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Class Action Defense Cases—In re Lehman Brothers: Judicial Panel For Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District Of New York

Judicial Panel Grants Defense Request for Pretrial Coordination of Individual and Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Opposition of Majority of Plaintiffs, and Transfers Actions to Southern District of New York

Seventeen (17) individual and class actions – nine in New York, five Arkansas, two California and one in Arkansas – were filed against Lehman Brothers and various other defendants alleging that defendants had made materially false and/or misleading statements that negatively impacted the value of Lehman Brothers securities. In re Lehman Brothers Holdings, Inc., Securities & Employee Retirement Income Security Act (ERISA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 9, 2009) [Slip Opn., at 1]. Some of the class actions were “brought by securities holders seeking relief under the federal securities laws,” while other class actions were brought by “participants in Lehman Brothers’s retirement savings plans suing for violations of the Employee Retirement Income Security Act of 1974 [(ERISA)].” Id., at 2. Additionally, the Judicial Panel was advised that five related class actions had been filed, and it treated these class actions as potential tag-along lawsuits. Id., at 1 n.2. Defense attorneys for 10 of the individual defendants filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) seeking centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York, where 8 of the New York class actions were pending (with the remaining New York class action pending in the Eastern District); this motion was supported by responding defendants. Id., at 1. Plaintiffs in four of the class actions (3 in the Southern District of New York and the one in the Eastern District of New York) supported centralization of the other lawsuits, but requested that their actions “be coordinated, rather than consolidated, with the other actions in this litigation, because these plaintiffs’ actions (1) have distinct legal causes of action with different burdens of pleading and proof or (2) involve different types of securities.” Id. Plaintiffs in eight of the actions opposed centralization, “arguing that (1) their actions do not share sufficient questions of fact with the other actions in this litigation, and/or (2) motions to remand their actions to state court are pending.” Id.

The Judicial Panel granted the motion for centralization, finding that the individual and class actions involve common questions of fact and that “all actions can be expected to focus on a significant number of common events, defendants, and/or witnesses.” In re Lehman Brothers, at 1-2. Accordingly, pretrial centralization “will eliminate duplicative discovery; avoid inconsistent pretrial rulings, including on the issue of class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id., at 2. The Panel rejected concerns the concerns of some plaintiffs that the MDL proceeding would be difficult to manage because some of the actions involve different types of securities or legal claims, finding that centralization will permit the parties to litigate the common issues “in a streamlined manner leading to the just and expeditious resolution of all actions to the overall benefit of the parties” and that the transferee court may permit litigation involving “non-common issues” to proceed on a parallel track. Id. The Judicial Panel also determined that the Southern District of New York was the appropriate transferee court “because (1) eight of the seventeen actions are already pending there, and (2) Lehman Brothers is headquartered in New York City and accordingly parties, witnesses and documents may be found there.” Id. Accordingly, the Panel ordered the lawsuits centralized in the Southern District of New York, id., at 2-3.

Download PDF file of In re Lehman Brothers Transfer Order