The PSLRA Nugget

The Nugget is Moving to a New Home

noreply@blogger.com (Christopher S. Jones) — Wed, 03 Feb 2010 22:04:00 +0000

Please update your bookmarks, as the PSLRA Nugget is moving to a new easier to remember website address. Also if you are getting this by email, and you would like to continue getting it that way, you just need to go to the new site and do a quick sign-up on the right side of the page. So, effective immediately, it's located at www.pslranugget.com and all of the old articles have been transferred there. Hope to see you there.

Yes Shorter is Better (at least in legal briefing)

noreply@blogger.com (Christopher S. Jones) — Wed, 03 Feb 2010 04:58:00 +0000

OK, you know who you are. The serial page extension requesters. But Judge, we have to have 100 pages to explain it. I know, I know, we've all done it. And yes I agree sometimes it's necessary. But District Judge Joy Flowers Conti has a very good reason to resist the temptation of going page limit crazy. What's that? Well, as she has observed:

Counsel and the parties should be aware of the court’s experience that shorter briefs are almost always more persuasive because they get to the point faster. They also contain less extraneous material that dilutes the parties’ main arguments, and frequently interferes with prompt resolution.

So there you have it. As Blaise Pascal ( a brilliant writer skilled at humor, mockery, and vicious satire) said, "I made this letter longer than usual because I lack the time to make it short." Can't say it better (or should I say shorter) than that. Bet you can't either.

You can read the order here.

Nugget (I know you've missed it): Counsel should be aware that the court discourages reply briefs as usually repetitive and therefore wasteful. Reply briefs therefore should promptly state the novel matter contained in the opposition brief that merits a reply, and not merely assert that opposing counsel has misstated the law.

Confidential Sources Still Alive & Kicking

noreply@blogger.com (Christopher S. Jones) — Wed, 19 Mar 2008 01:54:00 +0000

What's that? You thought Tellabs banned confidential witnesses? Well, let's not get carried away here, as there's certainly at least two ways to read that opinion. Of course, after the 7th Circuit decided Higginbotham v. Baxter, it was beginning to look like you might actually be right. But Senior Judge Samuel Conti (Nixon '70) (yes I said 1970) chose to reject the Seventh Circuit and go with the Fifth Circuit's view on the subject, which says that Tellabs does not "presumptively preclude confidential sources."

But wait a minute. The Fifth Circuit (in Central Laborers' Pension Fund v. Integrated Electrical Services Inc., 497 F.3d 546 (5th Cir. 2007)), never mentioned Tellabs in its CW analysis, so how can that be you ask? It's because "although the Fifth Circuit did not discuss Tellabs in its analysis of confidential sources, the court was clearly aware of the Tellabs decision as evidenced by numerous citations to Tellabs in its lengthy discussion of the PSLRA pleading standards. Thus, Central Laborers' Pension Fund suggests that, contrary to the Seventh Circuit's conclusion, Tellabs does not presumptively prohibit confidential sources."

So overall result: Defendants' Motions to dismiss denied in full.

You can read the whole opinion on Acquirelaw™ at ND CA Acquirelaw 242205801 In re Secure Computing II Sec. Litig. (March 4th, 2008) (just type the number in the citation in any Acquirelaw search box to quickly retrieve the Order).

Nugget: "The Ninth Circuit has not yet spoken to the issue of whether confidential sources, if described with the requisite particularity, may give rise to the cogent and compelling inference of scienter required by Tellabs. Without guidance stating otherwise, this Court is unwilling to abandon the binding Ninth Circuit precedent of Daou for the reasoning articulated by the Seventh Circuit in Higginbotham."

No Mondays Puh-leeze

noreply@blogger.com (Christopher S. Jones) — Sun, 16 Mar 2008 17:56:00 +0000

Attorneys who voluntarily set Monday deadlines are just simply no fun. I mean, you get to pick the days, so why kill a future weekend? You know all the work gets done at the last minute, so nix those Mondays the next time your curmudgeon opposing counsel tries to get you to agree to one.

Well, we've located one Judge who agrees. In the Sourcefire securities class action, Judge J. Frederick Motz (Reagan '85) asked the attorneys to "confer with one another to agree upon a briefing schedule in the event that defendants decide to file a motion to dismiss. In your discussions, please agree upon deadlines that will have the effect of moving this litigation along expeditiously but avoid (1) Monday deadlines, and (2) deadlines that would have an adverse effect upon the holiday schedule of counsel on either side."

What's that? A Judge who actually is professional enough to care about attorney's personal and family lives? This Judge needs to talk to some of his brethren, as he (unfortunately for our families) sure seems in the minority.

