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

In an opinion today, Judge Stein dismissed a case accusing Citibank of fraud and negligent misrepresentation for understating its exposure to mortgage-backed securities.  He dismissed the case because the plaintiffs were “holders” of the stock during the relevant time period (i.e., they did not buy at inflated prices and sell at a loss), and relied principally on a First Department decision in 2010, Starr v. AIG, which held that “holders” could not bring claims.  Judge Stein rejected the argument that Starr would not be adopted by the Court of Appeals:
Continue Reading Judge Stein Concludes Security “Holders” Cannot Bring Fraud Claims Under New York Law, Dismisses Case Against Citi

Judge Forrest, in an opinion today, denied class certification in a case accusing Deutsche Bank of misleading public statements concerning its exposure to mortgage-backed securities. The opinion was driven by Judge Forrest’s decision to disqualify the plaintiffs’ expert, Michael Marek, who testified that Deutsche Bank’s global registered shares (“GRSs”) traded on an efficient market.  She concluded he was not qualified to offer the opinions he offered, and that there were major methodological problems with his opinions:
Continue Reading Judge Forrest Denies Certification in Securities Class Action Against Deutsche Bank

In an opinion dated yesterday, Judge Scheindlin denied a motion to dismiss from two auditing firms, Ernst & Young and PriceWaterhouseCoopers, in a securities class action.  The auditors had issued “opinions” certifying the financial statements of a now bankrupt securities issuer (OSG), and argued that, under the Second Circuit’s recent decision in Fait v. Regions Financial Corp. (discussed in prior posts here and here), the plaintiffs would have to allege, under Section 11 of the Securities Act, that the auditors actually disbelieved their own opinions.  Judge Scheindlin disagreed:
Continue Reading Judge Scheindlin Rules Auditors Can Be Strictly Liable for False “Opinions” in Registration Statements