Opinion
21 MC 92 (SAS), 01 Civ. 3020 (SAS).
March 19, 2007
For Plaintiffs: Christopher Lovell, Esq., Victor E. Stewart, Esq., Ian Stoll, Esq., Lovell Stewart Halebian LLP, New York, New York.
For the Underwriter Defendants: Alan S. Goudiss, Esq., Adam Hakki, Esq., Shearman Sterling LLP, New York, New York, David M. Rein, Esq., Sullivan Cromwell, New York, New York.
For the Rediff Defendants: Geoffrey S. Stewart, Esq., Jayant W. Tambe, Esq., Maureen F. O'Hara, Esq., Jones Day, New York, New York.
MEMORANDUM OPINION and ORDER
I. BACKGROUND
This Opinion assumes familiarity with this Court's Opinion and Order, dated February 23, 2007, granting preliminary approval of the Rediff Settlement (the "February 23 Opinion"), see In re IPO Sec. Litig. (In re Rediff.com India Ltd. Sec. Litig.), Nos. 21 MC 92, 01 Civ. 3020, 2007 WL 656880 (S.D.N.Y. Feb. 23, 2007). All terms used but not defined herein have the same meaning ascribed to them in the February 23 Opinion.
The Underwriter Defendants had been privy to certain settlement documents in this action as early as October 2006. By no later than December 2006, they had access to those settlement documents in substantially their present form. In December 2006, this Court invited the Underwriter Defendants to file any opposition to the proposed settlement. They never did. The unopposed Rediff settlement was preliminarily approved by this Court on February 23, 2007.
On March 5, 2007, less than two weeks after the Court issued the February 23 Opinion, the Underwriter Defendants submitted a letter to the Court outlining various objections to the Rediff settlement, including an objection to the settlement of the section 11 IPO cause of action against the Rediff Defendants, and an objection based on the judgment reduction provision of the PSLRA. The Court generously treated that letter as a timely motion to reconsider the February 23 Opinion and granted the Underwriter Defendants an opportunity to be heard. Plaintiffs submitted a letter in response on March 15, 2007, in which they asserted, inter alia, that the Underwriter Defendants lacked standing to object to the settlement. The Court heard oral argument on March 16, 2007.
II. LEGAL STANDARD
A. Standing
In articulating the doctrine of Article III standing, the Supreme Court has identified an "irreducible constitutional minimum" that must be shown by a party seeking redress. This minimum is comprised of three distinct elements: (1) the party must have suffered an injury-in-fact, that is, the invasion of a "legally protected interest" in a manner that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical"; (2) the injury must be "fairly traceable" to the alleged conduct; and (3) it must be likely that the injury will be "redressed by a favorable decision."
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
Id. (quotation marks and citations omitted).
The standing requirements serve to ensure that judicial resources are "devoted to those disputes in which the parties have a concrete stake." Even if the party has standing originally, if that party "loses standing at any time during the pendency of the proceedings . . ., the matter becomes moot, and the court loses jurisdiction."
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 191 (2000).
Altman v. Bedford Cent. Sch. Dist., 245 F.3d 49, 70 (2d Cir. 2001).
In the settlement context, a non-settling defendant usually "lacks standing to object to a court order approving a partial settlement because a non[-] settling defendant is ordinarily not affected by such a settlement." However, "there is a recognized exception to this general rule which `permit[s] a non-settling defendant to object where it can demonstrate that it will sustain some formal legal prejudice as a result of the settlement.'"
Zupnick v. Fogel, 989 F.2d 93, 98 (2d Cir. 1993).
Id. (quoting Waller v. Financial Corp. of Am., 828 F.2d 579, 583 (9th Cir. 1989)).
B. Reconsideration
A motion for reconsideration is governed by Local Rule 6.3 and is appropriate where "`the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court.'" "A motion for reconsideration may also be granted to `correct a clear error or prevent manifest injustice.'"
In re BDC 56 LLC, 330 F.3d 111, 123 (2d Cir. 2003) (quotation omitted).
In re Terrorist Attacks on September 11, 2001, No. 03 MDL 1570, 2006 WL 708149, at *1 (S.D.N.Y. Mar. 20, 2006) (quoting Doe v. New York City Dep't of Soc. Servs., 709 F.2d 782, 789 (2d Cir. 1983)).
