Opinion
Master Docket 04 Civ. 3840(LAK).
November 16, 2005
MEMORANDUM AND ORDER
The individual defendants move for reconsideration of so much of the Court's ruling on the motions to dismiss as sustained the claim against them under Section 20(a) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78t(a), holding that culpable participation in the alleged Exchange Act violation is not an element a plaintiff must plead to state a claim; rather, lack of culpable participation is "an affirmative defense to be pleaded and proved by defendants." Alternatively, they seek certification of the question to the Court of Appeals under 28 U.S.C. § 1292(b).
A motion for reconsideration is a vehicle to bring to the Court's attention "matters or controlling decisions which counsel believes the court has overlooked." S.D.N.Y. Civ. R. 6.3. As review of movants' memorandum, the Court's opinion, and the several previous decisions by the undersigned that were relied upon readily demonstrates, the Court did not overlook the point and has concluded that the question upon which it ruled against the individual defendants is not controlled by any existing Second Circuit or Supreme Court precedent.
In re Bisys Secur. Litig., ___ F. Supp.2d ___, 2005 WL 2844792, at *13-*14 (S.D.N.Y. Oct. 28, 2005).
The motion for certification presents a closer question. The issue whether a plaintiff must plead culpable participation to state a claim under Section 20(a) is one on which courts are divided. It therefore should be regarded as one on which "there is substantial ground for difference of opinion." 28 U.S.C. § 1292(b). That question, if resolved in favor of the seven individual defendants, would terminate the action as to six, so the Court assumes that the question is "controlling" for purposes of the statute. The Court is not persuaded, however, that a definitive pretrial resolution of the issue would be likely "materially [to] advance the ultimate termination of the litigation." And it ultimately need not rely exclusively on that doubt in light of another practical consideration.
The Court notes a certain inconsistency in the moving papers. In seeking reconsideration, movants argue that this Court's ruling "is contrary to no fewer than three Second Circuit cases holding that culpable participation is a prima facie element of plaintiffs' control person liability case and one holding that culpable participation is an element that must be pled in order to state a Section 20(a) claim." Def. Mem. 1. If that truly were so, then there would be no occasion for an interlocutory appeal, as the question would not be one as to which there would be "substantial ground for difference of opinion" in this circuit. And the balance of their memorandum shows that movants recognize the overstatement in their request for reconsideration. In the portion of their memorandum seeking certification, they argue that certification should be granted because district court decisions in the Second Circuit are divided on this point and that "recent Court of Appeals cases have added to the confusion, causing judges on both sides of the aisle to reconsider, with multiple judges relying on the same opinions to change their viewpoints in opposite directions." Id. 14-15. The reality of the matter is that the Second Circuit has not definitively resolved this point, as the undersigned and many other judges of this Court have concluded.
"[I]nterlocutory orders are not to be certified routinely, even where the standards set forth in Section 1292(b) are met." Romea v. Heiberger Associates, 988 F. Supp. 715, 717 (S.D.N.Y.), aff'd without consideration of the point, 163 F.3d 111 (2d Cir. 1998). One of the factors for consideration is whether the "case[is] of unusual significance, [one] in which a ruling is of practical importance going well beyond run-of-the-mill concerns of parties before the Court," In re Auction Houses Antitrust Litig., 164 F.R.D. 345, 348 (S.D.N.Y. 2001), a standard that arguably is met here. But courts should consider also whether the issue is likely to come before the Court of Appeals on an appeal from a final judgment, and thus resolve the uncertainty without burdening that court with an unnecessary application for leave to take an interlocutory appeal, and whether the benefit to the district court of a pretrial resolution outweighs the burden on the Court of Appeals of deciding an appeal prior to final judgment. See In re Currency Conversion Fee Antitrust Litig., No. M-95, 2005 WL 1871012, at *3 (S.D.N.Y. Aug. 9, 2005) ("district court must consider the institutional efficiency of the federal judiciary when considering an application for Section 1292(b) certification"). Further, they should take into account that most civil cases settle and that, in consequence, there is a substantial probability that courts of appeals never would be called upon to pass on appeals in cases in which certification is sought.
This Court sees little likely advantage in the management or speed of resolution of this case that might be derived from an interlocutory determination of this issue. The action would be likely to consume substantially as much time with the individual defendants out of it as parties as it would if they remain. Regardless of whether they are parties, the individual defendants will be involved in the action as witnesses. Moreover, this issue is being litigated so frequently in this district that the Section 20(a) issue almost inevitably soon will come before the Court of Appeals on an appeal from a final judgment in another case. In consequence, even assuming that all of the requirements of Section 1292(b) were satisfied, this Court would deny certification in the exercise of discretion.
The Court recognizes the desire of the individual defendants for a definitive resolution now. A ruling in their favor in the Court of Appeals would eliminate their contingent exposure in this case. They perhaps might be mindful, however, of the adage that one should be careful of what one wishes for. A determination adverse to them by the Court of Appeals now conceivably could make it more difficult and expensive for them to settle the case. Of course, it is entirely up to them to decide what is in their interests.
For the foregoing reasons, the motion is denied in all respects.
SO ORDERED.