Lawyer Limelight: Jay Eisenhofer

Consider a lawyer accomplished if he’s made a pronounced mark in one corner of the law through his professional life. A small number have even created new fields of practice that hadn’t existed previously.

And then there’s Jay Eisenhofer, co-founder and managing director of leading plaintiffs’ firm Grant & Eisenhofer. Over a 35-year career he has been a pioneer in three areas of modern business litigation – institutional investor securities class actions; shareholder appraisal disputes over mergers and acquisitions; and international investor actions. All three are now well-established – and highly competitive – engines of the plaintiffs’ bar, and Eisenhofer has played an influential role in all three. Along the way, the firm Eisenhofer founded with former partner Stuart Grant has become one of the country’s premier plaintiffs’ firms, representing investors prosecuting cases alleging corporate fraud, self-dealing, accounting fraud and other financial and boardroom misconduct.

For most of G&E’s 23-year history, Eisenhofer has focused on fighting for institutional investors, particularly large U.S. pension funds. Amalgamated Bank, the New York City Retirement Funds, CALPERS and CALSTRS, the Service Employees International Union, the American Federation of State, County and Municipal Employees, Louisiana State Employees Retirement System and other public and union pension funds have all taken lead plaintiff roles in G&E actions.

“Jay was an early leader and advocate for corporate governance reform in the shareholder litigation arena,” says Charles Elson, who teaches law and finance at the University of Delaware and is regarded as a dean of corporate governance law.

A number of Eisenhofer’s early cases are considered seminal for establishing new law favorable to investors. He was lead attorney in AFSME v. AIG, in which the 2^nd U.S. Circuit Court of Appeals required public companies to disclose in their proxy materials the names of shareholder-nominated director candidates alongside those put forward by the company, reversing years of “no-action” letters by the SEC.  He represented investors in Carmody v. Toll Brothers, the first time the Delaware Court of Chancery held that poison pill plans with unlimited duration provisions violated Delaware corporate law – the court found that such “dead-hand” pills were, in fact, coercive to stockholders.

And in one of the first securities cases filed following passage of the landmark Public Securities Litigation Reform Act of 1995, G&E was lead counsel in Gluck v. Cellstar. It was the first time an institutional investor was appointed lead plaintiff in a securities class action and set the table for a generation of securities litigators to follow. Besides giving institutional investors new clout in pursuing securities claims, Cellstar resulted in financial recoveries far above historical averages.

The firm has also represented many of the world’s largest public employee retirement funds outside the U.S. – including in Sweden, Denmark, Norway, the Netherlands, UK, Australia, Canada, Germany, France and elsewhere – in establishing a new mechanism for class-like investor recovery through European courts and tribunals.

In one of its earliest global cases, G&E brought together more than 175 institutional investors across Europe to settle claims stemming from Royal Dutch Shell’s overstatement of proven oil and gas reserves, which resulted in a $450M settlement through a class recovery vehicle in the Netherlands that had not previously been used in a securities lawsuit. The firm’s settlements in cases against Fortis ($1.5B) and Royal Bank of Scotland ($1B) are among the largest recoveries on record in Europe. G&E is co-counsel in a shareholder fraud suit against Vivendi in the Commercial Court of Paris on behalf of a coalition of some 90 institutional investors from Europe, Asia and the U.S. The case, which alleges that Vivendi and prior leadership failed to disclose the company’s financial woes following its earlier tie-up with Seagram and Canal Plus – is set to go to trial in early December.

In another interesting non-U.S. case, the firm represents a large group of Greek bank depositors collectively suing the Republic of Cyprus for massive losses stemming from Europe’s financial crisis.

Many of today’s swashbuckling investor activists were influenced by Eisenhofer’s 2005 treatise, “Shareholder Activism Handbook,” co-authored with G&E director Michael Barry. The book was one of the first full-scale treatments of the then-emerging shareholder-management dynamic and laid the groundwork for many activist campaigns and legal contests since its first edition.

