Corporate Governance

The Rosca Scarlato LLC (“RS”) seasoned securities attorneys often represent shareholders nationwide in cases seeking remedies for corporate governance misconduct. Contact attorneys Alan Rosca or Paul Scarlato with any questions or to obtain additional information.

Corporate governance is a system of laws, jurisprudence, rules and practices that dictate how a company is controlled and directed. When the corporate insiders mismanage the company or put their own interest above the interest of the company, the company and / or the insiders may be held accountable for their misconduct by the shareholders of the company.

Securities attorneys Rosca and Scarlato have extensive experience investigating and pursuing cases on behalf of individual and institutional shareholders in securities class actions, shareholder derivative cases, and merger & acquisition cases. Shareholders who believe they suffered financial loss due to corporate insiders’ conflicts of interest, misuse of corporate funds, and/or mismanagement of a company in which they have invested may contact securities attorneys Rosca and Scarlato by calling toll free 888-998-0530, by sending an email at arosca@rscounsel.law or by leaving a message using a contact form on this page.

Protecting Investors Rights Through Securities Class Actions

Among the most common improper or downright fraudulent activities that may give rise to securities fraud claims are pump and dump schemes, illegal insider trading, concealment or misrepresentation concerning financial statements or important company developments, false claims, accounting fraud, and conflict of interest. When a public company through its directors and officers engages in fraudulent or improper activities, its harmed shareholders are entitled to file a lawsuit either individually, or on behalf of all shareholders to protect investors’ interest and hold the responsible parties accountable.

A securities class action is a lawsuit filed by an investor or a group of investors on behalf of a larger group called “the class” seeking to halt the misconduct and/or recover losses for all investors harmed by the same misconduct. When multiple investors file class action lawsuits the courts will typically appoint one of the lawsuits as leading and the plaintiff in that class action will become a “lead plaintiff”.

The Lead Plaintiff in a Securities Fraud Class Action

A lead plaintiff is typically the investor or a group of investors who is considered the most interested and capable of representing all shareholders. One of the criteria is the size of the damages. The Courts also check the lead plaintiff’s claims to see if they are similar to the rest of the shareholders and if the lead plaintiff will serve the interests of the rest of the group as a whole.

The lead plaintiff has control of the direction the litigation takes, and, in some cases, multiple shareholders may be appointed to serve as co-lead plaintiffs. Shareholders must typically apply for lead plaintiff within 60-days after the filing of the first securities class action complaint.

The Class Period and Settlement in a Securities Fraud Class Action

The class period can be defined as the limited period of time during which the misconduct was committed. After conducting an in-depth investigation and research, a skilled plaintiff’s counsel will determine the class period. In some cases, this time window may change as the litigation evolves due to the uncovering of additional information during the discovery process. Only the shareholders who invested during the class period will be included in the securities class action suit.

Securities class action cases often take two to three years counted from the date of filing of the first lawsuit until the case is resolved through judgement, settlement , or dismissal . However, some cases can take longer, especially if there are any appeals, while others can take significantly less time. Each case is different and past performance is not indicative of future results.

If the lawsuit is not dismissed by the court, the defendants may be interested to settle through the payment of cash, stock, or a combination of both to a common fund, which is then distributed to each member of the class depending on the estimated value of losses. Typically, an experienced team of securities attorneys will try and negotiate the best outcome for the entire class.

Holding Corporate Officers and Directors Accountable Through Shareholder Derivative Litigation

A shareholder derivative litigation is a lawsuit brought by a shareholder on behalf of their company to try and rectify issues that the officers or the board of directors are not willing, or are failing, to address. Shareholder derivative litigation is usually filed in connection to issues such as breach of fiduciary duty, conflict of interest, misleading financial statements, waste of corporate assets, self-dealing, excessive executive compensation, and other unlawful activities.

Shareholder derivative litigation may be filled under state or federal law. If the shareholder files the lawsuit in state law, then that state’s procedural rules and substantive law will typically apply. When filed under a federal court, the Federal Rules of Civil Procedure and that state substantive law will usually apply.

Below are some common denominators among many state laws regarding derivative actions:

• The shareholder must be invested in the company.
• The shareholder must prove the existence of attempts to inform the corporation’s directors of existence of a problem prior to filing the lawsuit, or the futility of doing so.
• The corporation retains any damages or other proceeds after a successful shareholder derivative litigation and not the shareholder who initiated the lawsuit.

The Shareholder Derivative Litigation

The main difference between shareholder derivative litigation and securities class action is that the shareholder is fiduciary for the former, which means they cannot seek a personal benefit. In comparison, securities class action settlement is shared among the shareholders based on financial interest.

The court weighs between the policy interest favoring the settlement against the need to protect the company and its shareholders. To that end, the court must ensure the settlement is fair, reasonable and adequate, but relevant legal principles may differ depending on each jurisdiction. To approve the settlement, the court typically considers factors such as:

• The validity of the claims
• The challenges hindering the enforcement of the claims through the courts
• The delay, expense and trouble of litigation
• The amount of the settlement compared with the amount and collectability of a judgement.
• Pros and cons views of the parties involved

The plaintiff’s counsel who secures a monetary or non-monetary benefit for the company and/or shareholders in derivative litigation case is typically entitled to an award of attorneys’ fees and case expenses. Factors that go into determining an attorney’s fee include the use achieved, the contingent nature of success, the efforts and number of hours spent by the attorneys in legal activities, the customary fee charge and the difficulty of the litigation and skill required to handle it.

Representing Shareholders Interest Through Merger and Acquisition Litigation

Announcements of mergers and acquisitions are sometime triggers for corporate governance litigation. In this type of litigation, the shareholders can file a lawsuit if corporation directors agreed to sell the company at a low price, or failed to adequately disclose the terms of the deal and/or important background information regarding the proposed deal. A bidder could also file the case if the company directors refused to sell the company at an advantageous price, breaching their fiduciary duties to their shareholders. The company can also sue a bidder if they violate state or federal law, and thus their bid should be enjoined by the courts.

The main goal of merger and acquisition litigation typically includes increasing investors’ consideration, forcing the disclosure of critical information that assists shareholders in deciding whether to approve a proposed corporate transaction and improving the proposed transaction’s terms to ensure fairness and eliminate any potential coercion.

Shareholder Representation by Knowledgeable Investor Right Advocates

At Rosca Scarlato LLC, securities attorneys Alan Rosca and Paul Scarlato have decades of combined experience representing the interests of investors. Their goal is to design and implement outstanding legal strategies intended to advance investors’ interest and achieve the best results for their clients. By running pre-suit investigations, attorneys Rosca and Scarlato are able to select and pursue only cases where they believe there are strong and actionable claims. They typically take corporate governance cases on a contingency fee basis, assuming the risk of the litigation, and only get paid if and when they achieve a successful outcome. To contact securities attorneys Alan Rosca or Paul Scarlato, shareholders may call 888-998-0530, email arosca@rscounsel.law or pscarlato@rscounsel.law, or send a message by using the contact form on this page. All consultations are free.

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