After passage of new SEC rule, Zion Oil and Gas requires shareholders to resolve disputes through arbitration

An oil driller that uses biblical verses to guide exploration has become the first company to block class-action shareholder lawsuits under new management-friendly policies approved by US securities regulators.

Zion Oil and Gas, a penny stock that as of September had no revenue from drilling, said in a Securities and Exchange Commission filing last week that it would require shareholders to resolve disputes through arbitration rather than court.

The move comes after the SEC in September announced it would no longer block companies from public markets if they banned shareholders from filing class-action lawsuits. Critics of the change said they worried it would harm corporate disclosures and shareholder rights, putting investors and markets at risk.

. . .

Laura Posner, a partner at law firm Cohen Milstein, said: “I think we’ll see an uptick of fraud because companies won’t face the public onslaught that could occur when they are caught engaging in malfeasance.”

Posner said most companies are unlikely to adopt these provisions, but those with higher risk profiles may take advantage of them.

. . .

Posner said: “Not only do you have companies and their counsel advising that these proposals are not in their best interest, but you have every asset manager, investment adviser and large institutional investor saying these are not good for the company.”

Benjamin D. Brown of Cohen Milstein Sellers & Toll PLLC pushed the UFC to increase its settlement payout to “life-changing” sums for fighters accusing it of wage suppression, earning his place as one of the 2025 Law360 Competition MVPs.

His biggest accomplishment:

For Brown, the year’s achievements came down to the split screen view of his transition to Cohen Milstein managing partner, a role he took on last year, even as he stayed active in his various cases, including major ongoing litigation over real estate broker fee rules.

“Our firm is at the center of so many high-profile litigations that I think managing this firm is almost a full-time job,” Brown said.

But at the same time, “litigation is more than a full-time job. … And the only way to make it work is by trusting my partners here at the firm who stand by my side and take on a lot of the day-to-day operations and management of individual litigations,” he said. “I think that to do it successfully, you have to have a lot of trust, a lot of really good teamwork, and a culture of sharing responsibility and working closely together. So it’s been gratifying that I’ve been able to stay involved in all my cases, meaningfully involved in all my cases.”

His proudest moment:

Brown said he takes particular pride in the February final approval hearing in which a Nevada federal judge signed off on a $375 million settlement in a class action that has taken more than a decade to settle in which fighters accused UFC of suppressing their wages. U.S. District Judge Richard F. Boulware II had rejected a previous version of the deal, saying he wanted to see the fighters getting “life-changing” sums and sending the parties back to cobble together a more generous agreement.

Brown noted that Judge Boulware wanted to hear from the fighters themselves to ensure the amounts were appropriately meaningful, so Cohen Milstein and its co-counsel talked to a great number of the class members.

“We presented them with estimates of what their actual award would be if the settlement was approved, which it ultimately was. We showed them what they could expect, and we asked them what this money would mean to them,” he said.

The fighters responded with a range of things they could do with the money, including paying for medical bills, education and more, according to Brown.

“Fighter after fighter wrote declarations about how this money was going to help them and change their lives. And it’s a rare thing when you specialize in class actions to get down to that level of interviewing individual class members at the end of a successful case. And hearing how important those results are going to be,” he said. “It’s just incredibly gratifying. And certainly one of my proudest moments of the past year and my career to date.”

Why antitrust law:

Brown said he is an antitrust attorney because, at a “systemic level,” he likes thinking about things on economic lines and because he believes in his role that he says “helps police corporate overreach and misdeeds.” But there are also the individual moments where he gets “to see the positive impact that your cases are having on your clients.”

Law360 is pleased to announce the formation of its 2025 Editorial Advisory Boards.

The editorial advisory boards provide feedback on Law360’s coverage and expert insight on how best to shape future coverage.

The members of Law360’s 2025 Editorial Advisory Boards are:

Benefits: Dan Sutter, Partner, Cohen Milstein

Competition: Dan Silverman, Partner, Cohen Milstein

Consumer Protection: Eric Kafka, Partner, Cohen Milstein

Employment Authority Discrimination: Harini Srinivasan, Partner, Cohen Milstein

Employment Authority Wage & Hour: Rebecca Ojserkis, Associate, Cohen Milstein

A Virginia federal court has refused to toss a proposed class action accusing some of the country’s biggest warship makers and naval engineering consultants of participating in an illegal conspiracy to suppress wages after the Fourth Circuit revived the case earlier this year.

U.S. District Judge Anthony J. Trenga issued an order Wednesday denying the remaining arguments for dismissal from the shipbuilders and consultants, which include General Dynamics, Huntington Ingalls Industries and CACI.

