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.
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.
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 blog. First, 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.
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.
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.
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.
We speculated in September that a decision to grant summary judgment against a class member in the long-running In re Vivendi Universal, S.A. Securities Litigation, 02 Civ. 5571 (SAS) (S.D.N.Y.) “could have implications for class members, but more likely for opt-outs.” Now Judge Shira Scheindlin, in what may be one of the well-known judge’s final decisions before stepping down from the bench, has granted summary judgment against another class member while relying heavily on her prior decision. The Court determined that, because the evidence established that the investment analyst had anticipated Vivendi’s liquidity issues (the subject of the fraud) and established that the class member continued to buy Vivendi shares after the end of the class period, Vivendi had successfully rebutted the presumption of reliance and established that the class member “was indifferent to the fraud.”
The deadline for parties to object to the settlement in the In re Credit Default Swaps Antitrust Litigation, Master Docket No. 13-MD-2476 (DLC) in the Southern District of New York recently passed on February 29, 2016. Unlike in most cases, where parties typically only object to settlements to the extent they allocate attorneys’ fees, several potential settlement class members to this litigation (“CDS Litigation”) have made specific, substantive objections to the potential distribution of settlement funds. In class plaintiffs’ (“Plaintiffs” or “Class Plaintiffs”) memo of law in support of approval of the settlement, Plaintiffs responded forcefully to these objections. Although Judge Denise Cote has yet to decide whether to approve the settlement, it is worth examining these new objections, which may suggest a trend in class-action settlement objections—at least in antitrust cases relating to securities transactions—moving forward. In addition, Plaintiffs’ heavy reliance on experts to create a settlement model may reflect another trend worth keeping an eye on.