Class Action Defense Blog

Court Holds Allegations in Securities Class Action Fail to Meet Heightened Pleadings Requirements Mandated by FRCP Rule 9(b) and the PSLRA (Private Securities Litigation Reform Act of 1995), and Denies Plaintiffs Request To Rule on its Year-Old Remand Motion as Untimely

Plaintiff investors filed separate putative class actions against New York Community Bancorp (NYCB) and several of its officers alleging violations of federal securities laws by making materially false and misleading statements to investors. In re New York Community Bancorp, Inc., Securities Litig., 448 F.Supp.2d 466, 469 (E.D.N.Y. 2006). The federal court eventually consolidated 11 such class action lawsuits, and appointed lead plaintiff and lead counsel. Following the filing of a Consolidated and Amended Class Action Complaint, defense attorneys filed a motion to dismiss and certain plaintiffs filed a motion for reconsideration of the consolidation order. Id. The district court denied the motion for reconsideration and granted the defense motion to dismiss.

The amended class action complaint alleged violations of the Securities and Exchange Act of 1934 (“Exchange Act”) and the Securities Act of 1933 (“Securities Act”) on behalf of NYCB shareholders. In re New York Comm. Bancorp, at 469. NYCB went through a period of substantial earnings growth and acquired several financial institutions, building "a unique and profitable core lending business comprised of multi-family mortgage loans." Id., at 470. Over time, however, market conditions changed and NYCB expanded into a " risky, but common, leveraging strategy involving mortgage-backed securities known as the 'carry trade.'" Id. The complaint alleged that NYCB diverted increasingly large sums away from conservative investments and to carry trade investments, but continually held itself out as a risk-adverse, conservative community bank. Id., at 471. The court summarized the material allegations of the complaint as follows: "In particular, the Plaintiffs allege that the Defendants: (1) falsely represented that NYCB was uniquely able to thrive in an environment of rising interest rates and that its business prospects remained strong; (2) highlighted a false strategy of deleveraging following the acquisition of Roslyn; and (3) failed to adequately disclose the extent of the risks of the carry trade activity." Id.

The court first addressed the motion for reconsideration, which additionally sought to reinstate a motion that the plaintiffs had filed more than a year earlier to remand to state court one of the class action lawsuits. In re New York Comm. Bancorp, at 474. Plaintiffs had filed their class action in state court, and the defense removed the lawsuit to federal court. Plaintiffs filed a motion to remand arguing that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) prohibits removal of cases based exclusively on the Securities Act. When the federal court consolidated the 11 securities class actions, it did not specifically address the remand motion but the practical effect of the court's ruling was to deny the motion. Id., at 475. In evaluating the plaintiffs' motion, the district court concluded that even though claim of improper removal appears to have merit, id., the fact remained that plaintiffs' motion was too late, id., at 475-76.

Continue reading "Class Action Defense Cases-In re New York Bancorp: New York Federal Court Grants Defense Motion To Dismiss Securities Class Action And Rejects Plaintiffs' Meritorious Remand Motion As Untimely" »

Posted In: Removal & Remand, Class Action Court Decisions, PSLRA/SLUSA Class Actions

Class action defense attorneys in California will continue to confront more labor law class action cases than any other category, but public accommodation/ADA (Americans with Disabilities Act) cases made a strong showing this past week. In an effort to assist class action defense attorneys in anticipating the claims against which they may have to defend, we provide weekly, unofficial summaries of the legal categories for new class actions filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. Employment law cases routinely lead the list and usually do so by a wide margin, but this past week class actions alleging public accommodation/Americans with Disabilities Act (ADA) claims ran a close second.

This report covers the time period from November 13 – November 16, 2006. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 44 class action lawsuits were filed in these California state and federal courts during that time period, of which 15 (34%) involved employment-related claims. New public accommodation/ADA class action lawsuits came in second with 11 new filings (25%). The third place category consists of 7 new unfair competition claims, which include unfair business practices and false advertising claims (16%).