You can read the whole letter on Acquirelaw™ at DD MD Acquirelaw 24686286 In re Sourcefire Sec. Litig. (D. Md. Sept. 4th, 2007) (just type the number in the citation in any Acquirelaw search box to quickly retrieve the Order).

Nugget: "Despite the informal nature of this ruling, it shall constitute an Order of Court, and the Clerk is directed to docket it accordingly.”

Reimbursement Denied

noreply@blogger.com (Christopher S. Jones) — Wed, 14 Nov 2007 02:09:00 +0000

Now this is entertainment (at least to me it is). And if you're a securities class action lawyer that's a word that might not enter your daily routine all that often. In the Motorola securities class action, Dr. Antonio Pagnamenta (Professor of Physics, emeritus at UIC), wrote a letter to the court which says (along with my annotations in Nugget green italics below of course):

Your Honorable Wise, and Most Hopefully Generous Judge Pallmeyer:

[A]s a member of the Class, I have carefully considered the entire situation so please don't waste your time repeating my extensive work, and then agreed to be a witness out of conviction that this was the right thing to do. I never expected any award for this as I am only concerned about others.

Only now, can you believe it, I have heard that you have awarded some money to the Class member witnesses for their efforts and, well, it's a lot so....

I am pleasantly surprised to say the least, but now please allow me to draw your attention, pardon the legalese, to my special situation:

I was travelling by CTA, because these professor salaries stink let me tell you, to my first interview at Fay Clayton's law office. I passed out and had a Fall so big that I capitalized it on the CTA station which I readily admit is the only part of this story that readers should feel compassion about.

In this I suffered considerable injuries to the right side of my face. Specifically, three teeth on my right side needed to get root canal work, in the amount of approx. $6000 and I knew I should have listened to mother and became an endodontist.

Medicare essentially covered my emergency and medical cost which is fortunate in light of my ridiculously low professor salary and pension. However, my dental work was referred to my dental insurance, which only covered $2000. These are approx, numbers, the exact amounts will be documented.

As I suffered these injuries because of my willingness to testify, I would not have had the accident if I had not gone to the law office which I am sure you will agree is a classic but-for situation. The doctors found no basic reason for this sudden fainting spell. I would appreciate it very much if the court could consider to reimburse me for my own out-of-pocket expenses of approx $4000, which are clearly the fault of the defendants in this class action.

The accident, the injuries, the expenses, all can be documented as soon as I am back in Chicago, within 10 days and if I pass out and hit my head while on the flight I would appreciate being reimbursed for that too, since if I hadn't agreed to testify I wouldn't have wrote this letter, and therefore wouldn't have left for the airport at the same time (see, e.g., A Sound of Thunder), and therefore it is also the direct fault of the defendants.

Respectfully submitted,
Antonio Pagnamenta
Professor of Physics, emeritus, and Professor of Confusing Cause and Effect

So I bet you're wondering, what did Judge Pallmeyer say? Well, she wrote back that "I am sorry to hear about your accident. Unfortunately, the court has no funds available to reimburse you for the expenses resulting from that accident."

You can read the letters, both dated August 10, 2007, on Acquirelaw™ at In re Motorola Sec. Litig., ND IL Acquirelaw 2022814382 (N.D. Ill. August 10th, 2007) (just type the number in the citation in any Acquirelaw search box to quickly retrieve the Order).

Nugget: The only other sentence in the Judge's response letter, and we at the Nugget, despite our jesting, wholeheartedly agree: “Best wishes for your complete recovery.”

The Look is Back

noreply@blogger.com (Christopher S. Jones) — Tue, 13 Nov 2007 04:14:00 +0000

I promise an article tomorrow, so in the meantime let me tell you that although the voting isn't closed yet it looks like the Acquirelaw™ Nugget will be be returning to its original color scheme. Even my long-time good friend and Super-Nugget fan (he is a top-notch securities class action investigator by the way if you are looking for one) Wolf at Worms & Hirsch told me straight up that the dark color scheme is one of the worst designs he has ever seen. (O.K, I guess I am paraphrasing, but that's not that far off). Adding insult to injury, my own spouse was one of those who voted it down, and both my Labradors started howling when they saw the screen. So enough already, you know what, forget the end of the vote, I'm putting it back the way it was now. Ah, now that's better, isn't it?

