We have been keeping up with the In re LendingClub Securities Litigation class action, No. 3:16-cv-02627-WHA in the Northern District of California (“LendingClub”), in regard to Judge William Alsup’s unusual decision to require additional briefing from the class plaintiff before agreeing to the class plaintiff’s choice of class counsel. Now, as the LendingClub Plaintiffs oppose the Defendants’ motions to dismiss, Plaintiffs’ counsel is highlighting a recurring trend in motion to dismiss practice: defendants arguing facts at the motion to dismiss stage, particularly in complex cases.
We posted earlier about the surprising decision of Judge William Alsup of the Northern District of California not to appoint lead counsel in the LendingClub class action cases at the same time he appointed a lead plaintiff. Instead, the judge ordered that candidates for lead counsel must submit applications to the newly appointed lead plaintiff, who would then move the court—via their current counsel, who was allowed to apply but not to receive special treatment—to approve the lead plaintiff’s choice.
That process has now concluded, and in a short order dated October 28, 2016 (“Op.”), Judge Alsup held that lead plaintiff’s current counsel, Robbins Geller, was an appropriate selection as class counsel. Specifically, “the Court [was] persuaded that the selection of Robbins Geller was within the scope of several reasonable choices and was not influenced by any pay-to-play considerations.” (Op. at 1.)
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.
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.”
A January 4, 2016 opinion in the Southern District of Texas by Judge Keith Ellison (“Op.”) in the In re: BP p.l.c. Securities Litigation, MDL No. 4:10-md-2185, has taken up the issue of whether plaintiffs can properly assign their claims to entities created solely for the purpose of litigating those claims. The court found that these assignments were invalid, which may give plaintiffs in other disputes pause before pursuing the same course in the future. This decision is an interesting contrast to the recent decision we covered in the In re Petrobras Securities Litigation, No. 14-cv-9662 (S.D.N.Y.) consolidated litigation, where certain opt-out plaintiffs whose assignments were challenged were allowed to proceed with their cases.
A recent motion to dismiss filed by the defendants in the In re Petrobras Securities Litigation, No. 14-cv-9662 (S.D.N.Y.) consolidated litigation challenges the standing of several institutional opt-out plaintiffs. Defendants’ arguments on standing, if accepted, could have a far reaching impact on an investment advisor’s standing to sue on behalf of funds it advises.
As background, Petróleo Brasileiro S.A. (“Petrobras”), a Brazil-based energy multinational, is a target of a Brazilian police investigation of alleged rampant corruption involving construction contracts. Allegedly, several large construction companies colluded to avoid Petrobras’s competitive bidding process, giving kickbacks to Petrobras executives to allow the collusion. As a result, Petrobras allegedly significantly overpaid for the construction of certain refineries.
In December 2014, investors who had purchased American Depository Shares (ADSs) of Petrobras on the New York Stock Exchange filed a securities class action in the Southern District of New York, alleging violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and (in an amended complaint) Brazilian securities laws. Plaintiffs allege that in regulatory filings and public statements, Petrobras misrepresented its financial condition, financial controls, and ethical practices. A motion to dismiss the class action was substantially denied.
However, on August 21, 2015, Defendants, i.e., Petrobras, affiliated entities, and their underwriters, filed a Motion to Dismiss certain Individual Opt-Out Complaints (the “Opt-Out Def. Mem.”). Defendants’ supporting memorandum makes a variety of arguments in favor of dismissal against a variety of plaintiffs, including arguments on standing. Continue Reading Standing of Petrobras Opt-Out Plaintiffs Challenged