Posted In: Class Actions In The News

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. In three separate and brief sections, Congress set forth the statutory provisions concerning limitations on actions under the Securities Act of 1933, 15 U.S.C. § 77m, and the liability of controlling persons under the Act, 15 U.S.C. § 77o, and provided that the statutory provisions of the Act – as well as the rules and regulations of the Commission in furtherance of the Act – may not be waived, 15 U.S.C. § 77n. These three sections state in full:

§ 77m. Limitation of actions

No action shall be maintained to enforce any liability created under section 77k or 77l(a)(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 77l(a)(1) of this title, unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 77k or 77l(a)(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.

Continue reading "15 U.S.C. § 77m-77o--Limitation Of Actions, Contrary Stipulations And Liability Of Controlling Persons Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress provided for civil liability in connection with prospectuses and communications in 15 U.S.C. § 77l, which provides:

§ 77l. Civil liabilities arising in connection with prospectuses and communications

(a) In general

Any person who--

(1) offers or sells a security in violation of section 77e of this title, or

(2) offers or sells a security (whether or not exempted by the provisions of section 77c of this title, other than paragraphs (2) and (14) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission,

shall be liable, subject to subsection (b) of this section, to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

Continue reading "15 U.S.C. § 77l--Civil Liabilities Arising In Connection With Prospectuses And Communications Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

Louisiana Federal Court Holds Concurs with Defense that Class Action Claims Against Vioxx Manufacturer on Behalf of Foreign Citizens may be Adjudicated Outside the United States

After Merck removed Vioxx from the market in September 2004, thousands of lawsuits were filed in state and federal courts, ultimately leading to centralization by order of the Judicial Panel on Multidistrict Litigation to the Eastern District of Louisiana. These lawsuits included not only class action filings, but 11 lawsuits on behalf of residents of other countries, including Italy and France. In re Vioxx Prods. Liab. Litig., ___ F.Supp.2d ___, 2006 WL 2504353, *1-*2 (E.D.La. August 30, 2006). Defense attorneys moved to dismiss the foreign class actions on grounds of forum non conveniens. Id., at *2. The parties stipulated that the federal court should limit its analysis to Italian and French class actions, and the district court granted the defense motion and dismissed the class action complaints. Id.,

In support of the motion to dismiss, defense attorneys argued that Vioxx had been regulated extensively in Italy and France, and that regulators in both countries "required that certain warnings and packaging information be included." In re Vioxx, at *2. Also, local physicians had prescribed Vioxx to the Italian and French citizens allegedly injured, and the product had been purchased and used, and the putative class members treated for any resulting injuries, in those countries. Id. Plaintiffs countered that Merck "designed, tested, and manufactured" Vioxx in the United States, and orchestrated worldwide distribution from within the United States. Id., at *3.

Continue reading "Class Action Defense Cases-In re Vioxx Products: Federal Court Grants Defense Motion To Dismiss Class Action Claims On Behalf Of Residents Of Italy And France On Grounds Of Forum Non Conveniens" »

Posted In: Class Action Court Decisions

Latest Defense Verdict Weighs Heavily Against Class Action Treatment of Vioxx Claims

The verdict is in on Merck's eleventh Vioxx trial, and a Louisiana federal jury agreed with defense attorneys that a Utah bank manager who suffered a heart attack after using Vioxx for almost a year had not established Vioxx caused his injury. Defense attorneys argued that the manager had used the drug for less than one year and had stopped using the drug four days before he suffered his heart attack. Importantly, the federal trial was before U.S. District Court Judge Eldon Fallon, who will ultimately rule on a pending motion to certify a Vioxx class action against Merck. Merck's defense attorneys wisely have argued that each case should be tried individually, and have pressed to have cases tried in advance of any class action determination. The outcome of those cases weighs heavily against class action treatment. The most recent verdict comes in Merck's fourth federal action - Merck's defense team is now ahead three to one in federal court. Judge Fallon has presided over all four federal trials. Merck has tried seven state court actions, winning three, losing three and facing a retrial in the remaining action.

The next federal trial against Merck is scheduled for November 27, 2006; Judge Fallon will again serve as presiding judge. The range of factual differences and the differing focus of the expert testimony across the federal cases may well persuade Judge Fallon that the lawsuits are not suitable for class action treatment.

