Angela DiIenno contributed to this article.

On September 27, 2016, the Second Circuit ruled against a value investor in an opt-out action brought in the continuing Vivendi litigation.  The recently issued opinion, however, does have positive implications for institutional investor class participants.  First, the opinion confirms the availability of the fraud-on-the-market theory of reliance for institutional investors.  Second, the opinion restricts the situations in which defendants may successfully rebut the presumption of reliance. Notably, however, institutions that have significant after-class purchases should be aware that such purchases could undercut their ability to rely on the fraud-on-the-market theory of reliance.

In GAMCO Investors Inc. v. Vivendi, S.A., GAMCO brought an individual action asserting Section 10(b) and Rule 10b-5 claims against Vivendi, alleging Vivendi made material misrepresentations regarding its liquidity.  First, the U.S. District Court for the Southern District of New York held that Vivendi was estopped from denying any elements of GAMCO’s Section 10(b) claim other than reliance.  After a bench trial on the reliance issue, the Court entered judgment for Vivendi, holding that Vivendi had successfully rebutted the fraud-on-the-market presumption of reliance.   Continue Reading In GAMCO v. Vivendi, the Second Circuit Affirms that Value Investors Can Rely on the Fraud-on-the-Market Presumption Unless Specific Facts Establish Non-Reliance

As detailed repeatedly in this space, the Canadian court system has issued a number of decisions which have altered the practice of bringing – or defending against – a securities class action for secondary market misrepresentation.  In its recent decision in Mask v. Silvercorp Metals, Inc. (“Mask”), the Court of Appeals for Ontario further clarified the evidentiary standard to be applied on a motion for leave and certification of a proposed class action.  Its decidedly defendant-friendly decision is relevant to any entity which finds itself defending against such a claim in Ontario. Continue Reading Canadian Appellate Court Confirms That Judges Must Consider Evidence From Both Parties when Deciding a Motion for Leave to Bring a Class Action

In a recent decision in the now-consolidated LendingClub class action cases, Judge William Alsup of the Northern District of California appointed a lead plaintiff but unexpectedly declined to appoint lead counsel at the same time.  Instead, the judge ordered that candidates for lead counsel must submit applications to the newly appointed lead plaintiff, who will then move the court—via their current counsel, who is allowed to apply but not to receive special treatment—to approve the lead plaintiff’s choice.

Continue Reading Court in LendingClub Class Action Requires Due Diligence by Lead Plaintiff Before Approving Lead Counsel

Although this blog is focused typically on opportunities for institutional investors to recover losses as class members or plaintiffs, we think this decision in Youngers v. Virtus Investment Partners, Inc., may also be of interest. In that case, the plaintiffs brought, on behalf of a putative class of purchasers of various mutual funds issued by Virtus Opportunities Trust (the “Virtus Trust”), claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated thereunder, and Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as well as derivative state law claims. The case stems from alleged misstatements made by the Virtus Trust’s investment advisor, Virtus Investment Partners (“Virtus Partners”), regarding the performance history of its AlphaSector Index trading strategy. Specifically, the complaint alleges that certain Virtus Trust registration statements were misleading because they stated that “the Index inception date is April 1, 2001,” and did not disclose that the AlphaSector strategy was not used to manage real assets prior to October 2008 and that the represented results prior to October 2008 were back-tested. Judge Pauley of the U.S. District Court for the Southern District of New York denied the motion to dismiss filed by Virtus Partners, holding, among other things, that the plaintiff had sufficiently pleaded loss causation with respect to his Section 10(b) claims.

