B of A II – Return to Rakoff

OK, is it just me, or didn’t Judge Rakoff in the SEC v. B of A action just tell everyone (in an opinion the Washington Post charitably called “a scathing critique“)  that the earlier proposed settlement “is not fair, first and foremost, because it does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the Bank’s alleged misconduct now pay the penalty for that misconduct.”

That was at $33 million.  So 2009 Judge.  Now the new proposal is to do the same thing at $150 million?  Huh?  Doesn’t that just make it 5 times worse?  Oh Boy.  If I know Judge Rakoff, and I don’t — but my co-counsel and former colleague Dave Brower and I did split the oral argument in the In re Merrill Lynch Deriv. Litig. action in front of him last year — so I know exactly how serious he can be.

Columbia’s John Coffee told the New York Law Journal that “the difference might be that the judge’s concern about ‘accountability will now be addressed by someone else’ — the state’s attorney general,” who brought his own lawsuit today.  That hardly seems reason to approve the settlement if you ask me.

All I can say is maybe an “Unopposed Agreed Joint Pretty Please With A Cherry On Top We Really Need to Do This Motion to Approve the Proposed Settlement” is in order.

Yes Shorter is Better (at least in legal briefing)

OK, you know who you are.  The serial page extension requesters.  But Judge, we have to have 100 pages to explain it. I know, I know, we’ve all done it.  And yes I agree sometimes it’s necessary.  But District Judge Joy Flowers Conti has a very good reason to resist the temptation of going page limit crazy.  What’s that?  Well, as she has observed:

Counsel and the parties should be aware of the court’s experience that shorter briefs are almost always more persuasive because they get to the point faster. They also contain less extraneous material that dilutes the parties’ main arguments, and frequently interferes with prompt resolution.

So there you have it.  As Blaise Pascal ( a brilliant writer skilled at humor, mockery, and vicious satire) said, “I made this letter longer than usual because I lack the time to make it short.”  Can’t say it better (or should I say shorter) than that.  Bet you can’t either.

You can read the order here

Nugget (I know you’ve missed it): Counsel should be aware that the court discourages reply briefs as usually repetitive and therefore wasteful. Reply briefs therefore should promptly state the novel matter contained in the opposition brief that merits a reply, and not merely assert that opposing counsel has misstated the law.

Confidential Sources Still Alive & Kicking

What’s that? You thought Tellabs banned confidential witnesses? Well, let’s not get carried away here, as there’s certainly at least two ways to read that opinion. Of course, after the 7th Circuit decided Higginbotham v. Baxter, it was beginning to look like you might actually be right. But Senior Judge Samuel Conti (Nixon ’70) (yes I said 1970) chose to reject the Seventh Circuit and go with the Fifth Circuit’s view on the subject, which says that Tellabsdoes not “presumptively preclude confidential sources.”But wait a minute. The Fifth Circuit (in Central Laborers’ Pension Fund v. Integrated Electrical Services Inc., 497 F.3d 546 (5th Cir. 2007)), never mentioned Tellabs in its CW analysis, so how can that be you ask? It’s because “although the Fifth Circuit did not discuss Tellabs in its analysis of confidential sources, the court was clearly aware of the Tellabs decision as evidenced by numerous citations to Tellabs in its lengthy discussion of the PSLRA pleading standards. Thus, Central Laborers’ Pension Fund suggests that, contrary to the Seventh Circuit’s conclusion, Tellabs does not presumptively prohibit confidential sources.”

So overall result: Defendants’ Motions to dismiss denied in full.

You can read the whole opinion here.

Nugget: “The Ninth Circuit has not yet spoken to the issue of whether confidential sources, if described with the requisite particularity, may give rise to the cogent and compelling inference of scienter required by Tellabs. Without guidance stating otherwise, this Court is unwilling to abandon the binding Ninth Circuit precedent of Daou for the reasoning articulated by the Seventh Circuit in Higginbotham.”

No Mondays Puh-leeze

Attorneys who voluntarily set Monday deadlines are just simply no fun. I mean, you get to pick the days, so why kill a future weekend? You know all the work gets done at the last minute, so nix those Mondays the next time your curmudgeon opposing counsel tries to get you to agree to one.Well, we’ve located one Judge who agrees. In the Sourcefire securities class action, Judge J. Frederick Motz (Reagan ’85) asked the attorneys to “confer with one another to agree upon a briefing schedule in the event that defendants decide to file a motion to dismiss. In your discussions, please agree upon deadlines that will have the effect of moving this litigation along expeditiously but avoid (1) Monday deadlines, and (2) deadlines that would have an adverse effect upon the holiday schedule of counsel on either side.”

What’s that? A Judge who actually is professional enough to care about attorney’s personal and family lives? This Judge needs to talk to some of his brethren, as he (unfortunately for our families) sure seems in the minority.

You can read the whole letter here.

Nugget: “Despite the informal nature of this ruling, it shall constitute an Order of Court, and the Clerk is directed to docket it accordingly.”

