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.”

Picture This

Well, there goes the Eastman Kodak securities class action, and yes I mean with prejudice.Why?Because Judge Michael A. Telesca (W.D.N.Y.) says “that Kodak’s warnings not only alerted investors of potential problems with changes in Kodak’s products, but also informed investors that the company was then currently facing the very problems identified in the Complaint.”

So “because the ‘total mix’ of information available to potential investors clearly informed investors that Kodak’s plans were subject to risks, and clearly informed investors of the nature of those risks, the allegedly false and misleading statements made by the defendants during the class period are not material, in that based on a totality of the information, the risks that plaintiffs claim were concealed were disclosed, and no reasonable investor would have been misled.”

You can read In re Eastman Kodak, issued November 1, 2006, at 2006 U.S. Dist. LEXIS 79879.

Nugget: “Therefore, the court, while bound to accept plaintiffs’ factual allegations as true, is not required to accept the plaintiffs’ conclusions or inferences based on those facts.”

Try and Try Again — and You Still Won’t Succeed

You may remember the article I wrote back in March about the Invision Technologies securities class action. That article, entitled Try Try Again, featured Judge Martin J. Jenkins (N.D. Cal.) gleefully (OK, I added the gleefully part) tossing the case. At the time, I commented that “all may not be lost,” as “Judge Jenkins is going to allow Plaintiffs to submit another amended complaint, but warned that ‘vague assertions and allegations, scattered throughout Plaintiffs’ Complaint will not serve to meet their PLSRA burden.’”

Well, here we are in Round II, and Judge Jenkins sure doesn’t seem satisfied. In throwing the case out for good, he says that “for obvious reasons it would have been impossible for Defendants to have disclosed violations that they were not aware of,” and “as a matter of logic it makes little sense to read Defendants’ statement as affirming the non-existence unknown violations.”

I’d tell you more, but what’s the point really? This goose appears cooked.

You can read In re Invision, issued August 31, 2006 at 2006 U.S. Dist. LEXIS 76458.

Nugget: “Plaintiffs have plead no specific allegations indicating that Defendants knew of facts at the time that this statement was made such that it would render this statement false.”

Trex Chilled

Looks like Plaintiffs didn’t fare too well in the Trex securities class action. Reading the opinion, it seemed as if Judge Glen E. Conrad (W.D. Va.) (who was appointed a U.S. Magistrate Judge in 1976 at age 27, and elevated to Article III status in 2003) rejected their complaint on nearly every point imaginable, as he concluded “that the facts and circumstances alleged in this case are not such as to support a departure from the general rule that puffing and forward looking statements do not constitute misstatements or omissions of material facts for purposes of the PSLRA.”

He continued, “as for plaintiffs’ claims which arguably implicate statements of present fact, the court concludes that, when read in context with other statements and information made available to the investing public, no reasonable investor could have been misled. To hold otherwise, would create unreasonable reporting requirements that would discourage and chill meaningful communication by corporate officers.”

You can read In re Trex, issued October 6, 2006 at 2006 U.S. Dist. LEXIS 73503 or here.

Nugget: “Even assuming that the accused statements and/or omissions could be viewed as false or misleading, the court concludes that the facts and circumstances alleged by plaintiffs do not give rise to a viable inference of scienter.”