Judge Trenga initially tossed the antitrust claims on statute of limitations grounds, but a split Fourth Circuit panel revived the case in May.

The judge said in Wednesday’s order that while the companies contend they have independent reasons for not poaching naval engineers from each other, the proposed class is offering anonymous witness statements about an alleged “gentleman’s agreement,” along with allegations about the “incestuous” nature of the industry.

“These arguments are substantial, but at the motion to dismiss stage this court is not permitted to ‘weigh[] the competing inferences that can be drawn from the complaint,’ and when considered in light of all the allegations in the complaint … plaintiff has plausibly alleged sufficient ‘plus’ factors,” the order said.

The judge said the engineers are offering statements from multiple witnesses about the companies not recruiting naval engineers from each other and said the witnesses either name each company as part of the conspiracy or discuss their policy of not recruiting workers from competitors.

. . .

The plaintiffs are represented by Brent W. Johnson, Zachary R. Glubiak, Steven J. Toll, Robert W. Cobbs, Alison S. Deich and Sabrina S. Merold of Cohen Milstein Sellers & Toll PLLC, Shana E. Scarlett, Steve W. Berman and Elaine T. Byszewski of Hagens Berman Sobol Shapiro LLP, George F. Farah, Rebecca P. Chang, Nicholas Jackson and Simon Wiener of Handley Farah & Anderson PLLC, Candice J. Enders and Julia R. McGrath of Berger Montague and Brian D. Clark, Arielle S. Wagner and Stephen J. Teti of Lockridge Grindal Nauen PLLP.

The debates over who qualifies for a transportation worker exemption to federal arbitration requirements and whether two steps should be used for collective action certification are some of the wage and hour issues on employment law attorneys’ minds as 2025 winds down.

Meanwhile, in federal courts, questions of whether wage and hour claims brought alongside allegations of sexual assault or harassment are exempt from arbitration and the proper standard for reimbursing pizza delivery drivers are also playing out.

Here, Law360 explores five wage and hour legal questions that are developing.

. . .

What standard should apply for collective action certification?

Two federal circuit courts in recent months have weighed in on whether the widely used twostep process for collective action certification is the proper standard, and parties in both of those cases have asked the U.S. Supreme Court to review.

In Andrew Harrington et al. v. Cracker Barrel Old Country Store Inc., a Ninth Circuit panel in July held on to the two-step process, in which a court first grants conditional certification for the purpose of distributing notice based on a “modest factual showing” and later addresses final certification or decertification.

Then in August, a Seventh Circuit panel in Monica Richards v. Eli Lilly & Co. et al. introduced a flexible approach that could involve either one or two steps.

The certiorari petitions that are now pending contain slightly different questions. In one, Eli Lilly and Co. is asking the justices to revisit Hoffmann-La Roche v. Sperling, the 1989 high court decision that gave courts the discretion to give notice to potential plaintiffs.

. . .

The two steps come from a New Jersey federal court’s 1987 decision in Lusardi v. Xerox Corp. In 2021, a Fifth Circuit panel in Swales v. KLLM Transport Services LLC tossed the two steps in favor of a single, more rigorous step, and a Sixth Circuit panel in 2023 in Clark v. A&L Homecare and Training Center LLC established an intermediate test.

There hasn’t been much movement on the issue in the lower courts since this summer’s decisions, said Rebecca Ojserkis of worker-side firm Cohen Milstein Sellers & Toll PLLC. “For the most part, this just hasn’t really percolated enough to see how courts are going to respond to the Seventh Circuit decision,” she said.

. . .

The employment tests that we’re working with from the past nearly 100 years, from when the
FLSA was enacted, don’t necessarily contemplate how work is performed today,” said Cohen Milstein’s Ojserkis, whose firm has represented incarcerated workers in wage litigation. “I
think that revisiting across courts and an appreciation for work being performed in all settings
is warranted.

Summary by Bloomberg AI

• Courts are scattered on whether US law applies to certain American depositary receipts, with recent rulings and a settlement showing divergent outcomes.
• The categorization of ADRs as foreign or domestic under US law becomes tricky when an investment fund has new ADRs created from stock purchased abroad.
• There is a circuit split on whether courts can decline to apply US law even when a domestic transaction took place, if the overall dispute is predominantly foreign.

In just a matter of months, three rulings and a one settlement showed just how scattered courts are on whether US law reaches some American depositary receipts, stand-ins for stock traded on foreign exchanges.

