June 14, 2018

First Universal Proxy Card!

For years there’s been a debate over universal proxy cards. The SEC hasn’t acted on its 2016 proposal. But according to this press release, we now we have the first US-incorporated company using one – SandRidge Energy. The proxy card names all SandRidge nominees and all Icahn Capital nominees – but Carl Icahn still sent a separate card with only the dissidents listed.

In its latest communication to shareholders, the company stresses that shareholders should use its card to vote for all company nominees and two (of seven) independent Icahn Capital nominees.

Perhaps this shows the strategy & gamesmanship that can be played with universal proxies? Maybe Sandridge knew it wouldn’t win a clean sweep – and wanted to facilitate vote splitting.

Corp Fin “Bedbug Letters”: Now Promptly Available on Edgar

Corp Fin has a longstanding practice of refusing to process registration statements with “serious deficiencies.” In the past, the Staff would send a “bedbug letter” to the company telling them to try again – and these letters would show up on Edgar 20 business days after the Staff completed its filing review. But in an effort to enhance transparency, Corp Fin recently announced that it’ll now post these letters on the company’s Edgar page within 10 calendar days. And as noted in this Cooley blog, the letters won’t beat around the bush:

The public release of these letters “will make it clear that the Division believes the filing under consideration is not minimally compliant with statutory or regulatory requirements.” Just to ensure there’s no mistaking it—and, some might say, to raise the humiliation quotient—these letters “will appear in companies’ filing histories as SEC STAFF LETTER: SERIOUS DEFICIENCIES.”

SCOTUS: No Tolling for Successive Class Actions

On Monday, the US Supreme Court unanimously held that a pending class action tolls the statute of limitation only for individual claims – not for successive class actions. Justice Ginsburg’s opinion in China Agritech v. Resh benefits companies because it effectively caps the period for exposure to class action claims that are premised on the same allegations as an earlier claim.

This particular case involved alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 of the Securities Act – which are subject to a 2-year statute of limitations. We’re posting memos in our “Securities Litigation” Practice Area – here’s an excerpt from Arnold & Porter’s take:

Although the Court acknowledged that the decision could lead to the filing of multiple class-actions, it concluded that this could be beneficial as “efficiency favors early assertion of competing class representative claims” so that “the district court can select the best plaintiff with knowledge of the full array of potential class representatives and class counsel.” In making this observation, the Court noted that the China Agritech litigation was governed by the Private Securities Litigation Reform Act of 1995 (PSLRA), which requires parties filing putative class actions to provide notice to potential plaintiffs of the filing of a purported class action, and an opportunity to apply for status as a lead plaintiff. This reflects a congressional preference “for grouping class-representative filings at the outset of litigation.” In this action, shareholder Michael Resh had ignored such opportunities to join either of the prior class action complaints, and the Court saw no reason to allow such a plaintiff “to enter the fray several years after class proceedings first commenced.”

The Court held that the decision would apply to class actions generally. Although the Court’s judgment was unanimous, Justice Sotomayor issued an opinion concurring in the judgment in which she expressed her belief that the holding should be limited to securities class actions governed by the PSLRA. She explained that “instead of adopting a blanket no-tolling-of-class-claims-ever rule outside the PSLRA context, the Court could have held, more narrowly, “that tolling only becomes unavailable for future class claims where class certification is denied for a reason that bears on the suitability of the claims for class treatment.” But as the Court noted, “Endless tolling of a statutes of limitations is not a result envisioned by American Pipe.”

Liz Dunshee