Posted In: Class Actions In The News

Federal Common Law Exclusively Governs Interpretation of Insurance Policies Issued Under National Flood Insurance Program (NFIP) and Federal Law does not Recognize Breach of Fiduciary Duty or Breach of Implied Covenant Claims Thus Supporting Defense Motion to Dismiss Those Claims for Relief in Class Action Complaint

Homeowners filed a putative class action in Maryland federal court against various insurance companies for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty arising out of the issuance of flood insurance under the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA). The class action complaint alleged that plaintiffs suffered damage following Hurricane Isabel in 2003, that they settled their policy claims for amounts below policy limits, and that defendants breached their contractual obligations under the insurance policies. Howell v. State Farm Ins. Cos., ___ F.Supp.2d ___, 2006 WL 2664379, *1 (D.Md. September 15, 2006). Defense attorneys moved to dismiss the second and third claims for relief under Rule 12(b)(6); the district court granted the motion holding that federal law does not recognize those claims.

Preliminarily, the federal court held that whether the class action complaint could assert claims for breach of the implied covenant or breach of fiduciary duty turned on federal law because "'federal common law alone governs the interpretation of insurance policies issued pursuant to the NFIP,'" Howell, at *2 and n.12 (citation omitted). However, neither the National Flood Insurance Act of 1968 nor FEMA regulations create such claims for relief, and "the Court has been unable to find any case law creating such a right under federal common law." Id. On the contrary, federal courts have consistently refused to recognize the existence of such claims. Id. Accordingly, the district court granted the motion to dismiss the second and third counts in the class action complaint. Id.

Posted In: Class Action Court Decisions

By Holding Itself Out as Operating in Massachusetts and by Drafting Membership Contract in Dispute Bally Subjected Itself to the Jurisdiction of the Massachusetts Federal Court, but Membership Contract was not Unlawful Thus Warranting Dismissal of Class Action Complaint

Plaintiff filed a putative class action in Massachusetts state court against Bally Total Fitness and Holiday Universal (a subsidiary of Bally) alleging common law and various consumer protection law violations arising out of a health club membership contract she signed that required payment of a $1565 membership fee plus dues of $8 per month. The membership fee could be financed at 14.75% interest for 36 months. If a customer canceled her membership within that 36-month period, she need no longer pay the monthly dues but she remained liable for the entire membership fee. The Contract also contained a provision limiting the liability of the health club “for the loss or theft of, or damage to, the personal property of members or guests.” Ruiz v. Bally Total Fitness Holding Corp., 447 F.Supp.2d 23, 25-26 (D. Mass. 2006). After defense attorneys removed the case to federal court on grounds of diversity jurisdiction, the defense moved to dismiss the class action for failure to state a claim, and argued also that the court lacked personal jurisdiction over Bally. Id., at 25. The district court held that it had personal jurisdiction over Bally, but granted the defense motion to dismiss the class action for failure to state a claim.

With respect to the personal jurisdiction claim, the federal court recognized that jurisdiction over a subsidiary does not establish jurisdiction over the parent company. The district court held at page 27, "In consideration of 1) the requirement that [plaintiff's] evidence of jurisdiction be accepted at face value, 2) the fact that Bally has held itself out as a company operating in Massachusetts and 3) the fact that the dispute in this case concerns a form membership contract that, in all likelihood, was developed by the parent corporation and not Holiday, the Court concludes that plaintiff has adequately demonstrated a basis for this Court's exercise of personal jurisdiction over Bally."

Continue reading "Ruiz v. Bally-Class Action Defense Cases: Massachusetts Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Jurisdiction But Grants Defense Motion To Dismiss Class Action For Failure To State A Claim" »

Posted In: Class Action Court Decisions

Ameet Sachdev of the Chicago Tribune reports that Cook County Circuit Judge Nancy Arnold has delayed approval of a three-year-old stockholders class action against Boeing because of the federal court indictment handed down against lead plaintiffs' counsel Milberg Weiss Bershad & Schulman. After the settlement had been submitted for her approval, Judge Arnold required that the six named plaintiffs appear in court and testify as to how they became plaintiffs in the case, including when the became Boeing stockholders and the amount of stock that they owned. Sachdev explains that while there is nothing overtly improper about the plaintiffs' behavior, "the judge's suspicions were aroused this summer after one of the plaintiffs' law firms, Milberg Weiss Bershad & Schulman, was indicted on federal charges of paying kickbacks to people to serve as plaintiffs in class-action lawsuits, just weeks before a settlement was proposed in the Boeing case." While the firm and its indicted named partners, Bershad and Schulman, have denied any wrongdoing, one of its clients has pleaded guilty to receiving $2.4 million in kickbacks. Judge Arnold may reject the settlement if she concludes that such misconduct occurred in this case.

