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Being Prepared for M&A Strike Suits: How Do You Avoid Disclosure Pitfalls in M&A Litigation?


Speaker(s): Deborah S. Birnbach, Michael T. Jones
Recorded on: Feb. 25, 2015
PLI Program #: 131243

Areas of Practice

Michael Jones, a partner in the firm's Litigation Department, is a member of the Securities Litigation & SEC Enforcement Practice and Technology Companies Groups. Mr. Jones specializes in regulatory and internal investigations, securities litigation, M&A-related litigation, fiduciary duty claims, and founder and partnership disputes.

Work for Clients

Mr. Jones represents corporate and individual clients in a variety of regulatory, civil and criminal investigations by the Securities & Exchange Commission, Department of Justice, SROs and state attorneys general, including allegations of accounting fraud, insider trading, violations of the Foreign Corrupt Practices Act and disclosure violations, among others. He has represented clients in federal criminal matters in which clients are defendants, investigation targets or cooperating witnesses.

Mr. Jones also represents corporations, officers, directors, investment advisors and other accounting professionals in a wide range of matters, including shareholder and derivative lawsuits, alleging violations of the Securities Exchange Act, the Investment Company Act and other federal and state securities laws, and appraisal actions. Mr. Jones also advises clients on process and disclosure issues related to mergers and acquisitions. In addition, he has represented clients in a variety of intellectual property litigation matters involving trademark and trade dress, copyright and patent claims, and general commercial disputes.

Mr. Jones’ representative matters include:

  • Ariba, Inc. – Defense of Ariba and its board of directors in shareholder class action lawsuits in California and Delaware state courts challenging and seeking to enjoin $4.3 billion acquisition of Ariba by SAP AG. We obtained voluntary dismissal of all matters.
  • A Fortune 100 Company – Conducted internal investigation concerning derivative trading and funding subsidiaries located within the U.S. and abroad. Investigation focused on various issues, including compliance with domestic and foreign tax rules and potential accounting and disclosure issues concerning intercompany funding relationships. 
  • Fortune 100 Company – Represented client in connection with four-plus year investigation conducted by the S.E.C. concerning a variety of complex accounting issues such as hedge accounting, interest rate swaps, changes in accounting
  • A Community Bank – Conducted internal investigation concerning mortgage lending practices and documentation. Advise client on voluntary disclosure of findings to regulatory authorities and disciplinary action for certain employees.
  • A Wholesale Manufacturing Company – Conducted internal investigation concerning compliance with customer contracts and Food and Drug Administration regulations. Advise client on disclosure obligations and remedial measures.
  • ZOLL Medical Corporation – Represented Zoll and its board of directors in defense of shareholder class action lawsuits in Massachusetts state court challenging and seeking to enjoin $2.21 billion tender offer by Asahi Kasei Corporation. Consolidated action stemmed from four separate actions initially filed in both state and federal courts in Massachusetts. We achieved a favorable settlement and allowed the tender offer to close as scheduled.
  • Sonesta International Hotels Corporation – Represented Sonesta and its board of directors in defense of two shareholder class action lawsuits in New York state court (one brought by a 30% shareholder) challenging and seeking to enjoin proposed merger and sale of Sonesta to entities affiliated with Hospitality Properties Trust. We achieved a favorable settlement, which allowed the deal to close as scheduled.
  • Investment Consulting Firm – Represented firm in various litigation matters and several investigations conducted by Department of Labor and various Attorney General Offices concerning alleged losses sustained by client in connection with the Madoff fraud.
  • Explorica, Inc. – Represented educational travel company for which we obtained a favorable jury verdict in trademark infringement trial against competitor that rebranded under a confusingly similar name.
  • New York Times/Boston.com – Represented national news provider in first impression copyright and trademark litigation concerning fair use and news aggregation on the Internet.

Professional Experience

Prior to joining Goodwin Procter in 2005, Mr. Jones was an associate in the Litigation Practice Group at Testa, Hurwitz & Thibeault in Boston. He has also served as a Special Assistant District Attorney for Middlesex County (MA), where he tried a variety of jury and non-jury misdemeanor and felony cases and argued a number of dispositive and evidentiary motions.

Recognition

Mr. Jones has been recognized as a 2012 Massachusetts Super Lawyer "Rising Star" by Boston Magazine.

Education

  • J.D., Northeastern University School of Law, 2004
  • B.S., Boston University, 2000

Bar and Court Admissions

Mr. Jones is admitted to practice in Massachusetts and California, and before the U.S. District Courts for the District of Massachusetts, the Northern, Central, Eastern and Southern Districts of California, and the District of Colorado, and the U.S. Court of Appeals for the Ninth Circuit.


