(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Alison Frankel

June 25 (Reuters) - Does the outcome of a securities

class action hinge on which shareholder firm is handling the

case?

Not most of the time, according to the latest draft of an

article for the NYU Law & Economics Research Paper Series.

In Paying for Performance? Attorneys Fees in Securities

Fraud Class Actions, law professors Adam Pritchard of the

University of Michigan, Stephen Choi of New York University and

Jessica Erickson of the University of Richmond analyzed outcomes

in nearly 2,500 securities class actions filed between 2005 and

2018 to find out if 15 top-tier shareholder firms - defined as

law firms whose settlement averages exceeded $30 million -

obtained better results for shareholders.

After controlling for the quality of the cases by

considering objective factors such as parallel government

investigations, accounting restatements and competition for

appointment as lead plaintiff, the study authors found that

top-tier firms pour vastly more time and money into their cases

- but don't achieve markedly different results in most of them.

The only band of cases in which Pritchard, Choi and Erickson

observed better outcomes for top-tier firms was in those against

companies with market capitalizations between $2.4 billion and

$14.4 billion.

The professors said they could not definitely explain why

top-tier firms outperform their counterparts in these cases but

not in cases against small or very large companies. They

hypothesized that well-capitalized plaintiffs' firms can afford

to invest their own time and money in midsized cases while

lower-tier firms - which can afford to litigate against small

companies and might be able to attract outside funding for cases

against the biggest defendants - can't invest as much as top

firms in cases against midsized defendants.

I had the study's conclusions in mind when I read the news

last Friday of Under Armour's ( UAA ) agreement to pay $434 million to

settle a shareholder class action alleging that the sports

apparel company misled investors about demand for its products

in 2015 and 2016. The class action deal, which follows Under

Armour's ( UAA ) $9 million settlement with the U.S. Securities and

Exchange Commission in 2021, came less than a month before the

company was slated to go to trial.

By any measure, the settlement is eye-popping for a company

with a market cap of $3 billion.

And it's important to remember that the outcome was anything

but a foregone conclusion in 2017, when lead counsel from

Robbins Geller Rudman & Dowd launched the case in federal court

in Baltimore, or in 2019, when the class action was dismissed

without leave to amend.

You won't be surprised to hear that Robbins Geller considers

the case to be proof of its added value to clients.

Start with Robbins Geller's handling of the 2019 dismissal.

While its appeal was underway at the 4th U.S. Circuit Court of

Appeals, The Wall Street Journal disclosed a previously

unreported government investigation of Under Armour's ( UAA ) revenue

recognition practices.

The article sparked new class actions, but Robbins Geller

believed it could also change the fate of its case. So the firm

attempted a highly unusual procedural maneuver, asking the

Baltimore federal judge who had tossed the class action case,

U.S. District Judge Robert Bennett, to issue an indicative

opinion that said he would revive the original case if it were

remanded to him by the 4th Circuit.

Trial team leader Robert Henssler told me he'd never before

asked a trial court for an indicative ruling but followed the

advice of the firm's appellate specialists.

The stratagem paid off: Bennett issued the indicative

opinion and the 4th Circuit remanded the case. Robbins Geller's

client, a Scottish pension fund, remained lead plaintiff and the

firm filed an amended complaint citing the newly disclosed

government investigation.

Over the next four years, Robbins Geller defeated Under

Armour's renewed dismissal motion; won class certification; and,

last February, convinced Bennett to deny the company's motion

for summary judgment.

The two sides were haggling over a prospective jury verdict

form when Under Armour ( UAA ) agreed to the $434 million settlement -

setting a new record, name partner Darren Robbins told me, for

settlement of a previously dismissed shareholder class action.

(The old record, again according to Robbins, was a $350 million

settlement with Alphabet in February 2024, in another

Robbins Geller case.)

Under Armour ( UAA ) declined to comment via an email from lead

counsel James Wareham of Fried Frank Harris Shriver & Jacobson.

Robbins and partner Michael Dowd said Under Armour's ( UAA ) defense

of their case shows the fundamental fallacy of the idea that law

firms are more or less interchangeable. When the class seemed

headed for trial, the company brought in superstar lawyers from

Kramer Levin Naftalis & Frankel and Paul, Weiss, Rifkind,

Wharton & Garrison - "not just anyone who hangs up a shingle,"

Dowd said.

He and Robbins said the same differentiation is true on the

plaintiffs' side, regardless of the conclusions drawn by

Pritchard, Choi and Erickson.

In an interview, Michigan professor Pritchard said he

regards the Under Armour ( UAA ) settlement - which he described as "a

home-run result" for Robbins Geller - as anecdotal validation of

the study he co-authored.

Under Armour's ( UAA ) market capitalization was about $8.6 billion

when Robbins Geller first filed a class action in early 2017.

That puts the case squarely in the narrow band of class actions

in which Pritchard and his co-authors found that top-tier firms

did, in fact, achieve better results, probably because of their

higher investment of time and upfront money.

In Pritchard's estimation, the lesson of the Under Armour ( UAA )

settlement is that institutional investors - like the Scottish

pension fund that led this case - should take market

capitalization into account when they're hiring law firms to

pursue shareholder class actions.

When I mentioned that to Robbins, he waved it away as

"pointy-headed stuff."

"All I know," Robbins said, "is that we as a firm are

committed to vindicating the rights of defrauded shareholders."

Read more:

Under Armour ( UAA ) to pay $434 million to settle lawsuit over

sales disclosures

Under Armour ( UAA ) shareholders can sue over sales disclosures -

judge

Under Armour ( UAA ) to pay $9 million to settle SEC charges