Posted in Class Action Decisions, International Class Action Law, Securities Class Actions, tagged 10b, 10b-5, absolute activist, conduct and effects, ficeto, morrison, national australia bank, scotus, securities class action, securities fraud, transactional test, u.s. supreme court on March 6, 2012 |
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The Second Circuit Court of Appeals issued a decision last week that confirms that there are still situations where primarily foreign securities fraud disputes may be litigated as class actions in the United States courts. The decision explores the contours of the US Supreme Court’s holding in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010) that § 10(b) of the Securities Exchange Act of 1934 does not have an extraterritorial reach. Here’s a link to the opinion, courtesy of the New York Law Journal: Absolute Activist Value Master Fund Ltd. v. Ficeto, No. 11-0221-cv (2d Cir., March 1, 2012).
Morrison recognized two situations in which a securities fraud claim would be sufficiently domestic in nature to be governed by § 10(b) and SEC Rule 10b-5. The first, not at issue in Absolute Activist, is where the security is traded on a US exchange. Absolute Activist addresses the second situation, which involves “domestic transactions in other securities.” The Second Circuit’s test for whether transactions are domestic is whether “irrevocable liability is incurred or title passes within the United States.” In simpler terms, if the parties become bound to effectuate the transaction in the United States, the transaction is a domestic one, but the transaction could also be domestic if title to the securities passes within in the United States, even if the parties became bound elsewhere. In reaching this conclusion, the panel rejected several other tests proposed by the parties, including tests proposed by the plaintiff that would have looked to the location of the broker-dealer or to whether the security was issued by a US company or was registered with the SEC, and tests proposed by defendants that would look to the place of residence of both the buyer and seller in the transaction or to whether a given defendant committed some affirmative act within the United States.
Unfortunately, given the fact-intensive nature of the test articulated by the Second Circuit panel, the decision leaves open the question of what specific facts might be sufficient to establish that irrevocable liability was incurred or title transferred within the United States. The panel held that the facts in the complaint were not sufficient to meet either requirement, but remanded with instructions to allow leave to amend. However, the opinion does offer some insight into what might be sufficient. In concluding that leave to amend would not be futile, the court held pointed to representations made by counsel at oral argument that there existed “trading records, private placement offering memoranda, and other documents indicating that the purchases became irrevocable upon payment and that payment was made through Hunter in the United States.”
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Posted in Articles, Class Action Trends, Commentary, tagged bayer, class action, class certification, dukes, erica p. john fund, halliburton, scotus, scotusblog, Supreme Court, u.s. supreme court, wal-mart on August 31, 2011 |
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Posted in CLE Programs, tagged bayer, class certification, CLE program, dukes, erica p. john fund, halliburton, rule 23, scotus, smith v. bayer, Supreme Court, u.s. supreme court, wal-mart, webinar on August 4, 2011 |
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For those of you who simply can’t get enough of the Supreme Court’s recent class action rulings, I will be speaking in an upcoming live phone/web seminar sponsored by Strafford Publications entitled “Class Certification After Dukes, Bayer and Halliburton Rulings.” The Webinar is scheduled for Tuesday, August 30, 1:00pm-2:30pm EDT. Here is a summary:
The Supreme Court’s watershed Dukes v. Wal-Mart ruling set new standards for Rule 23(a) class certification and provided guidance to the level of merits inquiry appropriate at the certification stage. It also clarified when a claim for monetary relief can be made under Rule 23(b). While Dukes is a shift in defendants’ favor, the Court refused in Smith v. Bayer to curtail relitigation of class actions in parallel state court litigation. Federal courts may not enjoin state courts from considering certification when a federal court has denied certification of the same class. In Erica John Fund v. Halliburton, the Court held that loss causation is not a prerequisite to class certification in a securities action. However, the Court did not address the existing circuit court divergence on whether a court should examine evidence of price impact at the certification stage. My fellow panelists and I developed this program to analyze three key Supreme Court rulings, Dukes, Bayer and Halliburton and their impact on current class certification jurisprudence. We will discuss how plaintiff and defendant counsel can best leverage or overcome the impact of these rulings in certification proceedings. We will offer our perspectives and guidance on these and other critical questions: What impact will Dukes have on the use of statistics and expert testimony in support of class certification? How will commonality and numerosity be applied after Dukes? What guidance, if any, does the Bayer case provide regarding relitigating competing class actions where class certification has already been granted? In light of Halliburton, should a district court examine evidence of price impact at the class certification stage, and if so, who has the burden of proof? After our presentations, we will engage in a live question and answer session with participants — so we can answer your questions about these important issues directly. I hope you’ll join us.
For more information or to register, visit the Strafford website at this link.
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Posted in Class Action Decisions, Class Action Fairness Act, Supreme Court Decisions, tagged anti-injunction act, CAFA, claim preclusion, collateral estoppel, frcp 23, home state, issue preclusion, kagan, local controversy, relitigation exception, rule 23, scotus, smith v. bayer, Supreme Court, u.s. supreme court, west virginia on June 16, 2011 |
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Earlier today, the Supreme Court issued its third of four class action-related decisions for the October 2010 term. In Smith v. Bayer Corp., No. 09-1205, the Court held that a federal court exceeded its authority when it issued an injunction preventing a state court from considering whether to certify a class on claims in which the federal court had previously denied class certification.
Justice Kagan’s opinion involves a fairly straightforward academic analysis of the “re-litigation exception” to the federal Anti-injunction Act and principles of issue and claim preclusion: where a state court applies a different class certification standard than the standard applicable under FRCP 23, the issue decided in the federal action on class certification is not the same as the one to be decided in the state court proceeding.
