Securities Group Of The Year: Cohen Milstein - Law360
Cohen Milstein Sellers & Toll PLLC tied up one of the biggest shareholder derivative settlements on record and clinched multimillion-dollar investor deals to hold big corporate boards accountable for rooting out alleged workplace bias and abuse, landing it among Law360's 2022 Securities Groups of the Year.
With roughly 30 attorneys in offices across the country, Cohen Milstein's securities litigation practice has long been a core strength, distinguishing the firm over its more than four-decade history as one of the top-tier investor-side shops.
After the 2008 financial crisis, for example, Cohen Milstein's securities litigators racked up a string of nine-figure settlements for mortgage-backed securities investors. And more recently, as the #MeToo movement brought toxic workplace concerns to the fore, the team has garnered recognition for pioneering shareholder derivative settlements that compel corporate culture reforms.
The team, co-chaired by managing partner Steven J. Toll and partner Julie G. Reiser, has burnished that track record in the past year by sewing up one of the largest-ever derivative settlements, this time in consolidated litigation tied to a costly bribery scandal involving major Ohio electric utility FirstEnergy Corp.
Cohen Milstein was one of three co-lead counsel on the case, in which its client, the Massachusetts Laborers Pension Fund, sought with other investors to hold FirstEnergy leaders liable for allegedly orchestrating bribes aimed at securing an Ohio state bailout of two nuclear plants owned by the utility.
Their settlement, approved in August by an Ohio federal judge, positioned FirstEnergy to receive a $180 million insurer-funded payout, marking the biggest derivative recovery to date in the Sixth Circuit and among the biggest nationally. The deal also provided for greater board oversight of FirstEnergy's political spending and other governance reforms.
Toll called it an "extraordinary result" that Cohen Milstein and its co-lead counsel managed to achieve while navigating multiple complexities, including the involvement of two different judges in two different courts — one of whom proved quite tough on the plaintiffs' side —and a special litigation committee of FirstEnergy's board.
"In derivative cases, when a special litigation committee is appointed, sometimes they try to take the case away from you, so we had to deal with that as well as getting over demand requirements," Toll told Law360. "Those are the types of issues you often have to confront in derivative cases; we had to overcome all of them to reach this excellent settlement. It was a real team effort."
This conclusion came just months after Cohen Milstein wrapped up as lead counsel in two other prominent derivative settlements, one involving specialty retailer L Brands Inc. — the former parent company of lingerie brand Victoria's Secret — and the other involving social media platform Pinterest.
The L Brands settlement, finalized in May by an Ohio federal judge, resolved multiple shareholder suits that claimed top brass damaged the company by allegedly fostering a hostile, abusive work environment and, in the case of founder Les Wexner, palled around with convicted sex offender Jeffrey Epstein.
Cohen Milstein represented an Oregon state retirement fund leading one of those suits. Under the settlement, L Brands — renamed Bath & Body Works Inc. in 2021 — and Victoria's Secret committed to invest $90 million in a suite of internal reforms, including adopting new anti-harassment policies and training, limiting their use of nondisclosure agreements and launching diversity, equity and inclusion-focused advisory councils.
The Pinterest settlement similarly focused on corporate culture, ending a Cohen Milstein-helmed derivative action in which investors accused the social media platform's leaders of tolerating a noxious mix of gender- and race-based discrimination at work.
Finalized in June by a California federal judge, the settlement called for Pinterest to put $50 million toward instituting regular pay equity reviews, hiring process improvements, employee resource group enhancements and other diversity and inclusion measures. Notably, it also established first-of-their-kind diversity goals for Pinterest's platform.
Both deals underscored efforts Reiser has spearheaded at the firm to leverage derivative litigation to push companies to confront harassment and discrimination in their workplaces, an approach that blends the strengths of the firm's securities and employment law practices.
"A derivative lawsuit is a very useful tool for investors who want to amplify the concerns of the employees within a company," explained Reiser, who built up years of experience working on civil rights cases early in her career at the firm.
"When you see a scandal at a company like Pinterest, where there were highly successful African-American executives who felt like their voices weren't heard, or at Victoria's Secret, where women in high-level executive positions were treated like they were the product, you end up in a situation where a company or board can lose their talent," Reiser said.
"Talent is a big part of what creates value for an organization, so when investors have a voice and are able to ask the board for accountability with measures to hire, train, promote and retain talent, I think they're playing a very important role," she added.
As this kind of derivative litigation has blossomed in recent years, companies have increasingly turned to forum selection bylaws that require shareholders to pursue derivative claims in more business-friendly state courts, overriding the exclusive jurisdiction that federal courts would otherwise have.
In January 2022, Cohen Milstein's securities team scored an important victory for shareholders on this issue at the Seventh Circuit, which ruled that the Boeing Co. could not enforce a forum bylaw restricting derivative claims to Delaware Chancery Court.
That decision came on appeal in a case that sought to hold Boeing officers and directors liable for alleged proxy misstatements in connection with their oversight of the jet manufacturer's flawed 737 Max design. Cohen Milstein represented the union worker benefit plan behind that action, which was ultimately settled with a $6.25 million deal late last year. Boeing agreed to rewrite its forum bylaw so that shareholders would be permitted to file derivative claims in federal courts.
"The ability to bring a federal proxy claim in federal courts was, we felt, an important right for investors to get a fair shake," Toll said, adding that the Ninth Circuit has recently split from the Seventh Circuit by upholding the enforceability of another company's Delaware Chancery forum bylaw. "It could end up in the Supreme Court one day. We'll see."
But while derivative suits have yielded some of the Cohen Milstein securities practice's highest-profile accomplishments over the past year, the team has been no slouch when it comes to securities fraud class actions. A $35 million settlement approved in July between a Miller Energy investor class and auditor KPMG offers a case in point.
The class, which Cohen Milstein represented as lead counsel, accused KPMG of helping Miller Energy Resources Inc., a now-defunct petroleum production firm, to falsify valuations of its Alaskan oil reserve assets, alleging this fraud fueled investor losses and contributed to the company's eventual 2015 bankruptcy.
Although pleading standards for auditor liability in securities fraud cases are notoriously stringent, Cohen Milstein and the investors survived a critical motion to dismiss and received class certification in Tennessee federal court in 2021, paving the way for the settlement finalized last summer.
"Overcoming KPMG's motion to dismiss was huge," Toll said. "Securities fraud cases against auditors are tough, and they're not brought very often, but we were successful with KPMG. It's a pretty remarkable recovery, considering just how challenging these auditor defendant cases are."
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