Hyderabad: Class action suits filed in the US in connection with the Rs7,136 crore accounting scandal at Satyam Computer Services Ltd have been stalled at a crucial stage, as law firms that filed the suits bicker on who the lead plaintiff should be to represent the victims if the 12 class action suits in New York were to be consolidated into one. Satyam is listed on the New York Stock Exchange (NYSE).
This delay, however, is likely to be temporary and will not provide any respite to the software firm, which is in the process of being sold.
The reason why the law firms are believed to be bickering is because lawyers earn a proportion of the damages awarded at the time of settlement of a class action suit. While the counsel for the lead plaintiff could stand to gain the most in terms of lawyer fees in the eventuality of a settlement, it is the judge who has the final say regarding who gets how much of the damages awarded. The exact quantum of damages to be sought in the Satyam case is yet to be determined, but some estimates put damages could go up to $500 million (Rs2,540 crore).
On 13 March, in response to a motion filed by three law firms—Glancy Binkow and Goldberg Llp., Vianale and Vianale Llp. and Law Offices of Harward G. Smith—judge Barbara S. Jones of the US district court of the southern district of New York ordered consolidation of 12 class action suits filed against Satyam.
The motion, which was reviewed by Mint, had also pleaded for the appointment of a lead plaintiff (a victim representing all the victims who are part of the class action suit) and law firms that represent the lead plaintiff.
The 13 March order by judge Jones had appointed Aekta Ben Patel as lead plaintiff. Patel, an investor in Satyam, claims to have suffered losses to the tune of $2.01 million as a result of investing in the company’s shares on NYSE. The motion also sought appointment of Glancy Binkow and Goldberg and Vianale and Vianale as the co-lead counsels.
However, on 16 March, the consolidation order was rolled back as some other law firms contested the consolidation motion.
The judge’s order to roll back the consolidation move is not expected to have any serious impact on the Satyam class action litigation itself other than delaying the entire process. “Competing motions could have been filed on Saturday after the order was passed,” said Menaka Guruswami, a Supreme Court lawyer with expertise in US law, including those relating to class actions.
Some of the 12 law firms whose class action suits were sought to be consolidated told Mint that there are indeed competing motions as to who should be the lead plaintiff and consequently the counsels for the lead plaintiff. “The entry of the order (of 9 March) was premature as briefing on the competing motions for lead plaintiff has not yet concluded,” said Jacqueline Sailer Murray, partner at Murray, Frank and Sailer Llp. However, she added that the latest order does not impact the eventual consolidation of the cases.
“The vacatur (vacating order) was probably a recognition that the earlier order was a technical error…the judge expected the motion not to be contested, as these motions often are not contested, and someone brought to her attention that in fact it was a contested motion, with several competing views about who should be lead counsel and lead plaintiff,” said Ralph M. Stone, partner at Shalov Stone Bonner and Rucco Llp.
Marc Ian Gross, partner at law firm Pomerantz Haudek Block Grossman and Gross Llp., said the recent order was a “non-event”. “Briefing on the motion for lead plaintiff was not completed, and the judge prematurely entered the order that has been vacated. The cases are being consolidated, but the appointment of lead plaintiff must await opposition and reply briefs that are due in the next few weeks,” he added.
When asked if the firm had received any intimation from any US court regarding consolidation of the class action suits against it, a Satyam spokesperson said everything related to the suits are being handled by Latham and Watkins Llp., the law firm it hired recently in the US in the wake of class action suits. Mint could not immediately reach Latham and Watkins’ spokesperson in the US for comments.