The Nugget Lives

noreply@blogger.com (Christopher S. Jones) — Thu, 08 Nov 2007 02:57:00 +0000

Hey, remember the Nugget? Yes, I’ve been gone for a while, but I’m back now. And you might notice I’ve got a shiny new name. It’s the Acquirelaw™ Nugget now instead of the PSLRA Nugget, but nothing else is going to change so don’t get yourself all upset. Well, more on that later, (and yes, my wife and I own Acquirelaw™) let’s try to get back in the swing of things here.

I’ve personally never seen this happen, but the Plaintiffs in In re Eli Lilly & Co. Sec. Litig. filed their “extensive” amended complaint under seal. Seems Judge Jack B. Weinstein (E.D.N.Y.) wasn’t too keen on that idea, as he quickly ordered “the parties to show cause why [it] should not be unsealed.” Plaintiffs said they didn’t mind unsealing it, but Defendants wanted redactions.

Judge Weinstein said that the complaint had to be unsealed, but since certain “documents cited within the complaint may contain trade secrets or confidential commercial information properly protected under subsection (c)(7) of Federal Rule of Civil Procedure 26,” he would allow the complaint to be “redacted” and “Special Master Woodin shall unseal such redacted documents as need no longer be sealed and they shall thereafter be filed with the complaint.”

You can read the Order, dated August 17th, 2007, on Acquirelaw™ at In re Eli Lilly & Co. Sec. Litig., ED NY Acquirelaw 242606290 (E.D.N.Y. August 17th, 2007) (just type the number in the citation in any Acquirelaw search box to quickly retrieve the Order).

Note re Judge Weinstein: He took the bench in 1967. In addtion, according to Wikipedia, "Judge Weinstein is also well-known for his personal, informal courtroom style (Weinstein conducts most hearings seated at a table in the middle of the courtroom with counsel, rather than from the bench, and often chooses to wear an ordinary business suit with no judicial robe)." Can any readers confirm whether this is true? Please let us know in the comment area below.

Nugget: “Access to judicial proceedings and documents is necessary for federal courts to have a measure of accountability and for the public to have confidence in the administration of justice.”

New Service for Securities Class Action Researchers

noreply@blogger.com (Christopher S. Jones) — Thu, 22 Feb 2007 04:04:00 +0000

Pssst… here’s a tip for you Nugget subscribers who just happen to be securities class action researchers. If your dream is to be able to word-search thousands of unpublished (and published) securities class action orders, opinions, and even minute entries check out the new service Acquirelaw™ at www.acquirelaw.com. I’m betting you won’t be sorry you did.

As for the Nugget, please be patient, I’ll get back in the swing of things soon. At least for this blogger, it’s a personal endeavor, so it’s something I do in my limited spare time, which lately has been very limited. Thank you for the many kind words from those of you who miss the Nugget’s ramblings – you make it all worthwhile, especially my favorite frequent commenters “Gary,” and “The Defense Bar,” whoever you are.

The Case that Just Won’t Die

noreply@blogger.com (Christopher S. Jones) — Fri, 09 Feb 2007 01:17:00 +0000

So let’s see, back in 1999, the Judge approved the settlement of the In re Paracelus securities class action, and entered final judgment. So why in the world are we reading a Memorandum Opinion issued in the case eight years later, you might ask? Well, it seems the settlement distribution process “took years,” with “lost checks,” and trying to “find claimants who were no longer at the addresses that had been provided.” So finally, “at the end of this process,” and after “approximately 1,400 claimants had received and cashed settlement funds,” a whopping $30,547.06 remained unclaimed.

So no big deal, right? Well, Lead Counsel proposed that the money be distributed to two designated charities, the Methodist Hospital Foundation and the Houston Volunteer Lawyers Program, invoking cy pres. Oh, but it’s not going to be that easy. The Judge said that “neither of the two designated charities was related to the class or its members,” and to make matters worse, “one charity was connected to the district judge, who promptly recused.” After reassignment, and a whole new round of briefing, along with a hearing, Judge Lee H. Rosenthal (S.D. Tex.) finally ordered that the money go to the “Institute of Law and Economic Policy, which will spend the money in a way that may indirectly and prospectively benefit the class members in the aggregate.”

Sheesh.

You can read In re Paracelus, issued February 6, 2006 at 2007 U.S. Dist. LEXIS 8316.

Nugget: “In the class action context the reason for appealing to cy pres is to prevent the defendant from walking away from the litigation scot-free because of the infeasibility of distributing the proceeds of the settlement (or the judgment, in the rare case in which a class action goes to trial) to the class members.”