Reimbursement Denied

Now this is entertainment (at least to me it is). And if you’re a securities class action lawyer that’s a word that might not enter your daily routine all that often. In the Motorola securities class action, Dr. Antonio Pagnamenta (Professor of Physics, emeritus at UIC), wrote a letter to the court which says (along with my annotations in Nugget green italics below of course):

Your Honorable Wise, and Most Hopefully Generous Judge Pallmeyer:

[A]s a member of the Class, I have carefully considered the entire situation so please don’t waste your time repeating my extensive work, and then agreed to be a witness out of conviction that this was the right thing to do. I never expected any award for this as I am only concerned about others.

Only now, can you believe it, I have heard that you have awarded some money to the Class member witnesses for their efforts and, well, it’s a lot so….

I am pleasantly surprised to say the least, but now please allow me to draw your attention, pardon the legalese, to my special situation:

I was travelling by CTA, because these professor salaries stink let me tell you, to my first interview at Fay Clayton’s law office. I passed out and had a Fall so big that I capitalized it on the CTA station which I readily admit is the only part of this story that readers should feel compassion about.

In this I suffered considerable injuries to the right side of my face. Specifically, three teeth on my right side needed to get root canal work, in the amount of approx. $6000 and I knew I should have listened to mother and became an endodontist.

Medicare essentially covered my emergency and medical cost which is fortunate in light of my ridiculously low professor salary and pension. However, my dental work was referred to my dental insurance, which only covered $2000. These are approx, numbers, the exact amounts will be documented.

As I suffered these injuries because of my willingness to testify, I would not have had the accident if I had not gone to the law office which I am sure you will agree is a classic but-for situation. The doctors found no basic reason for this sudden fainting spell. I would appreciate it very much if the court could consider to reimburse me for my own out-of-pocket expenses of approx $4000, which are clearly the fault of the defendants in this class action.

The accident, the injuries, the expenses, all can be documented as soon as I am back in Chicago, within 10 days and if I pass out and hit my head while on the flight I would appreciate being reimbursed for that too, since if I hadn’t agreed to testify I wouldn’t have wrote this letter, and therefore wouldn’t have left for the airport at the same time (see, e.g., A Sound of Thunder), and therefore it is also the direct fault of the defendants.

Respectfully submitted,
Antonio Pagnamenta
Professor of Physics, emeritus, and Professor of Confusing Cause and Effect

So I bet you’re wondering, what did Judge Pallmeyer say? Well, she wrote back that “I am sorry to hear about your accident. Unfortunately, the court has no funds available to reimburse you for the expenses resulting from that accident.”

You can read the letters, both dated August 10, 2007, right here.

Nugget: The only other sentence in the Judge’s response letter, and we at the Nugget, despite our jesting, wholeheartedly agree: “Best wishes for your complete recovery.”

The Nugget Lives

Hey, remember the Nugget? Yes, I’ve been gone for a while, but I’m back now so let’s try to get back in the swing of things here.

I’ve personally never seen this happen, but the Plaintiffs in In re Eli Lilly & Co. Sec. Litig. filed their “extensive” amended complaint under seal. Seems Judge Jack B. Weinstein (E.D.N.Y.) wasn’t too keen on that idea, as he quickly ordered “the parties to show cause why [it] should not be unsealed.” Plaintiffs said they didn’t mind unsealing it, but Defendants wanted redactions.

Judge Weinstein said that the complaint had to be unsealed, but since certain “documents cited within the complaint may contain trade secrets or confidential commercial information properly protected under subsection (c)(7) of Federal Rule of Civil Procedure 26,” he would allow the complaint to be “redacted” and “Special Master Woodin shall unseal such redacted documents as need no longer be sealed and they shall thereafter be filed with the complaint.”

You can read the Order here.

Note re Judge Weinstein: He took the bench in 1967. In addtion, according to Wikipedia, “Judge Weinstein is also well-known for his personal, informal courtroom style (Weinstein conducts most hearings seated at a table in the middle of the courtroom with counsel, rather than from the bench, and often chooses to wear an ordinary business suit with no judicial robe).” Can any readers confirm whether this is true? Please let us know in the comment area below.

Nugget: “Access to judicial proceedings and documents is necessary for federal courts to have a measure of accountability and for the public to have confidence in the administration of justice.”

The Case that Just Won’t Die

So let’s see, back in 1999, the Judge approved the settlement of the In re Paracelus securities class action, and entered final judgment.So why in the world are we reading a Memorandum Opinion issued in the case eight years later, you might ask? Well, it seems the settlement distribution process “took years,” with “lost checks,” and trying to “find claimants who were no longer at the addresses that had been provided.”So finally, “at the end of this process,” and after “approximately 1,400 claimants had received and cashed settlement funds,” a whopping $30,547.06 remained unclaimed.