The securities fraud cases, which involve Bayer AG, Toshiba Corp., and other companies, illustrate the complexities and difficult policy choices facing courts assessing whether purchases of new ADRs qualify as foreign or domestic under US law when the issuer didn’t arrange for their appearance in the US market. The divergent outcomes likely herald a US Supreme Court revisit and resolution.

. . .

Season of Developments

The US Court of Appeals for the Ninth Circuit in August said a pension fund couldn’t sue over ADRs converted from Toshiba stock purchased in Japan because the conversion in the US didn’t make the stock domestic. That non-precedential opinion is in tension with an earlier Ninth Circuit ruling in that case, as read in 2023 by a Northern District of California judge whose class certification order paved the way for investors to wrest $38 million from Bayer AG in a settlement finalized in October.

The appeals court’s 2018 opinion in Stoyas v. Toshiba Corp. adopted a test with three alternative ways to find a domestic transaction in circumstances where the trade wasn’t on an exchange. And, in granting class status in Bayer, Chief Judge Richard Seeborg said even though the investors’ brokers purchased shares in Germany, other parts of the process occurred in the US.

The Bayer investors’ expert showed title passing in the US from the depository institution that issued the ADRs to a broker, and from the broker to the investors. That’s “sufficient to establish that these transactions are domestic,” said Carol Gilden of Cohen Milstein Sellers & Toll PLLC, who represented the plaintiffs.

But in the recent Toshiba memorandum opinion, the key factor was the agents’ purchase in Japan. The Ninth Circuit called the conversion to ADRs in the US “irrelevant.”

Gilden said the new Toshiba decision “has no precedential value and is limited to the facts in that case.” Further, the facts “were different than in Bayer where we had a very well-developed record, probably better than the record in Toshiba,” she said.

Meanwhile, the Second Circuit in November certified a class of Credit Suisse bondholders on the strength of their “standardized” method for showing which purchases were domestic, as Seeborg did in Bayer.

. . .

Policy Tug-of-War

Underlying most of the suits are claims the foreign issuer misled the market, usually through conduct in its own country. That’s where policy considerations animating courts’ guidelines come in.

For Gilden, anti-fraud imperatives go hand-in-hand with the sale of stock. “Foreign companies come to the US markets because they can raise a tremendous amount of capital from investors here, which includes overseas investors who invest in the US markets—all of whom rely on the integrity of our markets and the accountability that the federal securities laws provide,” she said.

“Our markets give a premium—that is established by academic studies,” she said. “That’s why companies like to raise capital in the US markets and investors like to invest here.”

Nielsen faces new antitrust litigation that, if successful, would invalidate its contracts with networks, agencies and advertisers industrywide.  

In the antitrust action, filed Monday, Nielsen rival TVision seeks damages but also asks the U.S. District Court for Delaware to enjoin a wide range of industrywide Nielsen contract practices as violations of the Sherman Antitrust Act. Those practices, according to the filing, include Nielsen’s insistence on multi-year deals; staggering contracts with big networks so they won’t come up for renewal simultaneously; preventing customers from using Nielsen data they’ve already paid for if they don’t renew deals; and withholding data from networks to agencies and advertisers if deals aren’t renewed. 

According to the filing, those contract terms illegally restrain trade with TVision both directly and indirectly through their effect on other Nielsen rivals such as VideoAmp, which uses TVision’s panel data in its products.  

Simultaneously, TVision withdrew a motion to dismiss the patent lawsuit that was originally filed against it by Nielsen, opting instead to pursue the antitrust allegations as part of the litigation. 

… 

Yan Liu, TVision’s CEO, said in an interview that the company has expanded its antitrust scope and strategy by recently adding a new law firm, Cohen Milstein Sellers & Toll, which has a track record in major antitrust litigation, to its legal team. The firm has won antitrust settlements against the National Association of Realtors and UFC, among others, in recent years.  

“We believe they really have the expertise, not only about the patent side but also about the entire Nielsen go-to-market and business model, and how the business model really damaged our industry, preventing the industry from innovating,” Liu said. 

TVision’s counterclaim alleges that Nielsen’s dominance, via its estimated 90% share of TV currency transactions, lets it charge as much as four times more and generate five times higher profit margins in the U.S. compared to global markets with greater competition. 

A former naval engineer accusing shipbuilders of conspiring to suppress industry wages has told the U.S. Supreme Court that their petition for review of a Fourth Circuit decision reviving her proposed class action rests on a rule the panel never adopted. 

Susan Scharpf said in a brief Friday that although General Dynamics, Huntington Ingalls and other shipbuilders argued the panel adopted a rule under which Scharpf’s mere claim that their alleged no-poach deal is unwritten is enough to establish fraudulent concealment and delay the statute of limitations, the Fourth Circuit didn’t do so. 