Top Brass

noreply@blogger.com (Christopher S. Jones) — Mon, 13 Nov 2006 20:28:00 +0000

Plaintiffs can declare victory on the motion to dismiss the St. Paul Travelers securities class action, with Judge John R. Tunheim (D. Minn.) holding that “the facts alleged in the complaint, when taken as a whole, strongly suggest that the company's senior executives were aware that the financial statements issued during the class period were false or misleading when made.”

That’s because “the complaint alleges that the senior executives were aware that the financial statements neither accurately accounted for nor made sufficient disclosures regarding defendants' alleged participation in bid-rigging or misuse of finite reinsur-ance, and that “the alleged kickback scheme was so pervasive that the company named it the 'Top Brass' program, underwriters made false or 'B' bids on a regular basis to rig the insurance market, underwriters violated the company's underwriting policies to obtain large group insurance policies through the kickback program, senior executives had access to the Minnesota Department of Commerce Report that opined that the company had repeatedly violated its own underwriting policies, and the alleged misconduct accelerated after Jay Fishman became the CEO of the company.”

You can read In re St. Paul Travelers, issued September 25, 2006, at 2006 U.S. Dist. LEXIS 70261.

Nugget: “Investors need the complete picture to ensure that optimistic statements about a company's financial condition do not mislead investors."

Cut and Paste Nightmare

noreply@blogger.com (Christopher S. Jones) — Thu, 09 Nov 2006 23:30:00 +0000

You know it’s not going to turn out well for Plaintiffs when the Court says “at this juncture, the Court notes with great concern that Plaintiff includes the following as footnote 46 in its Opposition to Defendants' Motion to Dismiss.” What was the footnote, you ask? Well, here it is, and it seems fine, right?

“Defendant Warren signed the Form 10-Qs filed during the Class Period. (Complaint PP 149, 151, 153, 167, 169, 172, 184). The form 10-Ks were signed by defendants Hickey and Van Riper in 1999 (Compl. P143), by defendants Hickey, Van Riper and Warren in 2000 (Compl. P159), and by defendants Hickey, Kelsey and Warren in 2001.”

Oh, but I assure you, it’s not fine. Judge Harold A. Ackerman (D. N.J.) continued, lamenting that “this footnote caused the Court considerable confusion because, as noted above, the SAC makes mention only of Defendants Fass, Sternlicht and Bond.” So, “after a not inconsiderable expenditure of judicial resources, the Court discovered that footnote 46 was also, and more properly, included by Plaintiff's counsel as footnote 26 in its opposition brief to a motion to dismiss filed in Senn v. Hickey, No. 03-4372 (D.N.J. filed April 25, 2005), a case completely unrelated to the present action, with Plaintiff's counsel as the only common de-nominator.” Uh-oh.

You see, “in Senn v. Hickey, there were in fact defendants named Warren, Hickey, Van Riper and Kelsey; there are no such defendants in the instant action. This Court recognizes that the inherent nature of modern litigation and word processing lends itself to some ‘cut-and-pasting’ of boilerplate from one case to the next; this example of duplication, however, is not easily overlooked. The Court urges counsel to exercise greater diligence in its future filings.”

Result? Nothing to do with the footnote (I hope), dismissed with prejudice.

You can read In re Bio-Technology General, issued October 26, 2006, at 2006 U.S. Dist. LEXIS 81268.

Nugget: "The chasm this Court must traverse to reach Plaintiff's conclusion is simply too great."

Dura No Help to Sears

noreply@blogger.com (Christopher S. Jones) — Wed, 08 Nov 2006 22:36:00 +0000

The Sears securities class action was filed in 2003, but we’re still dealing with motions to dismiss. The third round of them actually. This time, it’s all about (our old friend) loss causation, with Judge Rebecca R. Pallmeyer (N.D. Ill.) taking on the Defendants’ Dura arguments -- and pretty much shooting them all down. As she put it, “to the extent Defendants suggest that Dura imposed stricter fact-pleading requirements for the economic loss and causation elements of an action under § 10(b), Defendants are mistaken.”

Judge Pallmeyer also commented that “Defendants' arguments are inconsistent,” and “more importantly, however, the kind of specificity the Defendants seek is simply not required at the pleading stage.”

You can read Ong v. Sears, issued October 18, 2006 at U.S. Dist. LEXIS 80294.

Nugget: “Dura has not abrogated Caremark or changed the law in the Seventh Circuit."

Picture This

noreply@blogger.com (Christopher S. Jones) — Wed, 08 Nov 2006 00:11:00 +0000

Well, there goes the Eastman Kodak securities class action, and yes I mean with prejudice. Why? Because Judge Michael A. Telesca (W.D.N.Y.) says “that Kodak's warnings not only alerted investors of potential problems with changes in Kodak's products, but also informed investors that the company was then currently facing the very problems identified in the Complaint.”