So no big deal, right?Well, Lead Counsel proposed that the money be distributed to two designated charities, the Methodist Hospital Foundation and the Houston Volunteer Lawyers Program, invoking cy pres.Oh, but it’s not going to be that easy.The Judge said that “neither of the two designated charities was related to the class or its members,” and to make matters worse, “one charity was connected to the district judge, who promptly recused.”After reassignment, and a whole new round of briefing, along with a hearing, Judge Lee H. Rosenthal (S.D. Tex.) finally ordered that the money go to the “Institute of Law and Economic Policy, which will spend the money in a way that may indirectly and prospectively benefit the class members in the aggregate.”

Sheesh.

You can read In re Paracelus, issued February 6, 2006 at 2007 U.S. Dist. LEXIS 8316.

Nugget: “In the class action context the reason for appealing to cy pres is to prevent the defendant from walking away from the litigation scot-free because of the infeasibility of distributing the proceeds of the settlement (or the judgment, in the rare case in which a class action goes to trial) to the class members.”

Top Brass

Plaintiffs can declare victory on the motion to dismiss the St. Paul Travelers securities class action, with Judge John R. Tunheim (D. Minn.) holding that “the facts alleged in the complaint, when taken as a whole, strongly suggest that the company’s senior executives were aware that the financial statements issued during the class period were false or misleading when made.”

That’s because “the complaint alleges that the senior executives were aware that the financial statements neither accurately accounted for nor made sufficient disclosures regarding defendants’ alleged participation in bid-rigging or misuse of finite reinsur-ance, and that “the alleged kickback scheme was so pervasive that the company named it the ‘Top Brass’ program, underwriters made false or ‘B’ bids on a regular basis to rig the insurance market, underwriters violated the company’s underwriting policies to obtain large group insurance policies through the kickback program, senior executives had access to the Minnesota Department of Commerce Report that opined that the company had repeatedly violated its own underwriting policies, and the alleged misconduct accelerated after Jay Fishman became the CEO of the company.”

You can read In re St. Paul Travelers, issued September 25, 2006, at 2006 U.S. Dist. LEXIS 70261.

Nugget: “Investors need the complete picture to ensure that optimistic statements about a company’s financial condition do not mislead investors.”

Cut and Paste Nightmare

You know it’s not going to turn out well for Plaintiffs when the Court says “at this juncture, the Court notes with great concern that Plaintiff includes the following as footnote 46 in its Opposition to Defendants’ Motion to Dismiss.” What was the footnote, you ask? Well, here it is, and it seems fine, right?

“Defendant Warren signed the Form 10-Qs filed during the Class Period. (Complaint PP 149, 151, 153, 167, 169, 172, 184). The form 10-Ks were signed by defendants Hickey and Van Riper in 1999 (Compl. P143), by defendants Hickey, Van Riper and Warren in 2000 (Compl. P159), and by defendants Hickey, Kelsey and Warren in 2001.”

Oh, but I assure you, it’s not fine. Judge Harold A. Ackerman (D. N.J.) continued, lamenting that “this footnote caused the Court considerable confusion because, as noted above, the SAC makes mention only of Defendants Fass, Sternlicht and Bond.” So, “after a not inconsiderable expenditure of judicial resources, the Court discovered that footnote 46 was also, and more properly, included by Plaintiff’s counsel as footnote 26 in its opposition brief to a motion to dismiss filed in Senn v. Hickey, No. 03-4372 (D.N.J. filed April 25, 2005), a case completely unrelated to the present action, with Plaintiff’s counsel as the only common de-nominator.” Uh-oh.

You see, “in Senn v. Hickey, there were in fact defendants named Warren, Hickey, Van Riper and Kelsey; there are no such defendants in the instant action. This Court recognizes that the inherent nature of modern litigation and word processing lends itself to some ‘cut-and-pasting’ of boilerplate from one case to the next; this example of duplication, however, is not easily overlooked. The Court urges counsel to exercise greater diligence in its future filings.”

Result? Nothing to do with the footnote (I hope), dismissed with prejudice.

You can read In re Bio-Technology General, issued October 26, 2006, at 2006 U.S. Dist. LEXIS 81268.

Nugget: “The chasm this Court must traverse to reach Plaintiff’s conclusion is simply too great.”

Dura No Help to Sears

The Sears securities class action was filed in 2003, but we’re still dealing with motions to dismiss.The third round of them actually.This time, it’s all about (our old friend) loss causation, with Judge Rebecca R. Pallmeyer (N.D. Ill.) taking on the Defendants’ Dura arguments — and pretty much shooting them all down.As she put it, “to the extent Defendants suggest that Dura imposed stricter fact-pleading requirements for the economic loss and causation elements of an action under §10(b), Defendants are mistaken.”

Judge Pallmeyer also commented that “Defendants’ arguments are inconsistent,” and “more importantly, however, the kind of specificity the Defendants seek is simply not required at the pleading stage.”

You can read Ong v. Sears, issued October 18, 2006 at U.S. Dist. LEXIS 80294.

Nugget: “Dura has not abrogated Caremark or changed the law in the Seventh Circuit.”