“Instead, it applied a factbound, consensus standard under which: (a) affirmative acts to cover up an antitrust conspiracy can be sufficient to allege fraudulent concealment; and (b) a wide range of conduct can be evidence of an affirmative cover up, including efforts to conceal evidence and avoid a paper trail,” Scharpf said. 

… 

The case stems from a proposed class action by former naval engineers and architects, Scharpf and Anthony D’Armiento, who accuse General Dynamics, Huntington Ingalls and 18 other companies of suppressing industry wages by illegally scheming for decades to not actively recruit, or poach, each other’s employees. The suit, filed in Virginia federal court in 2023, aims to represent a class of people employed by the companies as naval architects, marine engineers, or both, from Jan. 1, 2000. 

… 

The proposed class is represented by Brent W. Johnson, Steven J. Toll, Robert W. Cobbs, Alison S. Deich, Zachary R. Glubiak, Sabrina S. Merold and Callie C. Bruzzone of Cohen Milstein Sellers & Toll PLLC, Deepak Gupta and Thomas Scott-Railton of Gupta Wessler LLP, Shana E. Scarlett, Rio S. Pierce, Steve W. Berman, Kevin K. Green and Elaine T. Byszewski of Hagens Berman Sobol Shapiro LLP, George F. Farah, Nicholas J. Jackson and Simon A. Wiener of Handley Farah & Anderson PLLC, Candice J. Enders and Julia R. McGrath of Berger Montague, and Brian D. Clark, Stephen J. Teti, Arielle S. Wagner and Eura Chang of Lockridge Grindal Nauen PLLP. 

Friday Q and A: Under Chairman Paul Atkins, the SEC has been aggressively pursuing corporate governance reforms that could fundamentally alter the balance of power between public companies and their investors. Despite the broad reach of the initiatives, which take aim at shareholder proposals, securities class action lawsuits and financial reporting requirements, they haven’t provoked much of an outcry.

In recent weeks, however, that’s been changing. This week, we sat down with one of the leaders of the growing and increasingly vocal opposition movement. Laura Posner is a partner in the securities litigation and investor protection practice at Cohen Milstein Sellers & Toll, one of the largest plaintiffs law firms in the country. She’s also a former state securities regulator.

Unsurprisingly, Posner has strong opinions about what’s going on at the SEC during what she calls “the most anti-investor administration” ever. Read on for her take on the commission’s recently adopted policy statement that frees up companies to use mandatory arbitration clauses, as well as its controversial decision this week to largely stop reviewing shareholder resolutions this proxy season. She also discusses the benefits of class actions – even for the firms being sued. And corporate leaders, she argues, are also worried about Atkins’ efforts. What follows is our (lightly edited and condensed) conversation.

Capitol Account: What’s your background?

Laura Posner: I have been doing securities litigation and investor protection work my entire career. I’ve been at a number of private firms, but also was appointed by the New Jersey attorney general to be the [state] securities regulator for three years, between 2014 and 2017.

CA: What’s your broad take on the revamp of corporate governance that’s taking place at the SEC?

LP: It’s fair to say that this has been the most anti-investor administration that certainly I’ve seen in my lifetime, and I think it’s probably fair to say ever. We’re seeing that materialize in a lot of different ways.

CA: That’s quite a statement. Why hasn’t there been more of an uproar?

LP: There are dozens of public pension funds and a multitude of investor advocacy organizations…that are quite attuned to what’s going on right now…They are extremely concerned about the various edicts that are coming out.

CA: What about individual investors? These are somewhat arcane issues.

LP: You are correct that the average retail investor is certainly not understanding or really even aware of a lot of these things. Some of the topics have broken through in the public press, like, for example, [Donald] Trump’s desire, and what sounds like Chair Atkins’ desire, to move from quarterly reporting to semi-annual reporting. But some of these other things…it’s taking a little bit longer to break through.

CA: Is part of the reason that many of these changes are being conveyed in guidance, policy statements or even speeches?

LP: I think that’s very intentional because the SEC knows that if they actually issue rules, they have to open them up to public comment. And the overwhelming majority of comments are going to be negative. Not just from investors, by the way, [but] from corporations, from [directors and officers] insurers, from underwriters and accountants. There are a lot of folks who would view these proposals as really problematic.

CA: What do you think of Atkins’ contention that this effort is necessary to spur IPOs and make being a public company `cool again’?