So “because the ‘total mix’ of information available to potential investors clearly informed investors that Kodak's plans were subject to risks, and clearly informed investors of the nature of those risks, the allegedly false and misleading statements made by the defendants during the class period are not material, in that based on a totality of the information, the risks that plaintiffs claim were concealed were disclosed, and no reasonable investor would have been misled.”

You can read In re Eastman Kodak, issued November 1, 2006, at 2006 U.S. Dist. LEXIS 79879.

Nugget: "Therefore, the court, while bound to accept plaintiffs' factual allegations as true, is not required to accept the plaintiffs' conclusions or inferences based on those facts."

Try and Try Again -- and You Still Won't Succeed

noreply@blogger.com (Christopher S. Jones) — Fri, 03 Nov 2006 03:16:00 +0000

You may remember the article I wrote back in March about the Invision Technologies securities class action. That article, entitled Try Try Again, featured Judge Martin J. Jenkins (N.D. Cal.) gleefully (OK, I added the gleefully part) tossing the case. At the time, I commented that “all may not be lost,” as “Judge Jenkins is going to allow Plaintiffs to submit another amended complaint, but warned that ‘vague assertions and allegations, scattered throughout Plaintiffs' Complaint will not serve to meet their PLSRA burden.’”

Well, here we are in Round II, and Judge Jenkins sure doesn’t seem satisfied. In throwing the case out for good, he says that “for obvious reasons it would have been impossible for Defendants to have disclosed violations that they were not aware of,” and “as a matter of logic it makes little sense to read Defendants' statement as affirming the non-existence unknown violations.”

I’d tell you more, but what’s the point really? This goose appears cooked.

You can read In re Invision, issued August 31, 2006 at 2006 U.S. Dist. LEXIS 76458.

Nugget: “Plaintiffs have plead no specific allegations indicating that Defendants knew of facts at the time that this statement was made such that it would render this statement false.”

Trex Chilled

noreply@blogger.com (Christopher S. Jones) — Thu, 02 Nov 2006 02:56:00 +0000

Looks like Plaintiffs didn’t fare too well in the Trex securities class action. Reading the opinion, it seemed as if Judge Glen E. Conrad (W.D. Va.) (who was appointed a U.S. Magistrate Judge in 1976 at age 27, and elevated to Article III status in 2003) rejected their complaint on nearly every point imaginable, as he concluded “that the facts and circumstances alleged in this case are not such as to support a departure from the general rule that puffing and forward looking statements do not constitute misstatements or omissions of material facts for purposes of the PSLRA.”

He continued, “as for plaintiffs' claims which arguably implicate statements of present fact, the court concludes that, when read in context with other statements and information made available to the investing public, no reasonable investor could have been misled. To hold otherwise, would create unreasonable reporting requirements that would discourage and chill meaningful communication by corporate officers.”

You can read In re Trex, issued October 6, 2006 at 2006 U.S. Dist. LEXIS 73503 or here.

Nugget: “Even assuming that the accused statements and/or omissions could be viewed as false or misleading, the court concludes that the facts and circumstances alleged by plaintiffs do not give rise to a viable inference of scienter.”

Objectors Rebuffed

noreply@blogger.com (Christopher S. Jones) — Thu, 26 Oct 2006 03:07:00 +0000

So after "four years of vigorous litigation and two weeks of jury trial, the parties in" the AT&T securities class action settled the case for $ 100 million." Sounds pretty darn good, right? Not to certain objectors. But it looks like they pushed Judge Garrett E. Brown, Jr. (D. N.J.) to the end of his rope, as he found that "Objectors' Counsel fail to show that they improved the Class's recovery in any way," and that "the objections and the subsequent appeal were without merit and failed to improve the Class's recovery in any manner."

In fact, he said that "the Objectors' actions appear to have impeded the Class's recovery -- their objections and subsequent appeal resulted in wasteful litigation and delayed the distribution of funds to the Class. To date, those funds have not yet been distributed."

Looks like that's that. Finally.

You can read In re AT&T, issued September 25, 2006, at 2006 U.S. Dist. LEXIS 69086.

Nugget: "As a preliminary matter, the Court notes that Defendants suggest, in their opposition brief, that Objectors' Counsel should be made to pay expenses and attorneys' fees pursuant to 28 U.S.C. § 1927. (Defs.' Br. at 12-14.) Defendants have not, however, filed a motion seeking such relief, and the Court will therefore consider only the application for fees filed by counsel for Objectors' Counsel."