III. DISCUSSION
A. Standing
The non-settling Underwriter Defendants claim that their rights are affected by the settlement in only one way, namely that the settlement allegedly will infringe on their judgment reduction rights under the PSLRA. Because I conclude that the judgment reduction objection is both untimely and, in any event, has been resolved, the Underwriter Defendants lack standing to object to this settlement.
The Underwriter Defendants were aware of the judgment credit provision in the settlement as early as October and no later than December 2006, yet they never voiced any objection until after this Court granted preliminary approval — despite the Court's invitation to them in December 2006 to express any concerns they might have. As a result, I find that the Underwriter Defendants have waived that objection and thus have no injury-in-fact as a matter of law that could support standing.
Nothing changed in the time between December 2006 and the issuance of the Court's Opinion in late February. Indeed, the February 23 Opinion made no mention whatsoever of the judgment credit provision.
Even if the Underwriter Defendants had not waived their claim of injury-in-fact on the basis of the judgment credit provision, they would still lack standing to object to this settlement. It is apparent to the Court that the Underwriter Defendants' alleged injury-in-fact based on the judgment credit provision of the settlement was merely a hook to gain standing so that they could object on other grounds that do not affect their legal rights, but that concern them in the larger context of the three hundred remaining IPO cases. This is demonstrated by the fact that their "objection" to the judgment credit provision was resolved during a five-minute break at the March 16 Court conference. Thus, their hypothetical standing was gained and lost within a matter of minutes. In short, this alleged injury is not the kind of concrete injury and legal prejudice that is required for the Underwriter Defendants to have standing to object to this settlement.
I note that with respect to the remaining IPO cases, the question of whether a settlement class regarding the section 11 IPO claims can be certified remains open if and when a timely objection is made to such certification and if the Underwriter Defendants can demonstrate that they have standing to make such an objection.
B. Reconsideration
Even if the Underwriter Defendants did not lack standing, on reconsideration the Court adheres to its February 23 Opinion preliminarily approving the Rediff Settlement. The Underwriter Defendants argue that this Court overlooked the Second Circuit's decision in Miles v. Merrill Lynch Co. in certifying a class as to the section 11 IPO claims against the Rediff Defendants. They argue that the Second Circuit foreclosed certification as to plaintiffs' section 11 claims because individualized inquiries as to the knowledge of individual plaintiffs would predominate over issues common to the class. The Underwriter Defendants ignored, however, that the Rediff action is distinguishable from the other IPO cases — including the six focus cases considered in Miles — insofar as the Rediff Defendants, in defending against the section 11 IPO claims, never raised a defense that plaintiffs knew of the alleged misrepresentations. Thus, the defense of knowledge did not affect the predominance analysis of the certification of a settlement class as to the Rediff Defendants in this particular case. As such, the February 23 Opinion does not conflict with Miles or any other controlling authority.
471 F.3d 24 (2d Cir. 2006).
See id. at 43-44.
See 15 U.S.C. § 77k(a) ("In case any part of the registration statement . . . contained an untrue statement of material fact or omitted to state a material fact . . ., any person acquiring such security ( unless it is proved that at the time of such acquisition he knew of such untruth or omission) may . . . sue . . . ." (emphasis added)). The fact that the Underwriter Defendants in the Rediff action did assert a defense of knowledge as to the section 11 IPO claims does not alter the Court's conclusion that certification of the class for the section 11 IPO claims as to the Rediff Defendants is proper. If and when such claims proceed against the Underwriter Defendants, those defendants will be free to assert that the knowledge defense precludes certification of the class as to them because, as the Second Circuit held in Miles, 471 F.3d at 43-44, individualized inquiries as to knowledge would predominate over common issues.
This ruling is consistent with Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997). The section 11 claims against the Rediff Defendants could have been certified for trial (as well as settlement) because in the absence of the knowledge defense, common issues predominate. See In re IPO, 2007 WL 656880, at *9.
IV. CONCLUSION
For the reasons set forth herein, the underwriter Defendants' motion for reconsideration is granted, but the Court adheres to its original decision set forth in the February 23, 2007 Opinion and Order granting preliminary approval of the Rediff settlement. The Clerk of the Court is directed to close this motion.
SO ORDERED: