Institutional Investor Class Action Recovery

Class Plaintiffs in the case of In re Foreign Exchange Benchmark Rates AntiTrust Litigation alleged that Defendant banks conspired to fix prices in the foreign exchange (“FX”) market in violation of Sections 1 and 3 of the Sherman Antitrust Act.  All but one of the Defendant banks settled several years ago for a total of $2.3 billion.  Defendant Credit Suisse decided to proceed to trial, and on October 20, 2022, a Manhattan federal jury found that Credit Suisse played no part in a conspiracy to fix the foreign currency exchange market. 

On January 3, 2023, the First Circuit released an opinion that provides a straightforward analysis of the legal standards for determining if statements are non-actionable opinions, as well as the viability of materiality and scienter defenses.

Crypto litigation, fueled by a surge of investors and market volatility, has ballooned in recent years.  For example, numerous securities class actions and government subpoenas followed the May 2022 collapse of the $60 billion Terra network, along with stablecoin TerraUSD and the LUNA token.

On September 15, 2021, the United States District Court for the Northern District of California issued an order regarding a burdensome opt out provision in SEB Investment Management AB v. Symantec Corp. Presumably to make it easier for the parties to track a blow-up provision in the settlement, the proposed class settlement notice provided that investors wishing to opt out supply, among other things, holdings and transaction details.

In a scathing decision by the United States District Court for the Southern District of New York, the Court denied class certification of the Allergan securities class action (“Allergan”). See In re Allergan PLC Sec. Litig., 2020 U.S. Dist. LEXIS 179371 (S.D.N.Y Sept. 29, 2020).

The August 20, 2020 decision in In re: Volkswagen “Clean Diesel” Mktg., Sales Practices, and Prods. Liab. Litig., MDL No. 2672 CRB (JSC) by the United States District Court for the Northern District of California (“the Opinion”), dismissing a significant portion of the SEC’s federal securities claims against Volkswagen as having been previously released by the DOJ, serves as an important reminder for why such coordination is important and how defendants may take advantage of the failure to coordinate, as did Volkswagen.

The U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) will soon be presented the opportunity to address the novel question of whether investors who purchase a security in the context of a direct listing, rather than an initial public offering (“IPO”), have standing to bring claims under Sections 11 and 12(a)(2) of the Securities Act of 1933, despite the fact that such investors cannot allege that they purchased shares registered under and traceable to a defective registration statement.

In ruling on Defendants’ motion to dismiss in the FX Opt-Outs Action, Judge Schofield narrowed the antitrust claims, denied dismissal on the basis of forum non conveniens, and denied dismissal of the unjust enrichment claim.

Recently, the United States District Court for the Central District of California denied the defendants’ motion to dismiss the Second Amended Complaint (“Amended Complaint”) filed in the Toshiba securities litigation. As we previously wrote, in 2016, the district court dismissed the case, holding both that transactions in Toshiba’s unsponsored American Depositary Receipts (ADRs) are not “domestic” transactions as required by Morrison, and also that the plaintiffs’ Japanese law claims must be dismissed due to comity concerns and on forum non conveniens grounds. (link to prior blog). Then, in 2018, the Ninth Circuit reversed this decision, holding that Toshiba ADR trades are domestic, and allowed the defendants to file the Amended Complaint asserting more specific allegations about Toshiba’s connection to the ADR trades. (link to blog on 9th Circuit opinion).

On November 1, 2019, the United States Court of Appeals for the Second Circuit issued a summary order rejecting the appeal of an objector to the Foreign Exchange Antitrust Settlement. A few weeks earlier, U.S. District Court Judge Schofield had denied a motion filed by the objector and class counsel seeking an “indicative ruling” on their combined motion for approval of an agreement that would have ended the appeal. These two decision clear the way for the remaining distribution from the settlement fund, which totaled over $2.3 billion dollars.

Last week, the district court entered an order, granting CalSTRS’ motion for intervention for the limited purpose of tolling the statute of repose. While there is no longer a risk that the complaint will be dismissed (the vast majority of Plaintiffs’ claims have since survived dismissal), CalSTRS has successfully preserved its right to opt out if a class is certified. Allowing CalSTRS (and others) to use motions to intervene to toll the statute of repose rather than forcing such putative class members to choose to forego their rights or file their own opt-out action may preserve resources and encourage efficiency of the courts.

