Grant & Eisenhofer Represents Investors in $450 Mil. European Settlement
Delaware Law Weekly, April 25, 2007

Though it was an all-European matter, the unique $450 million settlement reached last week between Royal Dutch Shell plc and about 50 of its European investors has a local connection: the investors, mostly pension funds, were represented by Wilmington firm Grant & Eisenhofer.

The agreement, executed April 11 and subject to approval by the Amsterdam Court of Appeals of The Netherlands, resolves a dispute arising from Shell’s January 2004 “recategorization” of its oil and gas reserves, and the resulting price decline suffered by the shareholders, the document said.

This resolution marks the first time a recently enacted Dutch statute has been used in a securities litigation context, said Jay Eisenhofer, founding partner of Grant & Eisenhofer.

There is no legal means to pursue class-actions claims in The Netherlands, according to information provided by Grant & Eisenhofer. However, investors can propose class-wide settlements to the Amsterdam Court of Appeals using a special purpose foundation.

“I think this is the third time the statute was used, and the first time its being used for a securities fraud case, and the first time its being used for a European settlement as opposed to Dutch settlement,” Eisenhofer said.

His firm worked with the Dutch firm Pels Rijcken & Droogleever Fortuijn on the matter.

“Shell approached us about discussing a settlement and at some point during those discussions the Dutch lawyers raised this statute,” Eisenhofer said.

Hypothetically, the statute could be used in a similar case in the future, Eisenhofer said, but due to the unique circumstances, he doesn’t think it stands that good a chance of being repeated.

Nearly 50 institutional investors in the Netherlands, the United Kingdom, Germany, Sweden, Luxembourg, France, Denmark and Norway are involved in the settlement, which was announced at a news conference at The Hague, where Shell has it headquarters.

The largest group of investors is Dutch, led by Stichting Pensioenfonds ABP, which manages more than $230 billion in assets for about 2.5 million Dutch government and education employees.

The group is also led by Stichting Pensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen, which invests for two million health care and social sector employees in the Netherlands.

Eisenhofer said the settlement is a direct result of an opt-out lawsuit filed in U.S. District Court for the District of New Jersey by these two Dutch pension funds in January 2006.

According to the settlement agreement: “The shareholders who both resided and purchased outside the United States will receive an aggregate amount of $340.1 million under the settlement.”

The document also notes that an another $79.9 million will be available to U.S. shareholders should they accept the settlement offer Shell has agreed to make.

The agreement also stipulates about $19 million for other valid non-U.S. claims that may arise, and attorneys’ fees and administrative costs.

In an ancillary agreement, the parties stipulated that $96 million of a $120 million cash penalty paid to the Securities and Exchange Commission as a result of Shell’s inflated reserves would be distributed among the shareholders.

Another noteworthy provision in the settlement agreement: If the pending securities litigation brought by a group of by U.S. investors in New Jersey district court results in a higher payout than the Amsterdam settlement, Shell will make up the difference.

It’s possible that U.S. litigation could result in a higher payment, Eisenhofer said.

“If so, we’re going to benefit,” he said. “The second thing is some investors were concerned about being shut out of the U.S. case. A hearing is scheduled and the defendants were going to present their reasons why the foreign investors should be excluded.”

The lead plaintiffs in the U.S. case are the Pennsylvania Public School Employees Retirement System and the Pennsylvania State Employees Retirement System.

The approval process for the Amsterdam settlement cannot begin until the hearing in the U.S. case in June. At that point, the district court will decide whether to retain jurisdiction over the European investors. If it does, the agreement is null and void.

If it does not, the approval process begins. Eisenhofer explained that an initial hearing will be held. If the settlement is approved, notices will be mailed to the parties, followed by a final hearing, and then an opt-out period of about six months per the terms of the agreement.

Before press time, Shell did not respond to a request for comment.

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