In re Unumprovident Corp. Securities Litigation, 1:03-CV-049.
| Citation | 396 F.Supp.2d 858 |
| Decision Date | 12 September 2005 |
| Docket Number | No. MDL 1:03-MD-1552.,No. 1:03-CV-1005.,No. 1:03-CV-049.,No. 1:03-CV-1003.,1:03-CV-049.,MDL 1:03-MD-1552.,1:03-CV-1003.,1:03-CV-1005. |
| Parties | In re: UNUMPROVIDENT CORP. SECURITIES LITIGATION Silvio Azzolini, on behalf of himself and all others similarly situated, Plaintiff, v. Corts Trust II For Provident Financial Trust I, et al., Defendants. Harriet Bernstein, on behalf of herself and all others similarly situated, Plaintiff, v. Corts Trust For Provident Financing Trust I, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Tennessee |
Buckley P. Hollister, Andrew J. Brown, Ramzi Abadou, Milberg, Weiss, Bershad, Hynes & Lerach, LLP, Edward P. Dietrich, Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, San Diego, CA, Douglas S. Johnston, Jr., George E. Barrett, Barrett, Johnston & Parsley, Paul K. Bramlett, Bramlett Law Offices, Nashville, TN, Bryan A. Wood, Jeffrey C. Block, Julie A. Richmond, Kathleen M. Donovan-Maher, Berman, Devalerio, Pease, Tabacco, Burt & Pucillo, Boston, MA, Douglas M. McKeige, Eitan Misulovin, Javier Bleichmar, Bernstein, Litowitz, Berger & Grossman, LLP, Pamela E. Kulsrud, New York, NY, Roger J. Leblanc, Leblanc & Waddell, Baton Rouge, LA, J. William Pope, Jr., Ward Crutchfield & Associates, Chattanooga, TN, Gary S. Graifman, Kantrowitz, Goldhamer & Graifman, Montvale, NJ, for Plaintiffs.
John P. Konvalinka, Grant, Konvalinka & Harrison, PC, Michael A. Anderson, William H. Horton, Horton, Maddox & Anderson, PLLC, T. Maxfield Bahner, W. Jeffrey Hollingsworth, Chambliss, Bahner & Stophel, PC, Chattanooga, TN, for Defendants.
The Judicial Panel on Multidistrict Litigation ("JPML") has assigned to this Court a number of putative class action lawsuits against Defendant UnumProvident Corporation ("UnumProvident") and various of its directors, officers, and employees. For purposes of efficient case management, the Court consolidated several of these cases and then grouped the cases into two broad categories by subject matter. The first such category is comprised of a number of putative class actions alleging improper denial of disability insurance benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), and applicable state law (collectively "Coordinated Benefits Actions"). The second category includes various putative securities fraud class action lawsuits brought on behalf of purchasers of UnumProvident securities and UnumProvident-related securities, two consolidated putative class actions brought on behalf of UnumProvident employees participating in the company's 401(k) plan and alleging violations of various fiduciary duties under ERISA, and a consolidated shareholder derivative action asserting claims on behalf of UnumProvident against certain of its officers and directors (collectively "Securities Related Actions").
The instant Memorandum and accompanying Order address motions to dismiss filed in the putative securities fraud class actions by Defendant UnumProvident and Defendants Thomas R. Watjen, Robert C. Greving, Ralph W. Mohney, Jr., and J. Harold Chandler, all of whom are current or former UnumProvident directors or executives (collectively, "Defendants").1 Each of these defendants has moved the Court to dismiss all of the securities fraud claims asserted against them in the instant putative class action lawsuits (Case No. 1:03-CV-49, Court File Nos. 107, 108; Case No. 1:03-CV-1003, Court File Nos. 13, 14; Case No. 1:03-CV-1005, Court File Nos. 23, 25). Because these three actions rely on a common basis of underlying factual allegations and because the UnumProvident Defendants have raised common arguments in support of dismissal of all three complaints, the Court will consolidate its ruling on each of the various motions to dismiss into a single Memorandum.
UnumProvident, a Delaware corporation with its principal place of business in Chattanooga, Tennessee, is the parent company of a number of insurance companies operating throughout the United States and abroad. Through its subsidiaries, the company provides a wide range of group and individual insurance products including disability insurance, life insurance, long-term care insurance, and payroll-deducted voluntary benefits plans offered by employers to their employees. UnumProvident is a publicly-held corporation which periodically offers a variety of different types of securities for sale to the investing public.
At some point in early 2001, Defendant Structured Products Corporation ("SPC") established two New York trusts, Defendants CorTS Trust for Provident Financial Trust I ("CorTS Trust I") and CorTS Trust II for Provident Financial Trust I ("CorTS Trust II"), for the purpose of disseminating corporate-backed trust securities ("CorTS") backed by UnumProvident securities. SPC is a Delaware corporation and wholly owned subsidiary of Defendant Salomon Smith Barney Holdings, Inc. ("SSB Holdings") which in turn is a holding company apparently created by Defendant Salomon Smith Barney, Inc., an international brokerage and investment banking firm with its principal place of business located in New York, New York. None of these entities are affiliated with UnumProvident or any of the individual UnumProvident Defendants. Within the context of this Memorandum, SSB, SSB Holdings, SPC, CorTS Trust I, and CorTS Trust II are collectively referred to as "the SSB Defendants." Through initial public offerings on or about January 31, 2001, and on or about April 18, 2001, CorTS Trust I and CorTS Trust II certificates were issued and sold to investors. Both trusts' assets consisted entirely of securities issued in 1998 by a UnumProvident affiliate (Provident Financing Trust I), whose sole assets were in turn debentures issued directly by UnumProvident.
In late 2002 and early 2003, certain negative information about UnumProvident's accounting and business practices began to circulate in the public arena, the company's financial results took a turn for the worse, and the value of many of its securities dropped rather precipitously. On February 12, 2003, Frank W. Knisley filed a putative securities fraud class action lawsuit in this Court on behalf of all purchasers of UnumProvident securities (Case No. 1:03-CV-49, Court File No. 1). Four virtually identical lawsuits were filed in this Court in the months and weeks that followed and, on May 21, 2003, the Court consolidated the Knisley action with those suits and renamed the consolidated action In re UnumProvident Corp. Securities Litigation (Case No. 1:03-CV-49, Court File No. 50).2 Meanwhile, on May 8, 2003, Silvio Azzolini filed a putative securities fraud class action lawsuit of his own in the United States District Court for the Southern District of New York on behalf of persons who had purchased the CorTS Trust II certificates (Case No. 1:03-CV-1003, Court File No. 1, Doc. No. 1),3 and, on July 7, 2003, Harriet Bernstein filed a similar lawsuit in the United States District Court for the Eastern District of New York on behalf of purchasers of the CorTS Trust I certificates (Case No. 1:03-CV-1005, Court File No. 1, Doc. No. 1).4 Pursuant to an order entered on October 6, 2003, the JPML transferred these and a number of other putative securities fraud actions to this Court for coordinated and/or consolidated pretrial proceedings.
Following the conclusion of proceedings before the JPML, various entities filed competing motions pursuant to the Private Securities Litigation Reform Act of 1995...
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