LP: These changes are going to have the exact opposite reaction. I think you’re less likely to see IPOs. You’re going to see less investment in U.S.-based companies. People want to be able to vindicate their rights. They want to be able to get timely information to make smart investment decisions. And if we’re no longer having those rights available to us, or that information available to us in a disclosure-based regime, why invest in a U.S. company?

CA: The most controversial of these reforms might be the commission’s new policy statement that assures companies going public that they can include a mandatory arbitration clause in their bylaws. At least for now, though, the impact seems pretty limited. Do you agree?

LP: How big a deal it is depends on how many issuers take advantage of it.

CA: Will they?

LP: Companies don’t think these provisions are in their best interest. And when you think about the practical side of things, that’s self-evident.

CA: What’s the advantage for a corporation to face a class action in federal court as opposed to a private arbitration?

LP: More than 50 percent of securities cases are dismissed at the motion to dismiss stage. That is higher than any other kind of claim you could possibly bring in the United States. They also get the benefit under the [law] of no discovery obligations until a motion to dismiss is decided against them. You don’t get those benefits if you are in front of an unsophisticated arbitrator.

CA: Would there be fewer claims though?

LP: [Institutional] investors have fiduciary obligations to their members. They are going to have to bring arbitrations. We’re not talking about one litigation or five litigations or 10 litigations. We are talking, in certain circumstances, likely hundreds of separate arbitrations. The defendants in these cases are the CEO, the CFO – the senior executives are the witnesses. So you’re going to have your CEO deposed 200 times? That is not a manageable way to conduct business.

CA: Why are class actions good for investors?

LP: They benefit from not having to be an active participant [in the litigation]. The vast bulk of investors are absent class members who get to recover as part of any settlement or judgment without having to do anything. Part of the problem of arbitration is that all of those pension funds, all of those investors who don’t bring litigation…they’re going to have to file in arbitration.

CA: And if they don’t?

LP: They are going to lose out on the money that they would otherwise obtain through the class process.

CA: There’s also an argument that class actions serve as a complement to government enforcement. Was that your experience?

LP: As a former regulator, I really believe in the importance of regulators, both the SEC and state. They play a critical role. But in terms of actually providing financial recovery to investors, it’s not even close. The overwhelming majority of successful securities cases, the SEC never brings [and] no state regulator brings. So absent a class action, those claims are not brought. Even when there is a pending SEC action or state action, the amount recovered by the private bar on behalf of investors is seven, 10, sometimes 20 times more. Even in the most egregious of frauds.

CA: Government overseers also have limited budgets.

LP: I saw that firsthand. There’s no question that we did not have the resources necessary to police the markets by ourselves, and that the private bar played an absolutely crucial role in helping deter fraud and then recover money for investors.

CA: Why do you think the SEC’s majority took this step? Republicans have long complained about the trial bar bringing frivolous cases.

LP: That’s a good question. You might have to ask them.…We’ve recovered hundreds of billions of dollars for investors. These are not frivolous cases.

CA: What do you make of Atkins’ efforts to discourage, or perhaps do away with, shareholder proposals?

LP: Like a lot of things with this administration, it seems to be a remedy in search of a problem. I don’t think that companies are overwhelmed by shareholder proposals.

CA: How so?

LP: A lot of companies welcome – and find value in – hearing from their investors about ways in which they could properly manage or disclose things. Various funds have really made an effort behind the scenes to encourage companies to take certain actions. And companies [may say], `We weren’t focused on that issue, but you’re right.’ They affirmatively change their policies or their practices or their disclosures because they recognize these things are problematic.

Read the article in full, courtesy of Capitol Account.

Leading human rights lawyer Agnieszka Fryszman, L’96, joined students, alumni and members of the Georgetown Law community on Nov. 13 to deliver the Human Rights Institute’s annual Drinan Lecture on Human Rights. 

… 

In her address, “Against the Headwinds: Human Rights Lawyering in a Fractured World,” Fryszman discussed the role of lawyers in advocating for survivors of human rights violations amid rising authoritarianism and challenges to the rule of law. “All of you, you can do this,” she urged the students in the audience. “You can represent clients and change the trajectory of their lives.” 

“You need to find a law that fits,” said Fryszman, who in the spring semester will teach a course on human rights litigation in U.S. courts. “It might be negligence law, it might be foreign law, [it] might be international law.” 

Fryszman also noted the importance of avenues beyond legal advocacy, including electoral politics and public policy, in helping uphold human dignity and the rule of law. 

“Even though it’s never been perfect or fair, that promise of the rule of law, of justice in our courts, is worth fighting for,” she said. “With a little bit of legal creativity, a little bit of luck and a lot of tenaciousness, I think it’s possible to hold onto and expand that promise.”