Spector Roseman Kodroff & Wills, P.C., Bernstein Litowitz Berger & Grossmann LLP, and Cohen Milstein Sellers & Toll, PLLC, co-lead counsel in the historic Converium/SCOR securities class action (the first such case settled on a Trans-Atlantic basis), announce that on January 17, 2012, the Amsterdam Court of Appeal declared binding the two international settlement agreements in the litigation – an aggregate recovery of $58,400,000.
In its first landmark ruling, on November 12, 2010, the Court of Appeal announced that it had jurisdiction to declare the international settlements of the Converium action binding. In addition to showing its willingness to provide an effective forum for European and other investors to settle their claims on a pan-European or even global basis, the Court of Appeal in Converium substantially broadened its jurisdictional reach -- to the benefit of investors in this case and in future actions. In Converium, the Court of Appeal secured jurisdiction even though the claims were not brought under Dutch law, the alleged wrongdoing took place outside the Netherlands, and none of the potentially liable parties and only a limited number of the potential claimants are domiciled in the Netherlands. That decision, which is now final, recognizes that all other European Union Member States, as well as Switzerland, Iceland and Norway, must recognize the Court of Appeal's ruling, under the Brussels I Regulation and the Lugano Convention.
As a result of the two decisions by the Amsterdam Court of Appeal, the Netherlands has taken the most pragmatic approach within Europe to aid investors and other claimants by enacting a law (the Dutch Act on the Collective Settlement of Mass Claims (the "Dutch Collective Settlement Act")) that allows them to reach a collective settlement with a defendant or group of defendants. In addition, the ruling allows for the settlement to be declared binding on an entire class on an "opt out" basis which is the same under U.S. class action procedure.
The Dutch Collective Settlement Act requires that claimants' interests be represented through a Dutch foundation or association and the Court of Appeal will only declare a settlement binding if, among other things, the amount of the settlement is reasonable and foundation members are sufficiently representative of all participating investors. On February 18, 2009, the Stichting Converium Securities Compensation Foundation (the "Foundation") was incorporated to represent the interests of all legal and natural persons who, during the period from January 7, 2002 through September 2, 2004, purchased Converium common stock on a non-U.S. stock exchange and were not residents of the United States at the time of purchase. The Foundation is governed by a Board of Directors, each of whom is independent of Converium and Zurich Financial Services (ZFS). Pursuant to its articles of association, the Foundation is structured to include a number of participating parties, which signed agreements to become registered participants of the Foundation.
Because the Netherlands is the only European country with such a collective settlement procedure it has become an attractive venue for settling international mass claims, irrespective of whether any litigation has taken place in the Netherlands. The approach taken in the Netherlands is important for all investors. This was underscored by the U.S. Supreme Court's recent decision in Morrison v. National Australia Bank, which restricted the rights of investors to bring claims before U.S. courts for shares not purchased on a U.S. exchange. Thus, when U.S. courts will not hear their claims, European (and American) investors will more readily look to resolve them in European courts. The Dutch Collective Settlement Act, and the Court of Appeal's recent ruling in the Converium case, will make it easier for them to do so. The Court of Appeal noted the significance of its judgment in creating an alternative venue to declare international collective settlements in mass claims binding on all class members. The Court of Appeal explicitly referred to the limitations of the U.S. courts in securities cases as a result of the U.S. Supreme Court's decision in Morrison v. National Australia Bank.
Background of the Case
Converium Holdings AG ("Converium"), a major multi-line re-insurance company based in Switzerland, was spun-off from its former parent, ZFS, in December 2001. The Converium securities litigation began in October 2004 when Converium investors sued Converium and ZFS for violating U.S. securities laws. (Converium was acquired in 2007 by the French company SCOR and is now known as SCOR Holding (Switzerland) AG.) The lead plaintiffs alleged that, when ZFS spun off Converium in an initial public offering and over subsequent quarters, Converium's earnings were materially overstated because Converium concealed a massive deficiency in its North American loss reserves. This allegedly caused the price of Converium's stock and American Depositary Shares (ADS) to be artificially inflated from December 11, 2001 through September 2, 2004. Ultimately, in September 2004, Converium increased its loss reserves by $562 million, reported a loss for 2004 of $761 million and announced that it would place its North American operations into "run-off" and would no longer write reinsurance policies out of its U.S. offices. This caused the price of Converium's stock and ADS to drop, resulting in losses to investors.
Settlements on Two Continents
The action was originally brought on behalf of all investors who purchased Converium common stock on the SWX Swiss Exchange and American Depository Shares in New York. However, on March 6, 2008, the U.S. federal court certified a class that excluded all non-U.S. purchasers who bought their shares on the SWX Swiss Exchange, concluding that there was insufficient evidence of subject matter jurisdiction over their claims. Converium and ZFS ultimately agreed to settle investors' claims for a total of $143 million. Because of the U.S. court's decision, this settlement was split between those who purchased Converium shares in the U.S. and those who purchased them on the SWX Swiss Exchange. The U.S. federal judge presided over the former and the Amsterdam Court of Appeal is currently presiding over the latter.
Contacts:
Spector Roseman Kodroff & Willis, P.C.
Robert M.
Roseman, 215-496-0300
rroseman@srkw-law.com
or
Bernstein
Litowitz Berger & Grossmann LLP
Steven Singer
ssinger@blbglaw.com
or
Cohen
Milstein Sellers & Toll, PLLC
Daniel S. Sommers
dsommers@cohenmilstein.com