Sachdev reports that this is but one more blow to the once-powerful class action plaintiffs law firm. "The fallout from the indictment is being felt in courtrooms around the U.S. In Minnesota, a federal judge removed Milberg Weiss from a leadership role in cases accusing Medtronic Inc. of selling faulty heart devices. [¶] In New York, the state's comptroller fired the firm, which was representing New York's public employee pension fund as lead counsel in a case against pharmaceuticals giant Bayer AG. Ohio's public pension fund also axed Milberg Weiss."

Ameet Sachdev's article, entitled "Milberg case put on hold: Judge orders review of Boeing suit after law firm indicted," may be found in the Business Section of the November 13,. 2006 edition of the Chicago Tribune.

Posted In: Class Actions In The News

Massachusetts Federal Court Agrees With Defense that Post-CAFA Amendment of Class Action Complaint Rendered Suit Removable But Rejects Defense Claim that CAFA Shifts Burden of Proof to Plaintiff to Prove Remand is Warranted

Plaintiff filed a putative class action in Massachusetts state court against Bayer, Crompton Corporation and Uniroyal Chemical on February 10, 2005, alleging a conspiracy to fix prices on certain rubber and urethane products. Plaintiff amended the complaint in May 2005, and defense attorneys consented to the filing of a second amended class action complaint on February 6, 2006. Defense attorneys then removed the action to federal court on February 10, 2006, under the Class Action Fairness Act of 2005 (CAFA). Moniz v. Bayer A.G., 447 F.Supp.2d 31, 32-33 (D.Mass. 2006). Plaintiff filed a motion to remand the action to state court.

CAFA became effective on February 18, 2005. As a preliminarily matter, the federal court rejected the defense claim that CAFA shifted the burden of proof to the plaintiff to demonstrate that remand is warranted. Moniz, at 33-34. As the district court explained at page 34, “the clear majority of courts that have addressed the issue have held that, even where CAFA applies, the burden of proof on a motion to remand remains with the removing party because the text of the statute says nothing about changing that long-standing rule.”

Continue reading "Moniz v. Bayer-Class Action Defense Cases: Defense Removal Of Class Action To Federal Court Proper Under CAFA (Class Action Fairness Act of 2005) Because Of Post-CAFA Amendment To Class Action Complaint Massachusetts Federal Court Holds" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

FLSA Class Action Certification within Court's Discretion Even if Supported by only "Minimal Evidence" Virginia Federal Court Holds and Conditionally Certifies Class Action Subject to Defense Motion for Decertification Following Discovery

Plaintiffs filed a class action against their employers (see Note) alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Choimbol v. Fairfield Resorts, Inc., 475 F.Supp.2d 557, 558 (E.D. Va. 2006). Plaintiffs moved the court to certify the lawsuit as a class action; defense attorneys objected on the grounds that plaintiffs were not “similarly situated” to the class and had introduced no evidence that defendant Fairfield Resorts was a “joint employer” of plaintiffs or members of the putative class. The district court rejected defense arguments and conditionally certified a class action, holding that it had authority to grant the motion for class action treatment based on “minimal evidence” subject to a subsequent motion by defense attorneys for decertification of the class action.

