In an opinion yesterday, Judge Swain dismissed a securities class action accusing GM of “channel stuffing” — forcing excess inventory onto dealers to create the appearance of improving revenue — because the inventory at dealerships was fully disclosed:

The fundamental flaw of Lead Plaintiff’s thesis is that is own Amended Complaint reflects public knowledge of

In an opinion today, Judge Forrest granted summary judgment to two affiliated accounting firms in a securities fraud suit arising from what Judge Forrest described as an accounting firm’s “worst nightmare”:

An accounting firm’s worst nightmare might be to wake up one morning and discover that the company that one of its teams had audited for the past several years had in fact disappeared, and that what the team had been auditing had been merely a mirage. A twist that could serve only to heighten this distress might be the discovery that the company had been stolen a few years prior — its operations and related revenues transferred away — but that the engagement team had not discovered this fact. The team had issued a “clean opinion.” The accounting error in such a case would be fundamental: all aspects of the financial position of the company would have been entirely misstated, because the operations on which it was based were long gone. This scenario is not the storyline for an auditor’s version of a horror film; it is what happened here.

Continue Reading Judge Forrest Grants Summary Judgment to Auditors in Case of Missing Subsidiary

In a one-page Order Wednesday, Judge Swain stayed a securities class action accusing AIG of concealing its exposure to subprime securities pending a ruling from the Supreme Court in Halliburton Co. v. Erica P. John Fund, Inc., a case challenging the presumption of classwide reliance on the price of securities that are traded in efficient markets. The Halliburton case is scheduled for argument in March and a ruling is expected by July. The lead plaintiff argued that other courts have rejected stays pending the Halliburton ruling, but the defendants responded that, unlike in those other cases, fact discovery was already complete. The defendants also argued that Halliburton is a potential “game changer” for securities litigation:
Continue Reading Judge Swain Stays Securities Class Action Pending Supreme Court Challenge to Fraud-on-The-Market Presumption

In an opinion yesterday, Judge Forrest rejected a proposed securities class action settlement in which the settlement class was defined identically to a class that she had earlier ruled could not be certified. The earlier certification denial was based in part on the plaintiffs’ failure to show class-wide reliance under the “fraud-on-the-market” presumption. The parties pointed Judge Forrest to the Second Circuit’s 2012 decision in In re AIG, Inc. Sec. Litig., which held that “[b]ecause settlement eliminates the need for trial, a settlement class ordinarily need not demonstrate that the fraud-on-the-market presumption applies to its claims in order to satisfy the predominance requirement.” But Judge Forrest ruled that the AIG case did not altogether eliminate the requirement that class-wide issues predominate, even for purposes of a settlement class, and that the parties had not made the necessary showing:
Continue Reading Judge Forrest Rejects Securities Class Action Settlement Because “Settlement Class” Failed Certification Standards

In an opinion today, Judge Forrest denied the motion of former Goldman Sachs banker Fabrice Tourre for a new trial of SEC charges that he helped conceal from investors that a mortgage security was constructed, in part, by a hedge fund that was run by John Paulson and that was betting against the transaction.  She found there was sufficient evidence for the jury’s verdict:
Continue Reading Judge Forrest Denies Tourre’s Motion for New Trial

In an opinion filed last week but just posted to the ECF docket this morning, Judge Sweet denied the motion of Facebook and its underwriter banks to dismiss federal securities claims arising from the May 2012 Facebook IPO.  Noting specifically that the complaint does not allege securities fraud, Judge Sweet permitted the class action complaint of violations of other sections of the securities laws to go forward.
Continue Reading Judge Sweet Denies Facebook’s Motion to Dismiss Federal Securities Claims

In an opinion today, Judge Cote determined to sanction, in an amount to be determined later, a law firm that brought a class action alleging that AOL repurchased its stock at artificially depressed prices because it knew that it would later sell a portfolio of patents to Microsoft for over $1 billion, thereby boosting AOL’s stock price.  The patents were sold at an auction, but the plaintiffs alleged that the auction was essentially a sham because Microsoft was the predetermined winner.  A critical allegation in the complaint was that AOL’s Tim Armstrong called Microsoft’s Steve Ballmer long before the auction to “close the deal.”  Judge Cote found the allegation entirely unsupported and rejected counsel’s attempt to minimize it:
Continue Reading Judge Cote Sanctions Class Action Law Firm for Unsupported Allegations Against AOL