DEBORAH S. BIRNBACH
Partner

Deborah Birnbach, a partner in Goodwin Procter’s Securities Litigation & White Collar Defense Group and a member of the firm’s Executive Committee, concentrates in the areas of securities litigation, including class action defense; SEC, regulatory and internal investigations; M&A-related litigation; ERISA litigation; stockholder disputes; fiduciary duty claims; founder and partnership disputes; and private equity litigation surrounding private financings. Her securities and shareholder litigation practice is national in scope and involves representing investment managers, issuers and their directors and officers in securities and corporate governance matters across the country. In addition to engaging in active litigation, Ms. Birnbach counsels clients and their boards in managing and avoiding litigation risk, including through arbitration, mediation and other alternative dispute resolution methods.

Work For Clients

Ms. Birnbach’s clients include public and private financial services companies, technology companies, healthcare and life science companies, their boards and officers, and private equity firms and their partners.
 
Ms. Birnbach has conducted numerous internal corporate investigations for audit committees and other special board committees into financial accounting and corporate governance-related matters, including whistleblower matters under Sarbanes-Oxley and Dodd-Frank, and relating to financial accounting for alleged backdating of stock option grants for the audit committee of the board of a Fortune 500 technology company.
 
Ms. Birnbach’s securities and shareholder litigation matters have involved allegations of insider trading, misleading disclosures, insufficient deal consideration, improper revenue recognition and other alleged accounting irregularities, self-dealing and breach of fiduciary duty, among other issues. She has also represented clients in FINRA inquiries and in regulatory proceedings brought by the SEC, the DOL and other regulators relating to possible accounting irregularities, the accuracy and completeness of corporate disclosures to investors and securities trading by corporate officers and directors, among other matters. Her recent matters for institutional asset management clients and other fiduciaries have been related to subprime events and the credit market dislocation.
 
Recent representative matters include:
 
M&A Litigation

  • Onyx Pharmaceuticals, Inc. Merger Litigation (2013): Representing board of directors of Onyx in connection with shareholder class action litigation in Superior Court for San Mateo County, California and Delaware Court of Chancery, challenging Onyx’s $10.4 billion merger with Amgen. Successfully defeated plaintiffs’ efforts to disrupt tender offer and transaction closed on time.
  • Mac-Gray Merger Litigation (2014): Represented Mac-Gray and its board of directors in breach of fiduciary duty class action challenging acquisition of Mac-Gray by CSC ServiceWorks in January 2014. The case was settled favorably and the transaction closed on time.
  • Eloqua Merger Litigation (2013): Represented Eloqua, Inc., a provider of on-demand revenue performance management software and its board of directors in connection with shareholder class actions filed in the Eastern District of Virginia and in the Delaware Court of Chancery challenging Eloqua’s $930 million sale to Oracle Corporation. After initial discussions and negotiations with plaintiffs’ counsel, obtained voluntary dismissal of the litigation, and the transaction closed on time.
  • athenahealth Merger Litigation (2013): Represented athenahealth, Inc. in its acquisition of Epocrates, Inc. and litigation brought by Epocrates’ shareholders challenging the $293 million transaction  in Superior Court for San Mateo County, California, including allegations that athenahealth aided and abetted the Epocrates board’s alleged breaches of fiduciary duty. Obtained a favorable settlement and the transaction closed on time.
  • ZOLL Merger Litigation (2013): Represented ZOLL Medical Corporation and its board of directors in connection with shareholder litigation challenging Asahi Kasei’s $2.2 billion acquisition of ZOLL in Massachusetts state court. The matter was settled favorably, and the transaction closed on time.
  • Veramark Merger Litigation (2013): Represented Veramark Technologies, Inc. and its board of directors and obtained voluntary dismissal from plaintiffs in class actions filed in New York Supreme Court and the Court of Chancery in Delaware challenging the sale of Veramark to subsidiaries of Clearlake Capital Partners. The tender offer and transaction closed on time.
  • Ariba Merger Litigation (2012): Represented Ariba and its board of directors and obtained voluntary dismissal from plaintiffs of six putative class actions challenging Ariba/SAP $4.3 billion merger in the Superior Court, Santa Clara County, California and in the Court of Chancery in Delaware. All breach of fiduciary duty and aiding and abetting claims dismissed and transaction closed on time.
  • Phase Forward Merger Litigation (2011): Won affirmance by Massachusetts Appeals Court of dismissal of class action challenging Phase Forward’s merger with Oracle Corporation. The Appeals Court affirmed dismissal of breach of fiduciary duty claims against Phase Forward’s directors under Revlon and for alleged omissions from the proxy disclosures. Previously defeated plaintiffs’ preliminary injunction motion in Massachusetts Superior Court. The Appeals Court also affirmed dismissal of aiding and abetting claims against the entity defendants.
  • Leeds Equity Partners (Nobel Learning Merger Litigation) (2011): Represented Leeds Equity Partners in connection with its acquisition of Nobel Learning Communities, Inc. in litigation brought by shareholders of Nobel Learning in the Court of Common Pleas in Philadelphia, Pennsylvania. Plaintiffs sought to enjoin Leeds’ $150 million acquisition of Nobel Learning and alleged that Leeds aided and abetted in breaches of fiduciary duty by the Nobel Learning directors. Achieved a favorable settlement and the transaction closed on time.