Judge Ponders PayDay

noreply@blogger.com (Christopher S. Jones) — Mon, 23 Oct 2006 02:13:00 +0000

OK, the Nugget has been AWOL for a bit, but that’s nothing compared to how long the Cabletron securities class action has been pending. You see, as Judge William E. Smith (D. R.I.) explains, “the case, approaching its tenth year in the judicial system, has traveled from New Hampshire to Rhode Island, through various district judges' chambers, to the Court of Appeals and back, finally landing with this writer in late 2002."

And it looks like – it’s finally over, and if you’re looking for an extensive, academic, and real-world analysis of attorney fee awards in securities class actions, this is your opinion. Want a taste? How about, “the Court is persuaded, based on… the emerging trend in district courts nationwide, that the better approach to awarding attorneys' fees is the Percentage of Fund method.” That’s because “a lodestar cross-check may also be useful; however, it is unclear to this Court where the precise lines of "reasonableness" would be drawn if the lodestar cross-check was mandatory (Is .5 too low? Is 2.5 too high?).” “This Court is not required to decide whether the cross-check is an ethical imperative, nor to define the parameters of lodestar reasonableness; rather, it is sufficient to conclude that when the lodestar cross-check is applied to the fee award in this case, it raises no reasonableness concerns.”

Check out the opinion for more fee talk. You’ll likely be surprised at the conclusion.

You can read In re Cabletron, issued October 12, 2006, at 2006 U.S. Dist. LEXIS 76278.

Nugget: “The Court challenged numerous expenses contained in Plaintiffs' original submission. As a result, Plaintiffs modified their reimbursement request to reflect the removal of various questionable items such as multiple filing fees and premiums on administrative expenses. The amount described in this Order is the amended request.”

Auditor Can't Escape ANR Action

noreply@blogger.com (Christopher S. Jones) — Thu, 21 Sep 2006 16:59:00 +0000

KPMG Bermuda has lost it’s bid to be dismissed from the ANR securities class action. Senior Judge Ellen Bree Burns (D. Conn.) (pictured left) evaluated the audit firm’s alleged knowledge and intent, holding that “repeated restatements can… raise an inference of scienter.”

The other prong of her opinion addressed materiality, with Judge Burns finding that KPMG Bermuda’s audit opinions, which said that “ANR's financial statements fairly represented its financial position and were created in accordance with GAAP,” “were relied upon by investors making their investment decisions,” and “thus, plaintiffs have adequately pled the existence of material misrepresentations made by KPMG Bermuda.”

You can read Schnall v. ANR, issued August 30, 2006 at 2006 U.S. Dist. LEXIS 61898

Nugget: “While allegations of GAAP and GAAS violations alone are generally not sufficient to create a strong inference, of reckless behavior, where plaintiffs have alleged facts showing that there were numerous red flags that KPMG must have been aware of, if it were conducting any kind of audit, reckless conduct can be, and has been, inferred.”

Shotgun City

noreply@blogger.com (Christopher S. Jones) — Tue, 19 Sep 2006 14:59:00 +0000

The Eleventh Circuit has ruled in the First Horizon securities class action. But before we get to that, it helps to know that before the case got to the Court of Appeals, the District Judge (after throwing out Plaintiffs’ amended complaint), told Plaintiffs that if they wanted to file a motion to amend, they’d have to pay all of Defendants costs and fees associated with the motion to dismiss. Hmmmm, let’s see. Uh, nope, said the Plaintiffs, instead appealing the ruling.

Well, that appeal has now led to an opinion, authored by Circuit Judge Stanley F. Birch (pictured). In it, the Panel says that “the defendant is a no good defrauder.” Strong language, huh? Actually, the Panel uses that language in a rhetorical sense, ruling for Defendants by accepting the sound-in-fraud argument “when the facts underlying the misrepresentation at stake in the claim are said to be part of a fraud claim, as alleged elsewhere in the complaint.” However, before some of you start to get carried away, the Panel did make clear that they do not intend to “elevate the pleading standard when the claim is not alleged to have been part of another fraud-based claim.” So kind of where we were – don’t allege fraud in your ’33 Act claims.

And here’s another thing not to do if you’re a Plaintiff. The Panel held that “the complaint at issue in this case is a proverbial shotgun pleading,” which to them is a complaint that “incorporate[s] every antecedent allegation by reference into each subsequent claim for relief or affirmative defense.” In other words, how and exactly what you incorporate from the body of the complaint into the Counts is important – especially in the Eleventh Circuit. So if you’re drafting an amended complaint right now, do yourself a favor and read this opinion carefully. Otherwise, you could be responsible for a Nugget article you won’t like.

