Milberg has recovered hundreds of millions of dollars and effectuated substantial corporate governance improvements through its representation of shareholders in derivative litigation. Traditionally, a corporation’s management is responsible for prosecuting claims on behalf of the corporation. However, when management fails to take action in the best interests of the corporation, shareholders may bring a derivative action to assert the corporation’s rights and protect shareholder interests. Through its derivative litigation practice, the Firm has obtained important decisions benefitting plaintiff shareholders in major business centers including New York, California, Delaware, and Texas.
Emblematic of Milberg’s work in this practice area is the Firm’s representation in the In re Comverse Technology, Inc. Derivative Litigation, in which Milberg served as co-lead counsel. This case stemmed from alleged stock option backdating practices by the company’s former directors and officers. Milberg secured a settlement in 2009 providing for a $62 million cash payment and significant corporate governance reforms, including, the removal and replacement of the offending directors and officers with new independent directors and officers; the amendment of the company’s bylaws to permit certain long-term substantial shareholders to propose nominees for election as directors (proxy access); and the requirement that all equity grants be approved by both the company’s compensation committee and a majority of the non-employee members of the Board. Milberg’s work in this case also led to the seminal New York Appellate Division opinion clarifying the standards of demand futility and holding that a board of directors loses the protection of the business judgment rule where there is evidence of self-dealing and poor judgment. In re Comverse Tech., Inc., 56 A.D.3d 49 (N.Y. App. Div. 1st Dep’t 2008).
Other noteworthy cases in which Milberg has achieved settlements effectuating significant corporate governance reforms include: In re Topps Co., Inc. Shareholder Litigation, No. 600715/2007 (N.Y. Sup. Ct. N.Y. Cnty.) (resulting in significant corporate disclosures); In re Cablevision Systems Corp. Shareholder Litigation, No. 05-009752 (N.Y. Sup. Ct. Nassau Cnty.) (resulting in appointment of an independent special committee to review proposed special dividend payments); In re Trump Hotels Shareholder Derivative Litigation, No. 96-7820 (S.D.N.Y.) (resulting in settlement requiring Donald Trump to contribute a substantial portion of his personal interest in a pageant he co-owned and requiring the company to increase the number of directors on its board and submit future transactions to review by a special committee).
Among its active derivative cases, Milberg currently represents the New Jersey Building Laborers Pension Fund in a derivative action, pending in the Delaware Chancery Court, on behalf of shareholders of Massey Energy Company, the fourth largest coal company in the United States, against the company’s board of directors. The plaintiff alleges that the board breached its fiduciary duties during the period June 2008 to present by: (1) chronically disregarding mining safety regulations and incurring nearly $27 million in assessed violations by the Mine Safety and Health Administration; and (2) consistently failing to adequately address the poor safety conditions of its mines, culminating in an explosion on April 5, 2010 that tragically killed 29 miners in West Virginia and led to government investigations, resulting in severe reputational harm and exposing the company to significant risk and damages. The case is styled New Jersey Building Laborers Pension Fund v. Blankenship, No. 5430 (Del. Ch. filed Apr. 23, 2010).