Securities Class Action Cases

  • Metabolix Securities Class Action (2013): Won complete dismissal with prejudice of Section 10(b) and Rule 10b-5 claims in a shareholder class action against Metabolix, its CEO and CFO in the U.S. District Court for the District of Massachusetts. Plaintiffs alleged misrepresentations and omissions in connection with certain milestones in its biopolymer plastic manufacturing business.
  • The Princeton Review Securities Class Action Litigation (2012): Won dismissal with prejudice of securities class action litigation brought under Section 11, 12(a)(2) and 15 of the Securities Act of 1933 against this educational services company, certain of its current and former officers and directors and its underwriter in the U.S. District Court for the District of Massachusetts. This class action concerned a secondary offering of equity securities and challenged the company’s disclosures concerning its turnaround efforts and the trends and uncertainties in its business at the time of the offering.
  • MELA Sciences Securities Class Action Litigation (2012): Won dismissal of securities fraud class action asserting violations of Section 10(b) and Rule 10b-5 under the Securities Exchange Act of 1934 against MELA Sciences and three of MELA’s officers and directors in the U.S. District Court for the Southern District of New York. The allegations concerned alleged false and misleading statements prior to MELA obtaining FDA approval for its Melafind device, designed to assist in the detection of melanoma.
  • athenahealth, Inc. Securities Class Action Litigation (2011): Won complete dismissal of a putative class action alleging securities fraud and related claims against this software as a service (SaaS) company and certain current and former senior executives arising out of a revenue restatement. The complaint alleged misstatements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and sought damages for a class period of over two years.
  • NeuroMetrix, Inc. Securities Class Action Litigation (2011): Won affirmance by the U.S. Court of Appeals for the First Circuit of dismissal with prejudice of a putative class action alleging securities fraud and related claims against this medical device company and certain of its current and former officers. The suit alleged that various statements made by the company relating to reimbursement for its product were false or misleading in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The U.S. District Court for the District of Massachusetts granted our motion to dismiss the case in its entirety and with prejudice. Also achieved a favorable settlement of a related shareholder derivative action that involved no payment of money by defendants.
  • Inverness Medical Innovations, Inc. (now Alere, Inc.) Securities Class Action Litigation (2009): Won dismissal with prejudice of securities class action litigation brought under Section 11 of the Securities Act of 1933 against this leading medical diagnostic products company and its board of directors and senior management. This class action concerned a $737 million secondary offering of equity securities and challenged the company’s disclosures concerning the costs associated with its integration of acquired companies. Plaintiffs dropped their appeal of the case and no settlement monies were paid.
  • Millennium Global Investments, Ltd. (2009): Won dismissal of a securities fraud action involving allegations that various statements made by this hedge fund and other defendants relating to one of its funds were false or misleading violation of Section 10(b) of the Securities Exchange Act of 1934 and state law. The court granted our motion to dismiss the complaint, dismissing all six of plaintiff’s state law claims with prejudice and dismissing the securities fraud claim with leave to amend. Favorably settled subsequent class action litigation in 2014 arising out of same fund.
  • Arbinet-thexchange, Inc. Securities Litigation (2007): Obtained dismissal with prejudice of securities class action litigation filed in federal district court in New Jersey under Section 11 of the Securities Act of 1933 relating to the initial public offering of the world’s leading electronic market for the trading of telecommunications capacity. Successfully argued to the court, among other things, that plaintiffs’ allegations were inconsistent with and contradicted by the company’s public disclosures. The court agreed, and threw the case out. Plaintiffs chose not to appeal and dropped the case. No settlement monies were paid.