Years after Plaintiffs brought a federal securities complaint against Petrobras, and more than a year after the case settled for approximately $3 billion, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York ordered the unsealing of the majority of documents attached to parties’ summary judgment papers. Cornell University intends to use these documents in an arbitration in Brazil. Not only does Judge Rakoff’s decision come as an important reminder that sealing orders are not intended to last forever, but this decision also demonstrates how a motion to unseal may be used to bypass the traditional requirements of 28 U.S.C. § 1782, frequently invoked by entities seeking to use U.S. discovery in foreign proceedings.

The U.S. Supreme Court denied defendants-appellees’ petition for certiorari in Hagan v. Khoja. As set forth in our prior alert, the executives of the now-defunct biotechnology company, Orexigen, sought review of a Ninth Circuit decision, which not only created a departure from other courts in its narrow-approach to incorporation by reference and judicial notice, but according to the petition, also distinguished itself by being the first Circuit Court of Appeal to find that an issuer owes a duty to update a statement of historical fact that was accurate when made. At issue was whether Orexigen had a duty to disclose data that demonstrated interim results from an obesity drug trial were not as promising as once touted. In opposition to the petition for certiorari, respondent argued, inter alia, that “[e]ven if petitioners were correct . . . that this case implicates whether companies have a duty to update earlier statements of historical fact, the interlocutory posture of this case would make it the worst kind of vehicle for considering that question.”

In the Traffic Monsoon litigation, the U.S. Court of Appeals for the Tenth Circuit held that the enforcement provisions of the Securities Act and the Exchange Act reach Traffic Monsoon’s sales to customers outside of the United States. The implications of this decision are significant. This is the first Circuit Court decision to interpret Section 929P(b) of Dodd-Frank, and the first to adopt the position that Dodd-Frank limited Morrison’s application to allow for the enforcement provisions of the 1933 and 1934 Acts to apply extraterritorially. As a result, the decision may result in future decisions by the SEC to allow for holders of common shares to be eligible for recovery in connection with fair funds, rather than limiting eligible parties to holders of shares of American Depositary Shares or Receipts (ADR’s), a limitation the SEC imposed in the Fair Fund established for investors in BP. Recently, Traffic Monsoon has requested a stay of the Tenth Circuit's mandate while it prepares a writ of certiorari to the Supreme Court.

The United States District Court of the District of Connecticut will soon decide whether a putative class member may intervene “for the limited purpose of tolling the statute of repose.” Statutes of repose place an outer limit on when a claim can be brought. For example, claims brought under Sections 11 and 12 of the Securities Act of 1933 are subject to a 3-year statute of repose, 15 U.S.C. § 77m, and claims brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 are subject to a 5-year statute of repose. 15 U.S.C. § 1658. Less than two-years ago, the U.S. Supreme Court held that unlike statutes of limitations, which may be tolled by the pendency of a class action, statutes of repose cannot be so equitably tolled. CALPERS v. ANZ Securities. Should the District Court deny the motion, the putative class member, who purchased millions of Teva shares during the proposed class period will be time-barred from opting-out of the securities class action at-issue or asserting its own claims should the action be dismissed.

Last week, executives of the now-defunct biotechnology company, Orexigen filed a petition for certiorari before the U.S. Supreme Court, seeking clarification of the duty to update under the federal securities laws. The petition seeks further review of a recent decision by the Ninth Circuit, Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988 (9th Cir. 2018), which not only created a departure from other courts in its narrow-approach to incorporation by reference and judicial notice, but according to Orexigen, also distinguished itself from other Circuit Courts by being the first Circuit Court to find that an issuer owes a duty to update a statement of historical fact that was accurate when made. Specifically, the Ninth Circuit held that “by touting and publishing the ‘surprisingly’ positive 25 percent interim results [of the drug at-issue’s ability to decrease cardiovascular events], Orexigen created its own obligation to report that those results did not pan out after all” as evidenced by the 50 percent interim results.