Waiting Game

No new securities class action decisions came out over the past two days, so I’m just waiting on one. I’m also waiting on Ernesto, so if there’s no posts later this week it’s because there’s no power where I live in Boca Raton, South Florida. Looks like it’s going to be a (relatively) small storm, but you never know. Believe me, I’m certain that the power poles here in Florida are made of solid Gingerbread.

Tell it to the Jury Guys

It’s been a while since I wrote about Dura (O.K., all-right, or anything at all – that was a cheap shot by the way), as my fingers were tiring from reporting on all those failed motions to dismiss, and my intracranial pressure was at dangerous levels from reading one-too-many defense oriented articles about how Dura changed the world (when, unless you’ve eaten some magic mushrooms, which I hear are quite delicious, it changed virtually nothing except you can no longer allege price inflation by itself – a result that’s completely logical to me).

Anyway, a new Dura opinion has been issued by Judge Michael M. Baylson (E.D. Penn) (George W. Bush, Class of ‘02) (pictured), and it’s a must-read for you loss causation groupies. In a nutshell, Judge Baylson told the Defendants that couldn’t have summary judgment based on Dura, but they could ask a jury to decide the issue instead. Gee, thanks a lot, just what we need here at CIGNA, a jury of our “peers.”

So, after sorting out the battle of the experts, Judge Baylson held “that (1) Dura Pharmaceuticals does not compel a fundamental change in the way this Court should analyze proof of economic loss; (2) at this time it is not be appropriate to adopt the investment model advanced by Defendants to measure economic loss under the federal securities laws; (3) one of several methods used by courts prior to Dura Pharmaceuticals to analyze and quantify economic loss and damages is a transaction-based methodology; (4) applying that methodology, SERS has a viable claim for economic loss based on particular shares held at the end of the class period; and (5) there are disputes of material fact related to economic loss and damages that make summary judgment particularly inappropriate; and (6) a jury should be permitted to make relevant factual determinations for the purposes of calculating damages.”

So the Nugget lives. It’s good to be back.

You can read In re Cigna, issued August 18, 2006, at 2006 U.S. Dist. LEXIS 59915.

Nugget: “Granting summary judgment on the present record would deprive the Plaintiffs of their constitutional right under the Seventh Amendment to have a jury decide all issues concerning the award of damages.”

Death in the Family

The Nugget will be back full-speed soon, as I plan on starting back up this Monday August 28, so don’t worry. In the meantime, I have some awful news. Last week, attorney Craig Rieders (pictured) died suddenly and unexpectedly. He was only 46 years old.

For those of you who didn’t know him, Craig served as one of the lead bankruptcy counsel in the Enron securities class action, and many other cases in our field. Craig also served as bankruptcy counsel in several of my cases, and was a tremendously talented and street-smart attorney. I mediated a case with him last year with his assistance, and as anyone knows you can really get to know someone if you are in a room together for 12 hours. I can only imagine how devastated his family, friends, and colleagues must be, and I send my deepest sympathies to each of them. Whenever I saw Craig, he always had a new story or joke to tell, and he was always laughing and in a great mood. What a terrible terrible tragedy. I will miss him.

Serial Remover Foiled Again

I’ve heard of Defendants trying to remove their state court case to federal court, but these guys over at Prudential have got to be some of the most persistent removers (yes, I believe I have invented a new word in this context, but I think this situation warrants it) I’ve ever seen.Long story short, Plaintiffs brought a class action against Prudential in an Ohio state court alleging state court claims.But Pru claims the case is actually “a federal securities class action masquerading as a state-law case, and claims Plaintiffs’ purpose is to avoid federal jurisdiction where this kind of action was intended to be brought.”Yeah, right.

Anyway, here’s where things heat up.Twice Prudential tried to remove the case, first at the beginning, and next on the eve of trial, and twice they were remanded.Then the firestorm came, as “the state court trial proceeded, and the jury awarded Plaintiffs $11 million in compensatory damages and $250 million in punitive damages.”

So guess what Prudential did?Yep, that’s right, they removed the case a third time (now seven years after the case was filed), arguing that Merrill Lynch v. Dabit confers federal jurisdiction.Well, I must admit my eyes glazed over reading the rest (something about 28 U.S.C. § 1446), but you’ll surely want to know that newly commissioned Judge Jack Zouhary (N.D. Ohio) (pictured) sent the case back to state court again, and also declined “to decide the issue of whether the holding of Dabit otherwise precludes this class action.”

Want to try for a fourth removal?I wouldn’t put it past them. I have a perfect time – how about after Pru loses each appeal?

Update: Looks like Pru just lost the first appeal, although they did get quite a hefty reduction in the punitive damages — $250 million cut down to $6 million.

You can read Burns v. Prudential, issued July 10, 2006, at 2006 U.S. Dist. LEXIS 46329.

