Pomerantz LLP

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Symbol: PBR

Class Period:
01-22-2010 - 07-28-2015    



Judge Jed S. Rakoff of the Southern District of New York, in Petrobras preliminary approval hearing, February 2018

In a significant victory for investors, Pomerantz, as sole lead counsel for the class, along with Lead Plaintiff Universities Superannuation Scheme Limited, achieved a historic $2.95 billion settlement with Petroleo Brasileiro S.A.--Petrobras, and its related entity Petrobras International Finance Company, as well as certain of Petrobras’ former executives and directors. Pomernatz also reached a $50 million settlement with Petrobras' auditors, PricewaterhouseCoopers Auditores Independentes ("PwC Brazil"), bringing the total recovery on behalf of Petrobras investors to $3 billion. This settlement represents the largest securities class action settlement in a decade; the largest settlement ever in a class action involving a foreign issuer; the fifth-largest class action settlement ever achieved in the United States; and the largest settlement achieved by a foreign lead plaintiff.  The class settlement also represents a significant premium of 65% over the settlement of the individual actions on a pro rata basis.  

This stunning settlement was achieved after nearly three years of hard-fought litigation, including U.S. and foreign discovery and complex motion practice in the Southern District of New York, an appeal at the United States Court of Appeals for the Second Circuit, and during the pendency of a petition by defendants for a writ of certiorari to the United States Supreme Court.

Pomerantz’ achievement is significant not only for the outstanding multi-billion recovery to investors but also for the precedent-setting decisions achieved during the litigation.  Defendants appealed the District Court’s opinion certifying classes of both purchasers of Petrobras equity and debt on multiple grounds, including for failure to satisfy the requirement of ascertainability and for failure to satisfy the burden of showing that the Petrobras securities traded in efficient markets.  The Second Circuit accepted the appeal and, in an issue of first impression, squarely rejected defendants’ invitation to adopt the heightened ascertainability requirement promulgated by the U.S. Court of Appeals for the Third Circuit, which would have required plaintiffs to demonstrate that determining membership in a class is “administratively feasible.”  The Second Circuit also refused to adopt a requirement, urged by defendants, that all securities class action plaintiffs seeking class certification prove through direct evidence (i.e., via an event study) that the prices of the relevant securities moved in a particular direction in response to new information.  The Second Circuit rejected the notion that complicated event studies be submitted by Plaintiffs at the class certification stage, agreeing with plaintiffs that “event studies offer the seductive promise of hard numbers and dispassionate truth, but methodological constraints limit their utility in the context of single-firm analyses.” 

The litigation involved one of the largest securities class actions pending in the United States, in which Brazil’s energy giant, Petrobras, was accused of concealing a sprawling, decades-long kickback scheme from investors.  The scandal ensnared not only Petrobras' former executives but also Brazilian politicians, including former presidents and at least one-third of the Brazilian Congress.  According to plaintiffs, defendants’ fraudulent scheme involved billions of dollars in kickbacks, tens of billions of dollars in overstated assets, as well as significant losses to Petrobras investors.  Plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.

Building on its decision in Petrobras, in Strougo v. Barclays PLC--another case where Pomerantz serves as sole lead counsel--in another significant win for plaintiffs, the Second Circuit held that “direct evidence of price impact . . . is not always necessary to establish market efficiency and invoke the Basic presumption” of reliance.  Importantly, the Second Circuit also held that defendants seeking to rebut the presumption of reliance must do so by a preponderance of the evidence rather than merely meeting a burden of production. 

Jeremy Lieberman, Co-Managing Partner of Pomerantz, commented on the Petrobras class action settlement:  

“We are very pleased with this historic settlement, which represents the largest securities class action settlement in a decade and the largest class action settlement ever involving a foreign issuer.  In addition, throughout the course of this litigation, Plaintiffs achieved important precedents at the Second Circuit Court of Appeals regarding the ascertainability requirement during class certification, as well as the utility of event studies for establishing predominance in securities class actions.   These precedents will form the bedrock of class action jurisprudence in the Second Circuit for decades to come.   Simply put, this litigation and its ultimate resolution have yielded an excellent result for the Class.”