Broker-Dealer Litigation - Greenberg Traurig LLP

Exchange Act. Plaintiff’s claims arise from a proxy statement distributed by Republic Services,
Inc.’s (“Republic”) board of directors in advance of Republic’s annual stockholder meeting. The
proxy statement sought shareholder approval for several items, including two compensation
plans for Republic’s senior executives. Plaintiff asserted that the proxy statement contained
materially false and misleading statements or omissions regarding the ability of the
compensation plans to comply with Section 162(m) of the Internal Revenue Code.
In granting defendants’ motion to dismiss, the court determined that the proxy statement
issued by Republic did not make any misstatements regarding the proposed compensation plans
compliance with Section 162(m). The court found that the proxy statement made reasonable
conditional statements regarding compliance with Section 162(m) and that the plaintiff’s
complaint is based on his mischaracterization of the proxy statement. Further, the court found
that the defendant complied with the disclosure requirements of Section 162(m). Accordingly,
the court found that plaintiff’s claims for violations of Section 14(a) were unfounded.
In re Heckmann Corp. Sec. Litig., 2011 U.S. Dist. LEXIS 63830 (D.Del., June 16, 2011).
Plaintiff in a shareholder action alleged fraud, recklessness, and materially false
statements in connection with a merger between Heckmann Corp. and China Water and Drinks,
Inc. (“China Water”). Defendants were Heckmann Corp., China Water, and officers and
directors of Heckmann Corp. who had indicated in the proxy solicitation that they approved the
merger. Misstatements alleged in connection with the proxy solicitation for the merger included
(1) a failure to disclose that the audit firm had informed defendants that the president and CEO
of China Water had defended inconsistent VAT payments on the ground that such was common
practice in China and (2) that Heckmann Corp. had promised to reimburse the president and
CEO of China Water for 7.6 million shares of China Water stock used to induce China Water
shareholders to approve a merger amendment that reduced the amount of cash Heckmann Corp.
would have to pay.
Defendants moved to dismiss on a number of grounds. First, defendants argued that
plaintiff’s claims under Section 14(a) relied impermissibly on group pleading, but the court
found that because the complaint alleged that each defendant had specifically indicated their
approval of the merger in the proxy solicitation. The court also rejected defendants’ claims that
plaintiff had failed to meet the heightened state of mind pleading requirements of the PLSRA,
first on the grounds that the District of Delaware has not applied heightened pleading
requirements to claims under Section 14(a), and second because even if such claims were met,
the events underlying the alleged misstatements had occurred prior to the merger, but were not
disclosed in the proxy solicitation. The court further found that plaintiff met the loss causation
requirements for claims under Section 14(a) by alleging that that because if Heckmann Corp. had
failed to complete a qualifying transaction (e.g. the merger with China Water) within twenty-four
months of its IPO, shareholders would have received the IPO proceeds back, shareholders had
suffered a loss due to the merger and the proxy solicitation.
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