Schwartz v. TXU Corp.
Groundbreaking Corporate Governance Reforms Achieved in TXU Case
As co-lead counsel, Robbins Geller attorneys obtained a recovery of over $149 million for a class of purchasers of TXU securities. The recovery compensated class members for damages they incurred as a result of their purchases of TXU securities at inflated prices. Defendants inflated the price of these securities by concealing the fact that TXU’s operating earnings were declining due to a deteriorating gas pipeline and the failure of the company’s European operations.
This case exemplifies how the Firm, through its investigation, was able to uncover evidence of a massive fraud, based on information obtained from numerous well-placed former TXU employees, including a senior TXU Vice President, an attorney who was charged with reviewing the accuracy of the company’s class period SEC filings. Based on this information, plaintiffs were able to allege with great particularity that defendants misrepresented and omitted material facts concerning the severe business problems being experienced by TXU during the class period.
The highly detailed allegations in the complaint, as well as a supporting affidavit from the senior TXU Vice President, convinced the defendants to take the unusual step of seeking to and ultimately settling the matter even before the motion to dismiss was resolved by the trial court. Given the difficulty of litigating these types of actions in Texas and the Fifth Circuit, this was a phenomenal development that ultimately resulted in a very large recovery for the class.
In addition to the large settlement amount obtained for the class (over $149 million), TXU agreed to significant corporate governance reforms, including:
• Director stock ownership requirements
• Addition of two new independent directors
• Lead independent director
• Enhanced independence standards
• Appointment of corporate governance officer
• Enhanced CFO independence
But for the willingness of Robbins Geller’s attorneys to undertake an exhaustive investigation before filing of the operative complaint, this result would not have been obtained.
Schwartz v. TXU Corp., No. 02-CV-2243 (N.D. Tex.).