Oh, and as for the cost and fee thing, the Panel said it chooses to “strike a different path,” concluding that they “disagree that dismissal was the appropriate course of action for the district court to take at this juncture in the litigation,” because things seem “more clearly in Rule 12(e)'s remedy of ordering repleading for a more definite statement of the claim, rather than in Rule 12(b)(6)'s remedy of dismissal for failure to state a claim.” So, “given the district court's proper conclusions that the complaint was a shotgun pleading and that the plaintiffs' failed to connect their causes of action to the facts alleged, the proper remedy was to order repleading sua sponte.”

You can read Wagner v. First Horizon, issued yesterday, here.

Nugget: “Shotgun pleadings wreck havoc on the judicial system. Such pleadings divert already stretched judicial resources into disputes that are not structurally prepared to efficiently use those resources.”

How Do You Like Us in Bold?

noreply@blogger.com (Christopher S. Jones) — Tue, 12 Sep 2006 03:40:00 +0000

Having been dismissed once back in February 2006, Judge Marilyn Hall Patel (N.D. Cal.) (pictured) gave Plaintiffs in the iPass securities class action another chance. So what did they do? Well, I’m not sure what might have gone wrong, but Judge Patel says “Plaintiffs have merely changed the typeface in their amended complaint.” Is this really for real? Really? Wow, I couldn't see the true falsity before, but now that I read it in 14 point Bolded Palatino Linotype, it's so clear. I'm going to deny the individual defendants' motions to dismiss in full, and suggest to counsel that if they'd gone all out with the BlackAdder ITC fully-loaded 16 point, I'd have even kept those nasty auditors in this thing. But guess what? It didn’t work. I mean it really didn’t work.

In all fairness, it seems there were other changes to the second amended complaint, but they did about as much good as the ill-fated font switch (or whatever the actual typeface change actually was), with Judge Patel topping it all off by noting that Plaintiffs “failure to meet their pleading burden despite the Court's Order having laid out a clear blueprint for doing so suggests that amendment would be futile.”

Result? Dismissed with prejudice.

You can read In re iPass, issued September 6, 2006, at 2006 U.S. Dist. LEXIS 63654.

Nugget: “If anything, sale to repay a loan is more probative of good faith than bad, as it provides a reason for the sale wholly independent of future business difficulties.”

Posner Prose

noreply@blogger.com (Christopher S. Jones) — Fri, 08 Sep 2006 02:27:00 +0000

Classic Judge Posner. Just classic. I never get tired of reading his opinions, and believe you me I get tired of many of them quick. So, listen to this from yesterday’s Seventh Circuit opinion in the AT&T/Georgeson class action. You see, as he puts it, “after you buy a car and drive away with your new possession, much can happen to affect the value of your purchase. If what happens is traceable to something that occurred before the sale was complete, such as a defective engine block, you may be able to undo the sale on the basis that that something happened ‘in connection with’ the sale. But if something happens after the transaction is complete to make it less worthwhile to you, such as the dealer's replacing a tire that has worn out with one that is the wrong size, it is a separate wrong, not anything connected with the original sale unless the wrong is a breach of warranty.”

But “of course there is a literal sense in which anything that happens that would not have happened but for some prior event is connected to that event. In that sense the fraud of which the plaintiff complains is connected to the merger, without which there would not have been such a fraud against the plaintiff and her class. But in the same sense the fraud is connected to the Big Bang, without which there would never have been a MediaOne or even an AT&T.”

There’s more where that came from, so if you like Posner (Yeah!), or you really can’t wait to read another SLUSA case (until now, always a big Zzzzz), you can read the opinion or listen to the oral argument in Gavin v. AT&T & Georgeson, issued September 6, 2006, right here.

Nugget: “Georgeson's lawyer told us that the defendants had not sought removal on the alternative ground of diversity because they were certain there was jurisdiction under SLUSA. That was a mistake, but he added that he doubted that the plaintiff's complaint satisfied the requirement that the amount in controversy exceed $ 75,000. That was another mistake.”

Let the Money Do the Monitoring

noreply@blogger.com (Christopher S. Jones) — Wed, 06 Sep 2006 01:42:00 +0000

Judge William J. Haynes, Jr. (M.D. Tenn.) (pictured here during his 2004 Senate confirmation hearing) says that "to be sure, the plaintiff with the larger numeric loss is not automatically the plaintiff with the ‘largest financial interest’.” But “as to the Peoria Fund's various arguments” in the American Service Group securities class action, he reminded everyone that “it must be remembered that ‘[t]he manifest intent of the (PSLRA) is determining the Plaintiff most capable of pursuing the action and representing the interests of the class,’” and that “this standard has been described as "let the money do the monitoring.”

