Stephen M. LaRose

/My focus

The SEC, Securities Laws and Shareholder Issues

Whether in large corporations, financial institutions, partnerships or closely held corporations, disputes continue to arise over corporate governance, fiduciary concerns, alleged violations of the U.S. securities laws and corporate control matters. I regularly represent businesses and individuals in front of the Securities & Exchange Commission (SEC), as well as state securities regulatory bodies. I am involved in the defense of a number of actions asserted against clients by the SEC involving alleged disclosure issues in municipal bond offerings.

Investment Fund and Other Partnership Disputes

I represent private equity funds, hedge funds and managers and institutional investors to resolve disputes concerning fund management, compliance issues, redemptions and valuation matters. I handle matters involving the proper attribution of carried interests in a fund.

Private Equity Operating Company Disputes

More and more, I see a trend involving private equity funds’ involvement in disputes at the operating company level, generally over management of the operating company or its dealings with third parties. Recently, I defended a private fund sued in its capacity as decision maker for one of its portfolio companies. Similarly, the SEC continues to be active in this space, paying particular attention to private equity firms’ methods of receiving fees.

Tax Credit Funds

I work with the firm’s first-in-class Tax Credit & Affordable Housing Investment Disputes practice group and help clients protect their tax credit investments by resolving disputes between partners, working out problems at the operating partnership level, and attending to tax credit compliance issues.

/Representative experience

• Secured substantial judgement in arbitration on behalf of an affordable housing developer. The case involved the client’s dispute with another party over its rights to build a large residential affordable building
• Representing investor financial institutions in ongoing breach of contract and breach of fiduciary duty litigation in Massachusetts state court. The matters pertain to an investment in low-income housing tax credit (LIHTC) projects and claims associated with rights of first refusal issued in connection with the property
• Obtained a significant settlement in favor of an investor institution and firm client in a federal declaratory judgment action with respect to exercise of a purchase option
• Obtained judgment in federal court against the SEC, in favor of a client accused of violating the Securities Act of 1933 in the preparation of a municipal bond offering. Following extensive fact discovery engaged in during the case, all claims against the client were dismissed entirely and final judgment was entered, following a federal judge’s decision finding that there was no evidence that the client acted in a reckless or intentionally fraudulent manner. In fact, the judge found that the evidence showed that the client performed his duties in a good faith and professional manner.
• Defending an information technology and consulting company and two of its executives in litigation in Maryland federal court in connection with the earn-out provisions of a shared purchase agreement
• Representing closed-end mutual fund in multiple court actions relating to former fund manager’s fraud, conversion and related misconduct
• Representing public entity in SEC investigation relating to disclosures made in municipal bond offerings
• Successfully resolved claims raised by Massachusetts Securities Division against investment firm
• Obtained multimillion-dollar judgement on behalf of global travel company in three-week trial in dispute with international software company over software company’s unfair and deceptive business practices and breach of contract
• Representing private equity fund in litigation concerning an operating company’s ownership and control
• Obtained trial judgement for investment fund after three-day bench trial concerning commercial tenant’s breach of lease terms
• Representing hedge fund in litigation concerning asset valuation matters
• Secured eight figure, multimillion-dollar settlement payment for client in California-based arbitration proceedings concerning valuation of investment partnership asset
• Represented pension fund in matters concerning investment manager’s governance of investments
• Represented private equity fund in related parties’ dispute with investor over control of the target company, resulting in favorable settlement
• Represented U.S. bank and trust company in dispute concerning an investment trust’s significant losses caused by advisor’s unsuitable investments in risky and illiquid mortgage-backed securities, resulting in favorable settlement
• Represented a major manufacturer of consumer products in a trial brought by a supplier in federal court; at the conclusion of trial, obtained a directed verdict on the supplier’s claim of misappropriation of trade secrets; directed verdict was affirmed on supplier’s appeal before a federal appeals court
• Secured trial victory on behalf of an investment partnership after a lengthy trial in New Jersey state court; the client’s dispute arose with a municipality over the municipality’s decision to claim that a “PILOT” tax exemption was unenforceable, after having previously granted the tax exemption to the client, thereby unfairly subjecting the client to significant tax liability
• Secured judgment on behalf of investment partnership in California against plaintiffs’ claims in an involuntary bankruptcy proceeding; as part of the entry of final judgment, the court ordered that the opposing parties reimburse the client for all of Nixon Peabody’s attorneys’ fees
• Secured multimillion-dollar summary judgment award on behalf of investment limited partner in dispute with manager of tax credit partnership
• Secured dismissal of plaintiff’s lawsuit aimed at stopping development of multi-unit residential housing complex
• Secured trial victory in Massachusetts Superior Court on behalf of quasi-state agency, defending claims arising from eminent domain proceedings
• Defended nine pairs of Cayman Island and Delaware-based issuer/co-issuer defendants in a $100 million securities fraud case involving the sale of collateralized debt obligations (CDOs), resulting in a complete dismissal of the case
• Obtained dismissal of class action securities law claims against biopharmaceutical company and its directors, arising from merger agreement of two biopharmaceutical companies; class action plaintiffs brought multi-state actions alleging violations of the securities laws in an effort to stop the planned merger; the Delaware Chancery Court found in favor of the clients and against class plaintiffs in plaintiffs’ emergency motion for expedited proceedings, finding that class plaintiffs had no colorable claim
• Obtained summary judgment award in Massachusetts Superior Court for restaurant chain in zoning dispute that concerned approvals for electronic signage
• Obtained a favorable decision from the Massachusetts Supreme Judicial Court on behalf of corporate taxpayers, among others, in a first-of-its-kind claim alleging violation of substantive due process rights against the Department of Revenue
• Obtained permanent injunction in Massachusetts state court on behalf of global insurance and investment provider concerning a municipality’s unlawful decision to exclude certain investment providers from municipal employees’ retirement savings plan
• Advised European bank with respect to rights arising from investment in hedge fund that failed due to Madoff Ponzi scheme
• Advised European bank on its rights and obligations in role on liquidation committee of hedge fund that failed due to Madoff Ponzi scheme

/Looking ahead

Greater focus and development of environmental, social and governance (ESG) standards. As changes in the globe’s climate continue to progress and social issues take a larger stage in society, many investors now demand greater disclosure of ESG plans and practices. Indeed, the risks associated with ESG issues—damaging weather events caused by climate change, serious health events like endemics or even a global pandemic, and attention or inattention to issues of equality—all can affect corporate performance. We have a patchwork of standards now, but I expect that the SEC and other regulatory bodies will develop new standards to stay with the times, and begin to enforce those standards to meet investor calls for greater transparency.

/Insights

• “SEC investigations and litigation challenging municipal bond transactions,” Annual meeting of a leading bond counsel firm, April 29, 2021