Protecting Their Interests
Willis said the interest by European institutions has increased after those investors realized that serving as a lead plaintiff may be necessary to ensure they are treated fairly in U.S. settlements involving European companies. A lead plaintiff plays a key role in defining the class, determining the settlement distribution ratio, negotiating any governance improvements, and deciding whether a proposed accord is sufficient, Willis said. In addition to Parmalat and Shell, a number of major European firms have faced U.S. class-action cases. In 2004, a record 29 foreign issuers were hit with securities class actions in U.S. courts, according to a report by PricewaterhouseCoopers.

Willis recalled the example of the $120 million Deutsche Telekom settlement, where the class was defined narrowly to include only those shareholders who bought their shares on American exchanges. Those investors, who accounted for 24 percent of the firm's equity, ended up sharing the entire settlement, which was a "fairly inequitable result," Willis said. The excluded European investors had to file a multitude of separate claims in Germany. "Had a European been a lead plaintiff in that case, that likely would have not happened," Willis said, adding that concern about getting shortchanged has been "a major motivating force" for European institutions.

European investors were also excluded in the Elan, DaimlerChrysler, and Lernout & Hauspie settlements, Willis recalled. In the Lernout settlement, the class included only those investors who purchased shares on Nasdaq or other U.S. markets. The larger group of investors who bought their shares through Easdaq (Nasdaq's former European technology market) since have filed a separate class action in the United States, Willis said.

As the Parmalat case illustrates, American courts "have been quite willing to appoint Europeans either as co-lead plaintiffs or sole lead plaintiffs in U.S. class actions," as long as the Europeans can show that a U.S. court has jurisdiction over their claims, Willis said. If a European investor didn't buy its shares in the U.S., the court considers whether the alleged fraud had a substantial impact on the U.S. market or was carried out in some substantial way in the United States. In the Parmalat case, the judge found there was a sufficient connection because the company used U.S. bankers and attorneys to perpetrate the alleged fraud, Willis said.

U.S. courts have rejected some lawsuits by foreign investors on jurisdictional grounds. In January, a federal judge in Delaware dismissed a lawsuit by foreign DaimlerChrysler investors who weren't included in the $300 million settlement obtained by U.S. investors. In 2005, a federal judge in New York dismissed a lawsuit by Bayer investors after noting that just 8 percent of the German company's shares are traded in the United States.

Willis cautioned that European institutions should be careful about the cases they participate in and avoid those that might damage their reputations. "There are many cases that they can get involved in where they can really step forward to protect their own interest and make a statement about corporate fraud," Willis said. "But they need to be thoughtful about that."

In at least one case, Europeans were surprised to learn that they were a plaintiff. In October, the City of London's pension fund joined a U.S. shareholder lawsuit against BP's board over problems at the company's Prudhoe Bay oilfield in Alaska. According to The Times of London, city officials initially were unaware of the fund's involvement, but they later explained that the decision to join the suit was made by ABN AMRO Mellon, which manages the pension fund.

U.S. Law Firms Reach Out to Investors
In the past year, a number of U.S. law firms have formed partnerships with European firms, sponsored European pension fund conferences, and undertaken other efforts to woo foreign institutions. Attorney Adam T. Savett, writing in his "Lies, Damn Lies, & Forward Looking Statements" Web log, has described these efforts as an "arms race."

In October, Schiffrin & Barroway, a firm based outside of Philadelphia, announced a cooperation agreement with Winheller Attorneys at Law of Frankfurt, Germany. Schiffrin & Barroway, in cooperation with the Universities Superannuation Scheme of the U.K., recently issued a primer on U.S. securities litigation for European institutions.

Earlier this year, Labaton Sucharow & Rudoff, a New York-based law firm, formed an alliance with the TILP Group of Germany. "With increasing global investments in the U.S. securities markets and a scourge of corporate fraud that knows no geographic boundaries, financial institutions throughout the world require an international team to safeguard their interests," Labaton Sucharow says in a statement on its Web site.

Meanwhile, Cohen Milstein plans to open an office in London in January that will include as many as 11 attorneys. According to The Times of London, "American lawyers are increasingly identifying London as a potential new market for aggrieved investors."

Lerach Coughlin Stoia Geller Rudman & Robbins, one of the largest plaintiffs' firms in the U.S., also has assembled a number of international clients. According to the San Diego-based firm's Web site, those clients include: Bank of Ireland Asset Management, the London Pension Funds Authority, the Lothian Pension Fund of Scotland, the Merseyside Pension Fund of Britain, Standard Life Investments of Scotland, the Steelworkers Pension Trust of Britain, UniSuper of Australia, and Britain's West Midlands Pension Fund.

More Claim-Filing by European Investors
Prompted by press reports, more U.K. and European investors are taking steps to file claims for their share of U.S. securities settlements. For years, few European investors have bothered to file claims, in part because of ignorance about claim-filing procedures or distaste for American litigiousness.

These attitudes have changed in recent years as the pension press and other media have highlighted the issue. In July 2005, The Times noted that $4.7 billion in U.S. securities settlements went unclaimed by investors, recalled Alan Owens, a partner with the Irwin Mitchell firm in London. One recent example of this greater interest in filing claims is the U.S. Securities and Exchange Commission's WorldCom settlement, where investors from 110 countries submitted almost 450,000 claims, the agency said.

While no U.K. courts have held that pension fund trustees have a legal obligation to file claims, fund trustees do have an obligation to derive value for their fund, and filing settlement claims is an "obvious way to derive value after a loss has been incurred," Owens said during a SCAS Web cast in September.

"There are many hundreds, perhaps thousands, of institutions right across the U.K. and Europe already putting procedures in place to ensure that this particular part of their investment protection is covered," Owens said. Otherwise, they may face "difficult questions [from beneficiaries] if nothing at all has been done."