Longtime shareholder advocate Nell Minow, vice chair of shareholder engagement consultancy Value Edge Advisors, recalls one of her early SOS calls to Eisenhofer heading into a showdown with a recalcitrant board. “I was working at an activist fund at the time and our relationship with the CEO and board of one of our portfolio companies was strained at best, and the annual meeting, to be held at Wilmington’s storied Hotel Dupont, was coming up,” Minow recounts. “I’d handled a lot of annual meetings alone but this time I needed back-up and asked Jay to come with me. It was a good thing because at exactly the right moment he stood up and told the CEO that the board had to let me ask my questions. I felt like my knight in shining armor had come to my defense. Jay knows the law, has excellent judgment and is fearless on behalf of his clients.”

In the past two decades, G&E has recovered more than $27B for clients, in headline lawsuits against Pfizer, DaimlerChrysler, Goldman Sachs, UnitedHealthcare, Marsh & McLennan, Royal Bank of Scotland, Tyco, Global Crossing, PwC, Fortis and other mega companies and financial institutions. The firm is among the most respected and feared among shareholder counsel – quite an accomplishment for two former Skadden associates who switched sides. Grant, a longtime Lawdragon 500 member, retired last year, and Eisenhofer is focused on expanding the firm’s platform for the next generation.

Kurt Schacht, managing director of Standards and Financial Market Integrity at the CFA Institute, recalls in the early 1990s when he was general counsel for the State of Wisconsin Investment Board, one of the country’s largest public pension funds. “We couldn’t find a law firm that would represent investor interests in Wilmington,” he recalls. “Firm after firm declined representation of shareholder interests to protect their corporate client base, until Jay Eisenhofer agreed to represent us.”  Schacht notes that in case after case, securities fraud recoveries went up as Eisenhofer focused on representing the interests of the largest investors.  “Jay was a trailblazer in shareholder litigation and represented us as one of the very first lead plaintiffs under PSLRA. He’s done so much to improve investor protection and corporate accountability.”

LD: How would you characterize the current state of shareholder litigation? Some observers think the days of the big investor class actions are behind us.

JE: It’s funny – people have been forecasting the end of shareholder litigation for as long as I’ve been handling these cases. A lot of commentators actually claimed the PSLRA would kill it 25 years ago. Then, the meltdown in the early 2000s was said to be the death knell, especially after the onset of Sarbanes-Oxley legislation, which was expressly created as a guardrail for investor protection over accounting fraud in the wake of Enron. Ditto after the financial crisis and passage of Dodd Frank a decade ago. And yet, here we are, with new waves of cases emerging because this drug company misled investors about its pipeline of new treatment, or that company fabricated the performance of its autonomous vehicle technology.

I happen to believe that most corporate officers and directors are honest and that most companies are law abiding. But there are always some trying to cut corners or behave unethically. Until you repeal the laws of human nature, there’s going to be a need to protect the interests of shareholders and a group of lawyers willing to pursue claims on their behalf, just as there’s a need to protect interests of consumers.

LD: I know you’ve led many investor actions in non-U.S. courts, especially in Europe. What has driven your focus on this area?

JE: Major credit to our success outside the U.S. goes to the co-heads of our international practice – Olav Haazen and Guus Warringa, who are true all-stars in handling cross-border litigation. Olav, who teaches litigation law in the Netherlands, has played a key part in our biggest global cases, including marshalling some 300 institutional investors worldwide in advancing our case against Volkswagen in German courts over its diesel emission cheating scandal. He also represented foreign investors in pursuing claims against feeder funds and other defendants tied to the Madoff Ponzi fraud. Before he joined us in 2015, Guus was general counsel for APG N.V. in Amsterdam, which manages assets for one of the world’s largest public pension funds. Guus is renowned in the institutional investor community and was named one of the most influential figures in European capital markets by Financial News.

