Dutch Settlement Exports U.S.-Style Litigation
ABA Journal eReport, Martha Neil, April 12, 2007

Love'em or hate'em, big-bucks plaintiffs cases have been a uniquely American phenomenon—until now. In a legal milestone that could expand the field exponentially, a settlement of more than $350 million was announced Wednesday in a securities matter involving European investors who bought their shares outside the U.S.

"As far as we know, it's the first class-wide settlement between European investors and a European company over European securities claims—and on its face, it's one of the absolute largest recoveries ever in Europe," says a spokesman for Grant & Eisenhofer, a Wilmington, Del., law firm representing the foreign investors. 

Even more unusual, and in a uniquely European style, the issue was settled without any foreign lawsuit ever being filed on foreign investors' behalf.

Instead, the parties—Royal Dutch Shell PLC and groups representing individuals and dozens of institutional investors in nine European countries—are petitioning the Amsterdam Court of Appeals in the Netherlands to approve the agreement. The settlement, in which Shell did not admit to any wrongdoing, was announced in The Hague on Wednesday and resolves all claims brought by non-U.S. investors concerning the company's alleged overstatement of the value of its oil and gas reserves.

This should be possible, according to those involved in the negotiations, under Dutch law enacted in 2005, Wet Collectieve Afwikkeling Massaschade, Articles 907 and 910, and Articles 1013 and 1018 of the Civil Code of the Netherlands. 

Although never before applied in a securities matter, these statutory provisions allow the Dutch appeals court, which is similar to a federal appellate court in the U.S., to accept a collective resolution of a dispute if it is reasonable.

As Grant & Eisenhofer explained in a press release, "Although there is no legal mechanism to pursue class actions in the Netherlands, investors can propose class-wide settlements to the Amsterdam Court of Appeals using a special purpose foundation to effectuate the settlement." The parties filed such a petition with the Dutch court on Wednesday.

Meanwhile, there is an ongoing securities class action against Shell in federal court in New Jersey that the settling European plaintiffs can technically be considered a part of. However, because they did not buy their shares in the U.S., the foreign investors' claims are unlikely to survive jurisdictional challenge, according to those involved in the settlement. The federal court will be asked to exclude such foreign investors from the plaintiffs class in order to complete the European settlement.

Defense lawyer Ralph C. Ferrara of LeBoeuf, Lamb, Greene & MacRae's Washington, D.C., office declined to comment in detail on the settlement, but says Shell would have prevailed in the U.S. case as far as foreign investors are concerned. Shell voluntarily agreed to settle with the European investors, he says, because it is a company that cares about its image in the world.

Ferrara praised the collaborative approach, which he says establishes a better way to deal with such situations than U.S. plaintiffs litigation. "There's a whole different model now," he says. "The European model is, if you've got claims, sit down and talk."

Lead counsel Jay Eisenhofer described the settlement as an unprecedented, "uniquely European resolution" to a European problem that was "reached apart from a conventional litigation."

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