareholders and the board is paying $17 million in cash to them in the settlement.

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