Derivative Litigation

  • Metabolix Derivative Action (2014): Won complete dismissal with prejudice of breach of fiduciary duty case in Massachusetts Business Litigation court against current and former directors for, among other reasons, plaintiffs’ failure to plead that making a demand on the board would have been futile.
  • J.L. Hammett Derivative Litigation (2010, 2013): Won summary judgment for defendants in Massachusetts Superior Court on breach of fiduciary duty claims concerning alleged excessive compensation in connection with sale transaction. The Massachusetts Court of Appeals affirmed the summary judgment ruling in 2013.
  • SEC Enforcement Actions
  • SEC Investigation Concerning Revenue Recognition Issues (2014): Representation of software client concerning revenue recognition issues. Resolved favorably for client with no SEC action.
  • SEC Investigation Concerning Advisers Act Issues (2013): Representation of registered investment adviser concerning supervision of investment management employee. Resolved favorably for client with no SEC action.
  • SEC Investigation Concerning Revenue Restatement (2009): Represented international company in SEC formal investigation concerning revenue recognition practices in relation to recently acquired subsidiary. Resolved favorably for client with no SEC action.
  • SEC Investigation Concerning Whistleblower Complaint (2008) Representation of global communications components manufacturer in SEC investigation into whistleblower claims of purported accounting irregularities concerning expense reserves. Resolved favorably for client with no SEC action.
  • SEC Investigation Concerning Earnings Guidance (2008) Representation of global technology company in formal SEC investigation into adjustment of earnings guidance surrounding shift in business trends. Resolved favorably for client with no SEC action.

Other Litigation

  • EverBank Icelandic Króna CD Class Action (2012): Won summary judgment for defendant bank in a class action in the U.S. District Court for the Northern District of California on contract claims brought on behalf of purchasers of CDs denominated in Icelandic króna. The claims concerned the bank’s closure of those CDs and conversion of the proceeds to U.S. dollars in response to the Icelandic banking crisis in Q4 2008.
  • CombinatoRx, Incorporated Contract Litigation (2009): Brought an action on behalf of CombinatoRx, a biopharmaceutical company focused on developing new medicines built from synergistic combinations of approved drugs, asserting claims against a contract manufacturer for fraudulent inducement, breach of contract and other claims arising out of the manufacture and distribution of one of CombinatoRx’s product candidates. Obtained a $3.7 million settlement for CombinatoRx.

Recognition

Ms. Birnbach was recognized in 2009 by Boston magazine as one of the Top 50 Women Lawyers in Massachusetts, and for nine consecutive years has been selected a “Massachusetts Super Lawyer” in Securities Litigation by the same publication.

Professional Experience 

  • Ms. Birnbach is chair of the board of trustees of Discovering Justice, a nonprofit organization that is a pioneer in civic and justice education. She has been an officer, a member of the council and co-chair of the Litigation Section and of the Business Litigation Committee of the Boston Bar Association. She has served on the Joint Bar Committee on Judicial Nominations, which reviews, evaluates and makes recommendations on the qualifications of individuals under consideration for judicial appointments in Massachusetts, and on the Merit Selection Committee, which reviews and makes recommendations on the qualifications of candidates for judicial appointments in the U.S. Bankruptcy Court in the District of Massachusetts.

Thought Leadership

Ms. Birnbach publishes and lectures on securities litigation and SEC Enforcement issues. She is:

  • The author of a chapter in The Law of Investment Management (Oxford University Press 2009)
  • The author of an article on Disclosure Topics in M&A Litigation in The Review of Securities & Commodities Regulation
  • A faculty member on continuing legal education programs, including as a panelist on Ethics and Professionalism in M&A Litigation for the Tulane Corporate Law Institute.

Speaking Engagements

AMITA: Legal Issues for Startups
February 10, 2014
Cambridge, MA

Ethics and Professionalism in M&A Litgation
March 1, 2012
New Orleans, LA

Whistleblowers Under Dodd-Frank: Bounty Mutiny?
June 9, 2011
Boston, MA

Whistleblowers Under Dodd-Frank: Bounty Mutiny?
June 2, 2011
Palo Alto, CA

PRACTICES

  • Securities Litigation & SEC Enforcement
  • Privacy & Data Security
  • ERISA Litigation
  • Appellate Litigation

Education

  • J.D., 1992Columbia Law SchoolB.A., 1986Wellesley College
    (cum laude)

Admissions

  • BarNew York
  • Massachusetts
  • CourtsU.S. Court of Appeals for the First Circuit
  • U.S. Court of Appeals for the Second Circuit
  • U.S. Court of Appeals for the Ninth Circuit
  • U.S. District Court for the Eastern District of New York
  • U.S. District Court for the Southern District of New York
  • U.S. District Court for the District of Massachusetts
  • U.S. District Court of Colorado