So, “given MARTA's losses, its assets and the limited number of Plaintiffs seeking lead plaintiff status, the Court does not ascertain any practical need for an alternate method for determining the largest financial interest nor for the appointment of co-lead plaintiffs.”

You can read In re American Service Group, issued August 28, 2006 at 2006 U.S. Dist. LEXIS 61779.

Nugget: “If, later in this litigation, good cause is shown to revisit this issue, any plaintiff may move the Court for reconsideration of its appointment of the lead plaintiff.”

Two Little Birds, One Big Stone

noreply@blogger.com (Christopher S. Jones) — Fri, 01 Sep 2006 01:32:00 +0000

Judge Lance M. Africk (E.D. La.) (George W., Class of ’02) combined his rulings on the motions to dismiss the US Unwired securities class action and the derivative case. You see, after tossing the derivative case on a standing issue, it all came down to safe harbor and loss causation, with Judge Africk first finding that “beyond the blanket assertion by plaintiff that defendants knew that these statements were false when they were made, the Court can find no other suggestions of this alleged fraud.”

As for Dura, chalk this one up for the defense, as Judge Africk held that the Amended Complaint’s “Truth Begins to Emerge," section “failed to detail the statements made during the class period that would have revealed the truth about defendants' alleged misrepresentations and shown these misrepresentations to be the proximate cause of plaintiff's losses.”

So that’s it, right? Well, maybe not, as the dismissal was entered without prejudice. Remains to be seen if Plaintiffs will take another shot and amend.

You can read Romero v. US Unwired, issued August 11, 2006, at 2006 U.S. Dist. LEXIS 60589.

Nugget: “To establish the requisite causation, the truth regarding a defendant's putative misrepresentations must come to light.”

Waiting Game

noreply@blogger.com (Christopher S. Jones) — Tue, 29 Aug 2006 12:56:00 +0000

No new securities class action decisions came out over the past two days, so I'm just waiting on one. I'm also waiting on Ernesto, so if there's no posts later this week it's because there's no power where I live in Boca Raton, South Florida. Looks like it's going to be a (relatively) small storm, but you never know. Believe me, I'm certain that the power poles here in Florida are made of solid Gingerbread.

Tell it to the Jury Guys

noreply@blogger.com (Christopher S. Jones) — Sun, 27 Aug 2006 19:20:00 +0000

It’s been a while since I wrote about Dura (O.K., all-right, or anything at all – that was a cheap shot by the way), as my fingers were tiring from reporting on all those failed motions to dismiss, and my intracranial pressure was at dangerous levels from reading one-too-many defense oriented articles about how Dura changed the world (when, unless you’ve eaten some magic mushrooms, which I hear are quite delicious, it changed virtually nothing except you can no longer allege price inflation by itself – a result that’s completely logical to me).

Anyway, a new Dura opinion has been issued by Judge Michael M. Baylson (E.D. Penn) (George W. Bush, Class of ‘02) (pictured), and it’s a must-read for you loss causation groupies. In a nutshell, Judge Baylson told the Defendants that couldn’t have summary judgment based on Dura, but they could ask a jury to decide the issue instead. Gee, thanks a lot, just what we need here at CIGNA, a jury of our “peers.”

So, after sorting out the battle of the experts, Judge Baylson held “that (1) Dura Pharmaceuticals does not compel a fundamental change in the way this Court should analyze proof of economic loss; (2) at this time it is not be appropriate to adopt the investment model advanced by Defendants to measure economic loss under the federal securities laws; (3) one of several methods used by courts prior to Dura Pharmaceuticals to analyze and quantify economic loss and damages is a transaction-based methodology; (4) applying that methodology, SERS has a viable claim for economic loss based on particular shares held at the end of the class period; and (5) there are disputes of material fact related to economic loss and damages that make summary judgment particularly inappropriate; and (6) a jury should be permitted to make relevant factual determinations for the purposes of calculating damages.”

So the Nugget lives. It’s good to be back.

You can read In re Cigna, issued August 18, 2006, at 2006 U.S. Dist. LEXIS 59915.

Nugget: “Granting summary judgment on the present record would deprive the Plaintiffs of their constitutional right under the Seventh Amendment to have a jury decide all issues concerning the award of damages.”