However, the practical impact of the decision is that a plaintiffs’ lawyer who is unsuccessful in seeking class certification in federal court can try again in a state that applies a different class certification standard. Of course, the successive class action is potentially subject to removal under the Class Action Fairness Act (CAFA), but if one of the exceptions to CAFA applies, such as the home state or local controversy exception, the Court’s decision paves the way for multiple bites at the class certification apple.
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Posted in Class Action News, Employment Class Actions, Supreme Court Decisions, tagged 23(a), 23(b), 23(b)(2), back pay, class action, dukes, employment class action, frcp 23, injunctive, Supreme Court, u.s. supreme court, wal-mart on March 25, 2011 |
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The United States Supreme Court will hold oral argument next Tuesday, March 29, 2011, in case of Wal-mart v. Dukes, No. 10-277. The issue for review, at least so far, according to order granting certiorari, is:
Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) – which by its terms is limited to injunctive or corresponding declaratory relief – and, if so, under what circumstances.
Hopefully, questions posed by the justices during the argument will also provide insight into what the Court meant in its somewhat vague directive that the parties brief the issue “Whether the Class Certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).”
Another thing I’ll be looking out for is whether the questions appear to limit the analysis to the employment discrimination context, or whether they portend a more general analysis of Rule 23 that could impact class actions in other subject matter areas.
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Posted in Commentary, Federal Civil Procedure, Federal Court Decisions, Supreme Court Decisions, tagged anti-injunction, collateral estoppel, federalism, in re baycol, issue preclusion, judgment, relitigation exception, roberts court, scotus, smith v. bayer, states' rights, u.s. supreme court on January 18, 2011 |
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Earlier today, the U.S. Supreme Court held oral argument in Smith v. Bayer, which raises the question of a federal court’s power to enjoin a state court from considering class certification after the federal court had previously denied certification. A copy of the argument transcript is available for download at the Supreme Court’s website. Some of the key lines of inquiry from the Court can be summarized as follows:
- Are there differences between FRCP 23 and West Virginia Rule 23 that should have prevented the application of issue preclusion?
- Even if the elements of the two rules are substantially the same, does the fact that the West Virginia courts take a more favorable “tone” toward class certification mean that they are different for the purposes of an issue preclusion analysis?
- Does an individual have a protected due process right to be heard on a procedural issue, such as the appropriateness of class certification, as opposed to a substantive right or cause of action?
- Does it matter whether the plaintiff in the second case could have intervened in the first one?
- Why isn’t it sufficient that the state court in a subsequent case can decide to apply issue preclusion, as opposed to the federal court enjoining the state court from even considering the question?
- Does the absense of a formal judgment mean that the relitigation exception of the Anti-injunction Act cannot apply to class certification orders at all?
- Can the plaintiff and his or her counsel who unsuccessfully sought class certification in one case be considered sufficiently representative of other absent class members and their counsel to satisfy the identity of interest requirement of issue preclusion?
Although most of the questions involved how the case should be decided under express statutory language and established legal principles, it seems reasonable to expect that the Justices’ views on federalism, and the proper balance between federal and state power, will flavor the Court’s decision. The federalism theme is one that counsel for the plaintiffs, Richard A. Monohan, fell back to on several occasions during the argument. Perhaps not coincidently, two of the members of the Court’s conservative bloc, Justice Scalia and Chief Justice Roberts, asked some of the more biting questions implicating the fairness of precluding a new party from re-litigating an unsuccessful attempt at class certification by a different party.
To this point, the Roberts Court’s direction on issues of federalism has been less than clear (see this September 2010 National Law Journal article by Marcia Coyle). This case offers the opportunity to start charting a more specific course. At the same time, this is the kind of case that can foster unpredictable alliances within the Court. For example, the states’ rights supporters may find themselves joining forces with one or more Justices who see unfairness in preventing absent class members from having their day in court on the issue of class certification.
On the other hand, predicting the outcome or rationale of Supreme Court cases is a lot like predicting the NFL playoffs.
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Posted in Class Action Decisions, Federal Civil Procedure, Federal Court Decisions, Securities Class Actions, Supreme Court Decisions, tagged burden of proof, class certification, erica p. john fund, fraud on the market, halliburton, price inflation, scotus, securities class action, securities fraud, Supreme Court, u.s. supreme court on January 7, 2011 |
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Instead of a trilogy of class action decisions by the U.S. Supreme Court this term, it looks like there will be a “quadrilogy“!
For the fourth time in the October 2010 Term, the Court has granted certiorari in a class action-related case. Today, the Court granted cert in Erica P. John Fund, Inc. v. Halliburton Co., No. 09-1403. The appeal raises issues regarding the burden of proof for class certification in a securities fraud case when the plaintiff intends to prove causation and reliance based on a “fraud on the market” theory.
According to SCOTUS Blog, the specific issues presented for review are:
(1) Whether the Fifth Circuit correctly held that plaintiffs in securities fraud actions must not only satisfy the requirements to trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery; (2) whether the Fifth Circuit improperly considered the merits of the underlying litigation when it held that a plaintiff must establish loss causation to invoke the fraud-on-the-market presumption.
(See SCOTUS Blog case file for Case No. 09-1403).
Although Erica P. John Fund, Inc. is a securities case, the Court’s decision may have ramifications in other areas, including consumer class actions. Class action plaintiffs often attempt to employ the “fraud on the market” theory of reliance in consumer fraud cases, with varying success. (See these CAB entries dated April 27, 2009 and February 24, 2008).
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