Continue Reading Virtus Investment Partners Asks the Court to Certify for Interlocutory Appeal Its Decision on Loss Causation Concerning Mutual Fund Disclosures

The United States is a popular location for securities class actions, due in large part to its reputation as a generally plaintiff-friendly system.  A key contributor to that reputation is the acceptance of the “fraud-on-the-market” presumption of reliance.  However, in the wake of a recent decision by the Supreme Court of New South Wales, Australia is poised to become another popular location for “fraud on the market” actions. Continue Reading After Adopting the “Fraud-on-the-Market” Presumption of Reliance, Australia is Poised to Become a Plaintiff-Friendly Venue

There have been several recent and interesting updates to the In re Petrobras Securities Litigation, 14-cv-9662 (S.D.N.Y.) that we have discussed several times on this blogFirst, the Second Circuit has decided to accept review of the class certification question.  Second, Judge Jed Rakoff denied a motion to stay the underlying proceedings (including the impending trial) pending the Second Circuit appeal in a decision that called the class action “arguably secondary” to the numerous opt-out proceedings.  Finally, several plaintiffs have voluntarily dismissed their claims with prejudice—but without explanation.

Continue Reading Recent Developments in Petrobras Class Action Could Interfere with Trial Date

On June 29, 2016, the Dutch Court of East Brabant dismissed a foundation’s claims against Rabobank Group for alleged unlawful selling of interest rate swaps because it failed to meet the requirement of the Dutch Claim Code that a foundation sufficiently safeguard the interests of its members. While it is a lower court decision likely to be appealed, this dismissal depicts the increased scrutiny that foundations may face, particularly in the wake of the €1.2 billion settlement reached by the foundation in the Fortis case earlier this year. There will likely be an increase in the number of defense challenges to the ability of foundations to pursue litigation on behalf of members.   Therefore, before joining a Dutch foundation, institutional investors should carefully scrutinize the foundation’s organizational documents and governance structure.

Continue Reading Dutch Foundation Dismissed for Inadequate Safeguarding of Members’ Interests

In January of 2016, this blog commented on the Supreme Court of Canada’s decision in the seminal case of Canadian Imperial Bank of Commerce v. Green.  There, the Court held that a prospective plaintiff must move for leave to commence a class action for secondary market misrepresentation before the three-year statute of limitations passes; but if leave is not actually granted within that time period, the Court has jurisdiction to allow leave and backdate it to within the three year period.  Recently, the Ontario Superior Court of Justice in London had its first opportunity to consider the test for leave in the aftermath of Green in Bradley v. Eastern Platinum Ltd. (“Bradley”).  The court’s decision there shed further light on the evidence a plaintiff must proffer to “surpass the leave threshold.” Continue Reading Canadian Court Holds That Evidentiary Requirement For Leave To File Securities Class Action Is “Not A Low Bar”

Ever since the Supreme Court issued its opinion in Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010), courts have been making their own interpretations of what Morrison means for whether certain transactions are “domestic” and thus amenable to class-action securities claims.  Judge Dean Pregerson of the U.S. District Court for the Central District of California recently weighed in with a May 20, 2016 opinion (“Op.”) dismissing all claims with prejudice in the Stoyas et al. v. Toshiba Corporation class action, No. CV 15-04194, for failure to allege that the alleged fraud involved domestic transactions.  Although the opinion considers certain Japanese-law claims, the key question the Court addresses is whether Morrison allows claims to be brought based on transactions in unsponsored American Depositary Shares for non-U.S. companies.

Continue Reading Federal Court Declines to Exercise Jurisdiction Over Toshiba Despite Over-the-Counter ADS Sales in the United States

As securities litigation becomes increasingly globalized, the Mintz Levin Institutional Investor Class Action Recovery practice is constantly monitoring and participating in jurisprudential developments in a number of countries, both alone and through collaboration with foreign counsel. For example, in Australia, where the procedure to consolidate cases is not uniform, some securities class action cases may overlap, leaving issuers in the undesirable position of having to defend against claims of misrepresentation on two fronts. This scenario recently played out in New South Wales, where the Court found an interesting and workable solution to a problem with concurrent class actions in Smith v. Australian Executor Trustees Limited; and Creighton v. Australian Executor Trustees Limited.

Continue Reading Australian Court Manages Concurrent Class Actions By Giving The Class Members A Choice