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Halliburton And KBR In Class Action

Plaintiffs lawyers have filed a state derivative class action suit against some of the officers and directors of Halliburton and its one-time subsidiary, KBR. The suit in Houston alleges all sorts of malfeasance -- including the Nigerian bribery that led to the companies' $579 million settlements of Foreign Corrupt Practices Act offenses in February this year. As the AmLaw's Litigation Daily put it, the defendants are accused of "everything from overbilling to human trafficking to covering up a gang rape."

There's no private right of action under the FCPA so private litigants seeking relief have to resort to other causes of action -- such as common law fraud, RICO, securities law violations or, as in this case, breach of fiduciary duties.

Why did the plaintiffs file their suit in state court? We're not sure, but a case decided last year could be part of the reason. In Glazer Capital Management v. Magistri, the Ninth Circuit raised the bar for federal class-action plaintiffs in FCPA-related litigation. The complaint against some of the officers of InVision Technologies under securities laws, the court said, didn't plead facts "that would either directly or indirectly give rise to a strong inference of scienter on the part of those officers responsible for making the false statements" about FCPA compliance in its disclosures. See our post, More Hurdles For Private Litigants.

The plaintiffs here allege that some of Halliburton's and KBR's officers and directors -- including former Chevron Corp. CEO Kenneth Derr and Robert Crandall, the former chairman of American Airlines -- breached their fiduciary duty to provide oversight, unleashing a corporate “reign of terror.” The complaint says: Under defendants’ watch, and supposedly under their control and supervision, the companies were permitted to engage in conduct so notorious that the name "Halliburton" has become virtually synonymous with "corruption.”

The named plaintiff in the suit is the Policemen and Firemen Retirement System of the City of Detroit pension fund.

Download a copy of the May 14, 2009 complaint in Policemen and Firemen Retirement System of the City of Detroit v. Cornelison here.

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