The facts underlying the class action complaint are rather complicated but the salient facts are these, found at pages 559 through 561 of the district court’s opinion: Fairfield Resorts operates timeshares including Kingsgate, Governor's Green and Patriot Place timeshare locations in Virginia. Fairfield contracted with Sandulyak and Nunnery to hire immigrants to provide laundry, housekeeping and grounds maintenance services at certain properties in Virginia. Sandulyak (doing business as Carolina Janitorial) provides regional immigrant labor, and is “commonly owned, staffed and operated” by national immigrant providers Ambassador Hospitality and Proline Management. Fairfield’s contract with Ambassador provided that the immigrant laborers would be employees and Carolina Janitorial and that Fairfield had no right to supervise, direct or control the laborers. In practice, however, Sandulyak failed to supervise the laborers, Carolina Janitorial did not have a manager at the properties, and Sandulyak only visited the properties once every 1-3 months. Rather, for more than a year responsibility for supervision and day-to-day control over the laborers fell to Nunnery, who had negotiated the agreement with Ambassador “in the name and on behalf of Fairfield.”

Continue reading "FLSA Class Action Defense Cases-Choimbol v. Fairfield Resorts: Virginia Federal Court Conditionally Certifies Class Action Under Fair Labor Standards Act (FLSA) Holding Only "Minimal Evidence" Required To Support Class Action Treatment" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Judicial Panel Rejects Opposition to Defense Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 and Grants Defense Motion for Centralization of Three Class Action Lawsuits

On May 3, 2006, a laptop computer and external hard drive was stolen from the home of an employee of the Department of Veterans Affairs, resulting in the loss of “the names, dates of birth, and social security numbers of approximately 26 million veterans and active duty military personnel.” In re Dep’t of Veterans Affairs (VA) Data Theft Litig., 461 F.Supp.2d 1367 (Jud. Pan.Mult.Lit. November 3, 2006). Three putative class action lawsuits followed, and defense attorneys moved the Judicial Panel on Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 to centralize the lawsuits for pretrial purposes in the District of the District of Columbia. Id. Plaintiffs in already in the D.C. federal court supported the motion; plaintiffs in actions pending in New York and Kentucky opposed the motion, or alternatively requested transfer to Kentucky. The Panel agreed with defense attorneys that centralization was warranted and that the District of the District of Columbia was the appropriate transferee court. In so holding, the Panel rejected opposition arguments that centralization was not warranted due to the “minimal number of actions involved” and that “transfer under the ‘first to file’ rule” would be superior to centralization under Section 1407. Id.

NOTE: The Panel’s holding highlights that Section 1407 does not require a minimum number of pending lawsuits be on file in order to warrant transfer. The purpose of centralization under Section 1407 is “to eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” In re Dep’t of Veterans Affairs, at *1.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Judicial Panel Grants Unopposed Defense Request for Pretrial Coordination of Two Class Action Complaints Pursuant to 28 U.S.C. § 1407

Plaintiffs filed two class action lawsuits in federal court against Novartis Pharmaceuticals Corp. (NPC), Novartis Corp., Novartis Finance Corp., and Novartis Services, Inc., alleging violations of state and federal labor laws concerning compensation for overtime; specifically, the complaints alleged that defendants had misclassified NPC sales representatives as exempt from overtime pay. In re Novartis Wage & Hour Litig., 460 F.Supp.2d 1382 (Jud.Pan.Mult.Lit. 2006). Pursuant to 28 U.S.C. § 1407, defense attorneys moved the Judicial Panel on Multidistrict Litigation (MDL) to centralize the lawsuits for pretrial purposes in the Southern District of New York, where one of the lawsuits was pending. Id. The motion was unopposed. The Panel agreed with defense attorneys that centralization was warranted even though only two class action lawsuits had been filed, and agreed further – in accord with the agreement of the parties – that the Southern District of New York was the appropriate transferee court. Id.

NOTE: This transfer order illustrates (1) that Section 1407 does not require a minimum number of lawsuits be on file in order to warrant transfer, and (2) that the Judicial Panel independently determines whether centralization is warranted and, if so, the appropriate transferee court. Despite the agreement of the parties, the Judicial Panel explained that it selected the Southern District of New York based on its independent evaluation:

Continue reading "Class Action Defense Cases—In re Novartis: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Two Employment Law Class Action Lawsuits In The Southern District Of New York" »

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class action defense lawyers continue to face a greater number of labor law class action filings in California than any other category. As frequent visitors know, we provide weekly, unofficial summaries of the legal categories for class actions filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. This report covers the time period from November 3 - November 9, with employment law class action cases retaining their firm grip on the top spot on the class action filings list. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 29 class action lawsuits were filed in these California state and federal courts during that time period, of which 10 (almost 35%) asserted labor law claims. Class action lawsuits alleging unfair competition, including unfair business practices and false advertising claims, again came in a second with 6 new class action filings (21%), with various Consumers Legal Remedies Act violations a close third with 5 new filings (17%). The only other group of class action claims that pass the 10% threshold involved 3 securities fraud filings (10%).

