Petrobras Class Partially Decertified by
Appeals Court [10jul2017]
Acesso
Arquivo RAS em 2018-01-03
MANHATTAN (CN) —
Battered for three years by a corruption scandal, the Brazilian oil giant
Petrobras persuaded a U.S. appeals court Friday to partly decertify a
shareholders class accusing the state-run company of fraud.
In the wake
of the corruption investigation Operation
Car Wash, the New York litigation is one of continuing aftershocks for
Petrobras, its executives and at least one third of the Brazilian Congress in
By August
2015, Brazilian prosecutors had handed down 117 indictments, with five
politicians charged and 13 companies facing criminal cases.
Though never
implicated in the scheme herself, Brazil’s then-President Dilma Rousseff had
trouble untangling her anti-corruption platform from her seat on the company’s
board.
Opponents of Rousseff, who had been Brazil’s first female president,
milked that association to impeach her in favor of the far more right-leaning
Michel Temer.
More than a
dozen shareholder lawsuits against Petrobras poured into the Southern District
of New York in the meantime. Following a Securities and Exchange Commission
investigation, the investors alleged that Petrobras hid its bribery woes while
selling $98 billion in securities.
Universities Superannuation
Scheme (USS), a
Liverpool-based pension fund at the head of the case, won class certification
last year, but the New York-based Second Circuit directed the lower court
Friday to reconsider such status in light of Supreme Court precedent.
“It is a
longstanding principle of American law that legislation of Congress, unless a
contrary intent appears, is meant to apply only within the territorial
jurisdiction of the United States,” the 66-page opinion states, citing the 2010
ruling in Morrison v. National Australia Bank.
“Because
Petrobras notes do not trade on any U.S.-based exchange, noteholders in both
classes are only entitled to assert claims under the Exchange Act and the
Securities Act if they can show that they acquired their notes in ‘domestic
transactions,’” U.S. District Judge Nicholas Garaufis wrote for the court,
sitting on a three-judge panel by designation from Brooklyn.
Petrobras
did not appeal the portion of Rakoff’s decision certifying the class of
investors who purchased American Depositary Receipts on the New York Stock
Exchange.
As for the other
proposed investor classes, the three-judge panel sent the case back to U.S. District
Judge JED RAKOFF to apply this test.
Depicting
this finding as a temporary setback, Petrobras investors touted other parts of
the ruling as a “significant victory.”
Petrobras
had wanted the circuit to set a high bar for class certification by forcing
investors to prove it “administratively feasible,” but the three-judge panel
denied creating this standard.
JEREMY
LIEBERMAN, a managing partner of Pomerantz,
argued that this holding will benefit future shareholders as well as his
clients.
“This
decision represents a victory for class action plaintiffs in securities,
antitrust and consumer cases,” he said. “Most significantly, the Second
Circuit’s decision allows this important case against Petrobras and other
defendants to proceed apace, lifting the automatic stay imposed by the Second Circuit. As a result, we
intend to ask Judge RAKOFF to set a
trial date as quickly as possible, to allow the defrauded class members to
finally have their day in court.”
Attorneys
for Petrobras did not immediately respond to an email request for comment.
U.S. Circuit Judges PETER HALL and DEBRA ANN LIVINGSTON rounded out the Second Circuit panel.
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