Our Recent Successes

“This lawsuit’s primary goal has been well achieved and we are pleased by the excellent result. The achievement of ‘majority voting’ is a tremendous success, as well as the numerous measures instituted to prevent and detect stock option backdating. . . . Causing one of the largest and most recognized corporations in America to significantly change its governance and the way it does business, is an impressive feat.”

– Earl Seymour, Chairman of the Board, Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust, re Costco Wholesale Corp. Derivative Litigation, Dkt. No. 99

Some of our recent successes at improving corporate governance through litigation include the following:

Fossil

In re Fossil, Inc. Derivative Litigation, No. 06-cv-01672-F (N.D. Tex.). On May 4, 2011, the parties entered a settlement culminating in the following corporate governance changes:

  • Declassification of elected board members
  • Retirement of three directors and addition of five new independent directors
  • Two-thirds board independence requirements
  • Corporate Governance Guidelines providing for "Majority Voting" election of directors
  • Lead Independent Director requirements
  • Reprimands of executives
  • Revised accounting measurement dates of options
  • Addition of standing Finance Committee
  • Compensation clawbacks
  • Director compensation standards
  • Revised stock option plans and grant procedures
  • Limited stock option granting authority, timing, and pricing
  • Enhanced education and training
  • Audit engagement partner rotation and outside audit firm review

Costco

Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. Sinegal, No. 08-cv-01450-TSZ (W.D. Wash.). On December 20, 2010, the parties entered a settlement culminating in the following corporate governance changes:

  • Amendment of Costco's bylaws to provide "Majority Voting" election of directors
  • Elimination of overlapping compensation and audit committee membership on common subject matters
  • Enhanced Dodd-Frank requirements
  • Enhanced internal audit standards and controls, and revised information-sharing procedures
  • Revised compensation policies and procedures
  • Revised stock option plans and grant procedures
  • Limited stock option granting authority, timing, and pricing
  • Enhanced ethics compliance standards and training

F5 Networks

In re F5 Networks, Inc. Derivative Litig., No. C-06-0794-RSL (W.D. Wash.). On September 24, 2010, the parties entered a settlement culminating in the following corporate governance changes:

  • Revised stock option plans and grant procedures
  • Limited stock option granting authority, timing and pricing
  • "Majority voting" election of directors
  • Lead independent director requirements
  • Director independence standards
  • Elimination of director perquisites
  • Revised compensation practices

TXU Energy

Schwartz v. TXU Corp., No. 3:02-CV-2243-K (N.D. Tex.)
On January 21, 2005, the parties announced a settlement which included the following corporate governance changes:

  • Director stock ownership requirements
  • Addition of two new independent directors
  • Lead independent director
  • Enhanced independence standards
  • Appointment of corporate governance officer
  • Enhanced CFO independence

Ashland

Central Laborers' Pension Fund v. Chellgren, No. 02-CI-02174 (Kenton Cty. Cir. Ct., Ky.)
On January 27, 2005, the parties announced a settlement which included the following corporate governance changes:

  • Shareholder nominated director
  • Lead independent director
  • Mandatory director retirement age
  • Enhanced director independence
  • 2/3 of board must be independent
  • Minimum director stock ownership requirements
  • Stock option provisions
  • Trading controls

Hanover Compressor

Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. Hanover Compressor Co., No. H-02-0410 (S.D. Tex.)
Groundbreaking corporate governance changes obtained include:

  • Direct shareholder nomination of two directors
  • Mandatory rotation of the outside audit firm
  • Two-thirds of the board required to be independent
  • Audit and other key committees to be filled only by independent directors
  • Creation and appointment of lead independent director with authority to set up board meetings

Sprint

In re Sprint Shareholder Litigation, No. 00-CV-230077 (Mo. Circuit Ct., Jackson County)
In connection with the settlement of a derivative action involving Sprint Corporation, the company adopted over 60 new corporate governance provisions which, among other things:

  • Established a truly independent board of directors and narrowly defines “independence” to eliminate cronyism between the board and top executives
  • Required outside board directors to meet at least twice a year without management present
  • Created an independent director who will hold the authority to set the agenda, a power previously reserved for the CEO
  • Imposed new rules to prevent directors and officers from vesting their stock on an accelerated basis

Occidental Petroleum

Teachers’ Retirement System of Louisiana v. Occidental Petroleum Corp., No. BC185009 (Cal. Super. Ct. 1998)
As part of the settlement, corporate governance changes were made to the composition of the company’s board of directors, the company’s Nominating Committee, Compensation Committee and Audit Committee

E*Trade

Barry v. E*Trade Group, Inc., No. CIV419804 (Cal. Super. Ct., San Mateo County)
In connection with settlement of derivative suit:

  • Excessive compensation of CEO eliminated:
    • Reduced salary from $800,000 to zero
    • Bonuses reduced and to be repaid if company restates earnings
    • Reduction of stock option grant and elimination of future stock option grants
  • Important governance enhancements obtained, including the appointment of a new unaffiliated outside director as chair of board’s compensation committee