Posted In: Class Actions In The News

Martha Stewart and Martha Stewart Living Omnimedia Defense Attorneys Report $30 Million to Settle Class Action

Several news reports cite reliable sources that the class action against Martha Stewart Living Omnimedia and Martha Stewart has been settled pending court approval. Several lawsuits were filed apparently claiming that Stewart’s misrepresentations concerning her sale of ImClone stock artificially inflated the stock price of Martha Stewart Living. The separate lawsuits eventually were consolidated. News reports place the total settlement at $30 million, of which Martha Stewart personally will pay about $5 million. Insurers are expected to pay about $10 million, with the company – Martha Stewart Living – picking up the tab for the remaining $15 million.

News reports on the anticipated settlement may be found in an article entitled “Stewart Expected To Pay $5 Million To Settle Suit,” in the Business Section of the November 9, 2006 Los Angeles Times, and in an article entitled “Stewart To Pay $5 Million In Settlement Of ImClone Suit,” in the Business Section of the November 9, 2006 Chicago Tribune.

Posted In: Class Actions In The News

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress provided for civil liabilities arising out of false registration statements in 15 U.S.C. § 77k as follows:

§ 77k. Civil liabilities on account of false registration statement

(a) Persons possessing cause of action; persons liable

In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue--

(1) every person who signed the registration statement;

(2) every person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted;

(3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner;

(4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him;

(5) every underwriter with respect to such security.

If such person acquired the security after the issuer has made generally available to its security holders an earning statement covering a period of at least twelve months beginning after the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such omission, but such reliance may be established without proof of the reading of the registration statement by such person.

Continue reading "15 U.S.C. § 77k--Civil Liabilities On Account Of False Registration Statement Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress described the information that must be contained in a prospectus in 15 U.S.C. § 77j, which provides:

§ 77j. Information required in prospectus

(a) Information in registration statement; documents not required

Except to the extent otherwise permitted or required pursuant to this subsection or subsections (c), (d), or (e) of this section--

(1) a prospectus relating to a security other than a security issued by a foreign government or political subdivision thereof, shall contain the information contained in the registration statement, but it need not include the documents referred to in paragraphs (28) to (32), inclusive, of schedule A of section 77aa of this title;

(2) a prospectus relating to a security issued by a foreign government or political subdivision thereof shall contain the information contained in the registration statement, but it need not include the documents referred to in paragraphs (13) and (14) of schedule B of section 77aa of this title;

(3) notwithstanding the provisions of paragraphs (1) and (2) of this subsection when a prospectus is used more than nine months after the effective date of the registration statement, the information contained therein shall be as of a date not more than sixteen months prior to such use, so far as such information is known to the user of such prospectus or can be furnished by such user without unreasonable effort or expense;

(4) there may be omitted from any prospectus any of the information required under this subsection which the Commission may by rules or regulations designate as not being necessary or appropriate in the public interest or for the protection of investors.

Continue reading "15 U.S.C. § 77j--Information Required In Prospectus Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

Multidistrict Litigation Judicial Panel Concludes Centralization Under Section 1407 not Warranted

Three separate class action lawsuits against Edward D. Jones & Co. seeking overtime pay. The lawsuits were filed in the Central and Northern Districts of California, and the Western District of Pennsylvania. Two motions were filed with the Judicial Panel on Multidistrict Litigation (MDL) seeking to coordinate the litigation for pretrial purposes - one by the Pennsylvania plaintiff, and one by the common defendant, Edward Jones. In re Edward D. Jones & Co., L.P., Overtime Pay Litig., 442 F.Supp.2d 1370 (Jud.Pan.Mult. 2006). After oral argument, the Judicial Panel denied the motion, concluding that “centralization presently would neither serve the convenience of the parties and witnesses nor further the just and efficient conduct of this litigation.” Id., at 1371. The Panel explained that it did not believe “any common questions of act and law are sufficiently complex and/or numerous to justify Section 1407 transfer,” id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Sixth Circuit Holds that Putative Class Action Against Cable Company for Alleged Violations of Federal Cable Communications Policy Act Arising Out of Internet Service Provided to Plaintiff Properly Dismissed but not for Reasons Expressed by District Court

