The subprime and credit
crisis-related litigation wave may now be in its fourth year, but
lawsuits continue to come in. The latest of these suits - a securities
class action lawsuit involving Las Vegas Sands
- has a number of interesting features, and
it also raises the question whether we may see even further new filings
related
the credit crisis in the months ahead.
On May 24, 2010,
plaintiffs' attorneys filed a securities class action lawsuit in the
United
States District Court for the District of Nevada against Las Vegas Sands
Corp.,
its Chairman and CEO, Sheldon
Adelson, and its former President and COO, William
Weidner. The complaint can be found here. A May 24, 2010 Las Vegas Sun article
describing the lawsuit can be found here.
The complaint alleges that
the defendants' misled investors concerning developments at the
company's Asian
casino properties, as well as with respect to the company's liquidity
and the
company's vulnerability to the economic downturn. Specifically, the
plaintiffs
allege that defendants' statements during the class period were false
and
misleading because, according to plaintiffs' lawyers May 25, 2010 press release about the case:
(i)
increasing competition in Macau was steadily eroding the Company's
foothold in
the region, which undermined defendants' representations that everything
was
proceeding according to plan; (ii) the Company was facing a significant
liquidity crisis as a result of its ongoing expenditure of capital in
Macau and
Singapore, which forced the Company to divert funds from other
operations to
develop its Asian properties; (iii) that the Company, could not, in
fact,
weather the economic downturn, because the credit markets were drying up
and
Las Vegas Sands had failed to timely access those markets; and (iv)
increasing
visitor restrictions in Macau, which defendants represented would not
impact
the Company as significantly as its competitors, were expected by
defendants to
have just as devastating an effect on Las Vegas Sands.
There are several very
interesting things about this new lawsuit. The first is that it follows
in the
wake of an unsuccessful shareholders' derivative suit based largely on
the same
circumstances and similar allegations. The first of these lawsuits was
filed in
January 2009. A copy of the complaint can be found here.
According to a November 6,
2009 Las Vegas Sun article (here), Clark County (Neb.) District Judge Allan
Earl granted the defendants' motions to dismiss these
cases, citing, among other things, Adelson's investment of over $1
billion of
his personal fortune to try to rescue the company. Judge Earl found that
the company's predicament was the result of "reasonable business
decisions," that, while risky, and that may have brought the company to
the "brink of financial instability," might in the future
"provide the economic stability to ensure the future success of the
company."
Judge Earl also noted
that the events played out against a "backdrop" that involved "a
deteriorating global economy that struck with such frightening speed and
force
that it engulfed nearly every major banking, investment and gaming
company in
the world."
The other interesting thing
about the new lawsuit, and that might be a direct consequence of the
fact that
it follows after the unsuccessful derivative suit, is that this case
falls in
the category of "belated lawsuits." This complaint was filed on May
24, 2010 but the class period is August 1, 2007 to November 6, 2008. In
other
words, the complaint was filed 18 months after the date of the proposed
class
period cutoff.
As I recently noted (here), belated lawsuit filings, where the filed
date is
more than a year after the proposed class period cut-off, have been a
key
component of 2010 securities class action lawsuits. The phenomenon first
emerged in mid-2009, but the earliest cases related to nonfinancial
companies.
The speculation about the emergence of this filing trend
has been
that up until mid 2009, plaintiffs' lawyers were preoccupied filing
credit
crisis lawsuits against financial firms, and a backlog of cases against
nonfinancial firms built up.
The Las Vegas Sands
securities lawsuit seems to represent something different - a belated
case that
is related to the credit crisis. Of course, Las Vegas Sands is not a
financial
company, and in that respect the new lawsuit is not inconsistent with
the whole
belated lawsuit filing phenomenon. But the case and its allegations
about the
company's real estate developments, liquidity and funding problems are
all
related to the credit crisis.
For that matter the Las
Vegas Sands case is not the first belatedly filed credit crisis-related
securities suit in 2010. Cases filed earlier this year against The
Hartford
Financial Group (refer here)
and the Morgan Keegan funds (refer here)
each also were first filed more than a year after the proposed class
period
cutoff date and both reflect subprime meltdown or credit crisis related
allegations.
The consensus view has been
that the subprime and credit crisis-related litigation wave has largely
ended,
but the fact is that a number of subprime and credit crisis related
securities
suits have been filed in 2010-as many as 13, by my count. The
possibility of
further belated filings, relating back to events that unfolded a
significant
time ago, raises the prospect that there could be even further subprime
and
credit crisis-related cases yet to come.
Bottom line: it may be
premature to suggest that the subprime and credit crisis-related
litigation
wave has ended. It may have quite a bit further to run.
I have in any event added
the Las Vegas Sands case to my table of subprime and credit
crisis-related
lawsuit filings, which can be accessed here. I note that the list, which I first began
compiling
in April 2007, is now 214 cases long. I certainly never foresaw how
lengthy or
long-lived the list would be when I first began it so long ago.
Special thanks to Adam
Savett of the Securities
Litigation
Watch blog for providing a copy of the Las Vegas Sands
securities class action complaint.
Read the The Sands of Time in its entirety at D&O Diary, a blog by
Kevin LaCroix.