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Michael Celio Provides Insights on Securities Litigation Trends

California Lawyer
July 2012

Defense Counsel beware. That's the message from Robert Khuzami, Director of the SEC’s division of enforcement, who in the past year has pointedly criticized defense and in-house counsel for impeding agency investigations. He has repeatedly promised to wield the tools at his disposal—from withdrawing typical courtesies to possible suspension from the bar and investigation by the Department of Justice. Our panel of experts discusses this as well as trends in mergers and acquisition litigation, and Canada’s potential as a forum for securities class actions. They are Michael D. Celio of Keker & Van Nest; Matthew Larrabee of Dechert; Kenneth Herzinger and Michael Torpey of Orrick, Herrington & Sutcliffe; Pete M. Stone of Paul Hastings; and Mary Blasy of Scott + Scott. The roundtable was moderated by California Lawyer.

MODERATOR: How does the SEC and the Public Company Accounting Oversight Board’s increased focus on attorney and witness misconduct in investigations affect your practice?

CELIO: The answer for me—and I hope for most lawyers—is “not at all.” The SEC is a party to these cases, and it should not also be judge and jury. I’ve been surprised by the SEC’s emphasis on attorney misconduct, and while I don’t condone bad behavior, it is inappropriate for the SEC to attempt to police the conduct of its litigation adversaries. It can really chill zealous advocacy.

MODERATOR: What is the impact of the Second Circuit court decision in denying class certification in the New Jersey Carpenters case (New Jersey Carpenters Health Fund v. Rali Series 2006-QO1 Trust, 2012 WL 1481519 (2nd Cir.))?

CELIO: In the Second Circuit opinion you can see a significant emphasis on the standard of review. It seems this is as far as the court is willing to go. The opinion is not hinting at the endorsement of a theory of the law that would be extended to cover a Rule 10(b)5 case. The structure of Section 11 is different than the structure of a traditional fraud case—the availability of an affirmative defense based on the plaintiffs’ unique knowledge make a big different. New Jersey Carpenters could be a big deal in the Section 11 context, but I don’t see it expanding beyond that.

To read the complete article, please see the attached pdf, or click here.

Michael Celio handles white collar criminal cases, complex civil litigation, and enforcement actions brought by the U.S. Securities and Exchange Commission or the Department of Justice. An experienced trial lawyer, Mr. Celio has tried more than a dozen cases to verdict in state and federal courts. He has significant expertise defending civil and criminal securities cases, having tried the only two U.S. cases involving allegations of stock-options backdating.