Just the Facts

In 2001 Tellabs, Inc.’s stock declined suddenly, triggering a slew of investor suits. First out of the gate was a several-hundred-million-dollar investors’ securities class action filing. Next came a high-value ERISA stock-drop suit on behalf of 7,500 employees who were invested in the company’s 401(k) plan. Plaintiffs in both suits claimed that Tellabs’s top executives misrepresented the company’s business prospects; the ERISA suit alleged that top management breached their duties by allowing plan participants to invest in Tellabs stock.

While the original securities class action stalled on appeal, the ERISA suit raced toward trial, raising the stakes for Tellabs and its ERISA counsel, Charles Jackson of Morgan, Lewis & Bockius. Defending ERISA suits is riskier, since plaintiffs need only to prove negligence, a lower burden of proof than what is required in a securities claim. But a settlement or loss in the ERISA matter could have undercut Tellabs’s defense in the investors’ suit. Jackson, who had won the only other ERISA stock-drop suit trial to date, for client US Airways Group, Inc., in 2006, convinced Tellabs that the case was winnable. Jackson’s team had “already seen the hurdles in a case like this, got over them, and won,” says Charles Kennedy, Tellabs senior managing counsel. After an eight-day bench trial in June, Jackson’s team delivered a complete defense victory–the plaintiffs chose not to appeal. (The securities case went to the U.S. Supreme Court to address pleading requirements and is back in district court.)