Nugget: “Ultimately, the cases Prudential cites in its effort to expand the concept of ‘order or other paper’ are either easily distinguishable or unpersuasive.”

Judge Notes Trial Comes at End of Case, Not Beginning

So when your Judge says that “Defendants are pummeling a straw man,” how do you think it turned out for them? Not to well, actually, as Chief Judge Lewis T. Babcock (D. Colo.) (Reagan Class of ’88) explicitly recognized that “Plaintiffs allege not that the Defendants made false statements concerning demand for their products but rather that they omitted to disclose information that they had a duty to reveal,” and concluded that “a jury could find that the Defendants had a duty to make a full and truthful disclosure of the facts.” Ah yes, the omission. That’s still illegal too, you know.

Judge Babcock also rejected Defendants’ attempts “to require that a Plaintiff’s complaint mimic a newspaper article, specifying the what, where, when, why, and how of each discrete communication and transaction of which the fraud was constituted, “ finding “that understanding would render the authorities meaningless.”

You see, that’s because “requiring plaintiffs to set forth in their complaints each and every piece of evidence demonstrating the fraudulent event would be tantamount to trying the case at the pleadings stage, which is verboten.” So, “while the PSLRA certainly heightened pleading standards for securities fraud lawsuits,” Judge Babcock says that “if Congress had intended in securities fraud lawsuits to abolish the concept of notice pleading that underlies the Federal Rules of Civil Procedure, Congress would have done so explicitly.”

You can read Croker v. Carrier Access, issued July 18, 2006, at 2006 U.S. Dist. LEXIS 48603.

Nugget: “The plaintiffs have filed an Amended Complaint consisting of 102 pages, which the defendants describe as prolix. Whether prolix, ponderous, or panoptic, the document is insufficiently detailed to satisfy the defendants, who move in two separate motions for dismissal on the ground that the allegations are not particular.”

Net Gainers, Do Not Pass Go, Do Not Collect $2 Million

Now who would’ve thunk that we’d be reading an opinion issued in the Cendant case in 2006? I mean seriously, this thing settled in like 1972, didn’t it? Well, June 2000 actually, but even that’s an awfully long time ago. So what could possibly generate an opinion now you ask? Well, how about some sizeable shareholders who submitted claims in the settlement but were rejected by the administrator because it found their claims“did not merit compensation under the Plan because the profits they made by selling stock at artificially inflated prices cancelled out any losses they suffered on stock held after the irregularities were disclosed.”

So you can read the Court’s lengthy analysis if you’re fascinated by plans of allocation, but if you’re not (perhaps because you are normal), you will be satisfied to know that the Third Circuit, led by Judge Thomas L. Ambro, affirmed the denial of payment to these shareholders because they “reaped a net gain rather than a net loss.” As Johnny might have put it, if you came out ahead, your claim is dead. Dead indeed.

You can read In re Cendant, issued July 18, 2006 right here.

Nugget: “The bottom line: SKAT’s profit far outweighs its loss amount. Thus, it is not entitled to any payout.”

Third Circuit Squashes Ungrateful Objectors

It takes a lot of nerve, let me tell you. Sorry, I’m getting ahead of myself again. You see, Plaintiffs’ counsel in the AT&T securities class action reviewed more than 4 1/2 million pages of documents, took eighty depos, and even went to trial for eight days (back in October 2004) before securing a $100 million settlement. And after all that (and that’s just scratching the surface I’m sure), some objectors come in at the end complaining that counsel’s fee request of 21.25% was too high. Too high? Are these people serious? In a country where most contingent attorneys routinely charge 1/3 (and in some jurisdictions 40% if the case goes to trial), 21.25% is certainly reasonable. And when you factor in four years of intense work with no guarantee of any payment, well, all-right I’ll stop.

So anyway, after being rejected by the District Court, the objectors appealed, “contending the award of attorneys’ fees and expenses is unfair and unreasonable because (1) it is excessive, (2) it employs a sliding scale that provides for the fee percentage to increase rather than decrease as the settlement amount increases, and (3) it provides for payment of the full amount of attorneys’ fees before class members will receive payment. Objectors ask that fees be reduced to 15% of the settlement fund, in addition to requested costs and expenses, and that the pay-out be staged, with the final installment withheld until class members have been paid.”

Well, the Third Circuit rejected the objectors on every point, with perhaps the most interesting part saying that “the District Court did not abuse its discretion in concluding the sliding scale was fair and reasonable in light of the size of the settlement fund, the difficulty and length of the litigation, and the fact that all benefits accruing to class members are properly credited to the efforts of class counsel.”

You can enjoy In re AT&T, issued July 20, 2006, right here. I sure did.

Nugget: “The lodestar cross-check, while useful, should not displace a district court’s primary reliance on the percentage-of-recovery method.”