Wednesday, February 22, 2006

Dura Can't Plug These Leaks And Dribbles

Magistrate Judge Andrew J. Peck (S.D.N.Y.) has recommended that Judge Lewis A. Kaplan (S.D.N.Y.) (featured in Monday's Brontosaurus article) certify the NTL securities class action. As Judge Peck noted, “the major issue on the motion is whether the named plaintiffs (Fleck and Cheyne) are typical or are subject to unique defenses based on loss causation issues.” In holding that they were not, “the Court finds that the class complaint adequately alleges that certain negative information about NTL leaked out during the class period, and thus the named plaintiffs can show loss causation and are not atypical.”

That's right, yet another Dura loss for Defendants (regular Nugget readers know the drill). Why you ask? Well, as Judge Peck put it, “because Lead Plaintiffs have made some showing that these disclosing events slowly revealed the false information regarding NTL and have tied some if not all of the dissipation in the value of NTL's stock to those events, they have adequately plead loss causation.” Of course, “some of that loss may be attributable to general stock market declines or decreases in NTL's stock price unrelated to the alleged fraud,” but “the Court cannot determine how much of Fleck's loss is attributable to the alleged fraud and how much is attributable to other factors for which defendants are not liable. But this same question will have to be determined for the class as a whole - it is not unique to Fleck (or Cheyne).”

So, “accordingly, Fleck's situation is typical of others in the class - a need to show the drop in NTL's share price during the class period was not attributable to general factors but to ‘dribbled’ disclosures or ‘leakage’ of truthful information regarding NTL's prior misrepresentations and/or omissions.”

You can read In re NTL, issued February 14, 2006, at 2006 U.S. Dist. LEXIS 5346.

Nugget: “Indeed, defendants' opposition to class certification on this ground essentially is a motion to dismiss on loss causation grounds.”

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