Throughout the week over at Securities Docket  I highlight the most interesting columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation. Here is a digest of my picks for the week ending November 9.

Litigating Post-Close Merger Cases

Boris Feldman, The Harvard Law School Forum on Corporate Governance and Financial Regulation

The frequency of merger lawsuits has increased steadily over time. What has changed more abruptly is their life cycle. Until recent years, once a deal closed, the lawsuit usually went away. If the plaintiffs had been unable to wring out a “therapeutic” settlement pre-close (usually, “enhanced” disclosure + a fee) they ignored or dismissed the case after the acquisition was complete. The conventional wisdom was that plaintiffs' leverage — threatening to interfere with the deal — was gone, and so there was no longer a path to payday.

In several recent cases, however, plaintiffs' merger lawyers have refined their business model. They keep the litigation alive post-close….

Chicago judge okays AG suit vs S&P. Bad omen for rating agencies?

Alison Frankel, Thomson Reuters News & Insight

S&P moved to dismiss the case on several grounds, including an argument that state-law claims against S&P are pre-empted by federal regulation of the rating agencies. The agency's most substantive defense was that the AG's case was based on statements that are either opinions protected under the First Amendment or generalities that don't amount to actionable representations.

Cook County Judge Mary Ann Mason, in a very clearly written decision, firmly rejected both of those arguments (as well as every other defense S&P raised). First of all, she said, the AG's suit isn't based on S&P's actual ratings of publicly traded securities (which are generally considered to be protected opinions) but on S&P's representations about its independence and objectivity. And those representations, she said, are not mere puffery…. Mason's reasoning is certainly alluring, but I'm not convinced that it opens the floodgates for similar actions by other state AGs armed with state deceptive practices laws. Here's why….

NERA Releases Study of Securities Suits against Non-U.S. Companies

Kevin LaCroix, The D & O Diary

The report notes the irony that the increase in the number of suits filed against non-U.S. companies has occurred after the U.S. Supreme Court's 2010 opinion in the Morrison case. It has been widely believed that the transaction-based test enunciated in Morrison would reduce the number of securities suits involving non-U.S. companies….

Even though Morrison has not yet had a perceptible impact on the number of filings involving non-U.S. companies, Morrison has had an impact. As claimant classes are defined to omit claims on behalf of shareholders who purchased shares on non-U.S. exchanges, the shareholder classes on whose behalf the securities claims are asserted have become narrower. As the report states, “Morrison's effect is more likely to narrow the scope of a claim against a non-U.S. company than to eliminate the claim entirely.”

Stop Drinking The Kool-Aid

Mike Koehler, FCPA Professor

Since April the Department of Justice has been running a Kool-Aid stand and many people have been drinking the Kool-Aid. The Kool-Aid being served up and consumed is Morgan Stanley's so-called declination….

Morgan Stanley may indeed have being doing the right thing in its compliance program and for that it deserves credit. However… The reason Morgan Stanley was not prosecuted for Peterson's actions is because there was no basis to hold Morgan Stanley liable even under lenient respondeat superior standards.

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