LD: G&E has recently planted its flag in the emerging movement of Environmental, Sustainable and Governance investing. Can you tell us more about that effort?

JE: In 2018 we launched an ESG Institute, created as both a thought leadership and advocacy arm to help investors through the legal thicket of sustainable investments, a movement that has gained traction globally around a host of issues impacting corporate citizenship. We’ve been looking at everything from human rights and fossil fuel emissions to social justice. To cite one example, the Institute petitioned the U.S. Customs and Border Protection to block imports of palm oil by Malaysian producers accused of deploying forced and child labor. One targeted producer, owned by the Malaysian government, was alleged to hold workers on remote palm oil plantations under slave-like conditions. And in fact, the CBP agency issued an order in late September banning all goods into the U.S. from this dominant producer, known as FGV Holdings Berhad.

LD: It’s exciting to watch how you’ve been expanding the firm’s platform to support a host of new litigation practices with additional terrific lawyers. Can you tell us about a few of them?

JE: Championing investors will always be core to G&E, but we’ve made a concerted effort in recent years to broaden our practice arsenal and position us for future growth beyond securities litigation.

That includes the addition of experienced tort litigator Elizabeth Graham to lead our portfolio of complex pharmaceutical and medical device litigation – Beth was an instrumental part of the team securing a $1.6B settlement from Bayer this past August stemming from claims over the company’s troubled Essure birth control implant.

Beth and several G&E colleagues have also built an important new women’s advocacy platform, highlighted this past year with the filing of several high-profile sexual assault and harassment lawsuits, including cases against the country’s largest chain of wellness massage centers. On another front, director Lisa Weinstein was brought on to build a medical malpractice capability, focused on catastrophic birth injury litigation.

LD: Any other areas?

JE: We now have a robust environmental and toxic tort practice Director Kyle McGee is representing state Attorneys Generals in actions against Monsanto over production and sale of toxic PCBs, blamed for contaminating waterways and other natural resources across the country. Kyle is also directing environmental cases against 3M, Dupont, Chemours and other manufacturers of hazardous PFAS chemicals, which have tainted groundwater resources.  And in 2019, Beth Graham played a lead role in obtaining $143M in payments to residents and businesses of several Massachusetts towns harmed by a series of gas-ignited fires and explosions caused by Columbia Gas the year before.

G&E has also taken on a number of antitrust and consumer class actions, and added directors specializing in bankruptcy and intellectual property, areas we had not historically litigated.

I’m especially energized by the civil rights practice we launched in 2019 that has brought several high-profile cases, including one on behalf of a former Death Row inmate in Florida exonerated for a brutal double murder. Leading that group are directors Kimberly Evans and Diandra Debrosse Zimmermann. Kim is handling cases involving wrongful incarceration, discrimination, sexual assault and other forms of harassment. Diandra, better known as Fu, heads our newest office in Birmingham, Ala., and frequently represents public entities in a range of non-investor litigation, including data breach matters. In one heartbreaking case, Fu currently represents the family of a nine-year-old Alabama girl whose teachers and school administrators failed to stop serial bullying by her classmates, which tragically led to her suicide.

LD: Has the firm entered the fray of Covid-related litigation?

JE: We have indeed, especially on behalf of small businesses wracked by economic losses directly tied to the coronavirus pandemic. In 2020 we have brought a series of lawsuits against major insurance carriers over Covid-related claims denials. The firm’s policyholder clients include fitness centers, restaurants, wine bars and other customer-facing enterprises, who contend that insurers illegally denied them coverage for business interruption losses after they followed state instructions regarding lockdowns and restricted operations.

LD: And what about any personal interests?

JE: As our firm matures healthily towards a second generation, I had the opportunity to collaborate with my 10-year-old son Mark this past year on an adventure novel called “Black Shadow.” It’s a super-charged time-travel story that invites readers to “imagine flying from solar system to solar system pirating stolen goods from soldiers, thieves and police."