K&L Gates, Milbank Beat Neuberger Berman Shareholder Claims
Lawyers for a Neuberger Berman LLC mutual fund shareholder have struggled for about four years to hold Neuberger executives and board members liable for ill-fated investments in two U.K.–traded Internet gambling companies. Federal prosecutors targeted the companies, NETeller and 888, in the mid-2000s, and Neteller and its founders eventually pleaded guilty to violating U.S. antigambling laws.
On Monday the named plaintiff and his lawyers at Hanly Conroy Bierstein Sheridan Fisher & Hayes struck out once again—apparently for good—at the U.S. Court of Appeals for the Second Circuit. In a six-page summary order, a Second Circuit panel affirmed a lower court's decision granting a defense motion to dismiss the plaintiff's derivative claims.
The Second Circuit went even further than Manhattan U.S. District Judge Thomas Griesa, who dismissed the claims without prejudice in March. The panel remanded to Judge Griesa to enter judgment dismissing the case with prejudice, bringing the litigation to an end.
Hanly Conroy's Thomas Sheridan III didn't immediately respond to our request for comment. He originally filed the derivative suit in August 2011 in Delaware federal court, alleging violations of the Racketeer Influenced and Corrupt Organizations Act, breach of fiduciary duty, negligence, waste, and related claims.
Griesa, who assumed control of the case after it was transferred to the Southern District of New York, pointed out in his March ruling that this was the "plaintiff's fourth suit grounded in the same theory." Earlier purported class actions and derivative suits filed in state and federal courts in New York and Delaware were either dismissed voluntarily by the plaintiffs or thrown out.
The latest attempt also failed, the Second Circuit ruled Monday, because the shareholder plaintiff, Benjamin Gamoran, conceded the independence and disinterestedness of Neuberger's board by going to the board to demand action on his concerns. "Upon completing its timely investigation, the board furnished [the plaintiff] with a letter providing a thorough summary of the board's process and reasoning," the panel wrote. "Nothing further was required."
Milbank, Tweed, Hadley & McCloy's Douglas Henkin, who represented Neuberger Berman at the Second Circuit, didn't immediately respond to our call. Nicholas Terris at K&L Gates, who represented the individual defendants, declined to comment.