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Class Action Defense Cases—In re Bank of America Auction Rate Securities (ARS): Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfer Class Actions To California

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Responding Class Action Plaintiffs, but Transfers Actions to Northern District of California

Three class actions – one each in California, Illinois and New York – were filed against Bank of America Investment Services, Inc.; Bank of America Securities, LLC; Bank of America Corp. (collectively “BofA”) alleging “that Bank of America entities and/or its employees made misrepresentations in the context of the sale of auction rate securities (ARS).” In re Bank of America Corp. Auction Rate Securities (ARS) Marketing Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 12, 2009) [Slip Opn., at 1]. Two additional class actions were filed in New York, and treated as potential tag-along matters, id., at 1 n.2. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York, id., at 1. Lead plaintiff in the California class action opposed the motion, or alternatively requested that the class actions be centralized in California; lead plaintiff in the Illinois class action also opposed centralization, or alternatively requested centralization of the class actions in Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id., at 2, but determined that the Northern District of California was the appropriate transferee court, id., at 3.

In opposing centralization of the class actions, plaintiffs’ lawyers argued: “(1) the actions do not share sufficient questions of fact; (2) there are only a few actions involved in the litigation, making voluntary coordination among the parties preferable to formal centralization; and (3) centralization of the actions to which the Private Securities Litigation Reform Act of 1995 (PSLRA) applies with the Independence Tube action (to which, plaintiffs assert, the PSLRA does not apply) will slow the progress of the latter action.” In re BofA, at 1-2. The Judicial Panel disagreed, explaining at page 2, “All actions possess a common factual core regarding Bank of America’s role in selling ARS. In particular, plaintiffs in all actions allege that…Bank of America failed to disclose that (1) ARS were not cash alternatives similar to money market funds, and (2) the ARS sold by Bank of America were only liquid because, at the time of sale, Bank of America and other broker-dealers artificially supported and manipulated the market to maintain the appearance of liquidity and stability. Transfer of these related actions under Section 1407 will foster a pretrial program that: (1) allows pretrial proceedings with respect to any non-common issues to proceed concurrently with pretrial proceedings on common issues, [citation]; and (2) ensures that pretrial proceedings will be conducted in a streamlined manner leading to the just and expeditious resolution of all actions to the overall benefit of the parties.” The Panel selected the Northern District of California without analysis, id., at 2-3.

Download PDF file of In re Bank of America Corp. Auction Rate Securities (ARS) Marketing Litigation Transfer Order