Plaintiff filed a putative class action against his internet provider, Comcast, alleging violations of the subscriber privacy protection provisions of the federal Cable Communications Policy Act of 1984 (CCPA), 47 U.S.C. §§ 521-561. Klimas v. Comcast Cable Communications, Inc., 465 F.3d 271, 273 (6th Cir. 2006). Defense attorneys moved to dismiss the class action on the ground that plaintiff "lacked standing to contest alleged violations of the privacy provisions in § 551(b) by [Comcast] in the operation of its broadband internet services." Id. The district court granted the motion on grounds rejected by the Sixth Circuit; however, the Circuit Court affirmed the judgment of dismissal based on the plain language of the statute, which "by its terms, applies only to a 'cable system'" or to acts "in the provision of cable service," id.

Plaintiff contracted for internet service with Comcast, which launched its internet service around January 1, 2002. Six weeks after its launch, Comcast announced that it had "stored temporarily" IP (internet protocol) addresses and URL (universal resource locators) information, but stated that "[t]his information has never been connected to individual subscribers and has been purged automatically to protect subscriber privacy" and that the practice was being terminated "immediately." Klimas, at 273-74. Plaintiff promptly filed a putative class action alleging that Comcast violated § 551(b) by "collecting personally identifiable information concerning subscribers" and violated § 551(a) by failing to give written notice of the nature of personally identifiable information Comcast collected with respect to its customers and the nature of it use of that information. Id., at 274.

Continue reading "Klimas v. Comcast Cable-Class Action Defense Cases: District Court Properly Granted Defense Motion To Dismiss Class Action Under Cable Communications Policy Act Because Act Does Not Apply To Internet Services Sixth Circuit Holds" »

Posted In: Class Action Court Decisions

Lawsuit Alleging Violations of Federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) Based on Failure to Provide Written Disclosure of YSPs (Yield Spread Premiums) Allowed to Proceed as Class Action

Plaintiffs filed a class action against NovaStar Mortgage alleging violations of Washington's Consumer Protection Act (CPA) based on the lender's failure to disclose in writing the payment of yield spread premiums (YSPs) in violation of the federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA), and Washington's Consumer Loan Act (CLA). Pierce v. NovaStar Mortgage, Inc., ___ F.Supp.2d ___ (W.D. Wash. October 31, 2006) [Slip Opn., at 1-2]. The district court denied plaintiffs' first motion to certify a class, agreeing with defense counsel that plaintiffs had not demonstrated numerosity or typicality under Rule 23(a) and had failed to establish the predominance and superiority elements of Rule 23(b). Id., at 2. Defense attorneys opposed class certification largely on the ground that YSPs were not required to be disclosed in writing; the federal court agreed, holding that "verbal disclosures and independent knowledge of the YSP were relevant" in evaluating whether NovaStar violated RESPA, TILA or CLA, id. However, in connection with a renewed motion to certify the lawsuit as a class action, the court rejected that defense argument and granted plaintiffs' motion.

In considering the renewed motion for class certification, the district court stated that class certification turned on "whether verbal disclosures are legally relevant" to the CPA claims. Slip Opn., at 3. Plaintiffs argued that verbal disclosures were irrelevant because the lender was required to disclose YSPs in writing under the CLA, and because violations of the CLA are per se violations of the CPA. Id., at 2. Defense attorneys argued that the CLA does not require written disclosure of YSPs. Id., at 4. While the federal court found that plaintiffs had not cited any provision of the CLA requiring lenders to disclose YSPs, it determined that this was irrelevant, explaining at page 5:

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Posted In: Certification of Class Actions, Class Action Court Decisions, RESPA/TILA Class Actions