Opinion
02 Civ. 7377 (LAK).
May 16, 2007
MEMORANDUM AND ORDER
In a thorough and thoughtful report and recommendation, dated February 9, 2007 (the "R R"), Magistrate Judge Andrew J. Peck recommended that defendants' motion for summary judgment dismissing the complaint be granted. Plaintiffs object in part, contending that the dismissal of their federal securities fraud claims with respect to their purchases in Period 3, as defined in the report and recommendation, and their state law claims would be inappropriate. They argue that there are genuine issues of fact as to loss causation with respect to Period 3 purchases and that the state law claims are not preempted by The Securities Litigation Uniform Standards Act ("SLUSA"), 15 U.S.C. § 78bb(f)(1).
I have concluded, after careful consideration, that plaintiffs' objections are without merit. Indeed, they rest in significant part upon distortion of Magistrate Judge Peck's reasoning. As I already have described this lawsuit in detail in Gordon Partners v. Blumenthal, 347 F. Supp.2d 15 (S.D.N.Y. 2004), and as the R R is quite complete, I write only to emphasize two points that, in my view, alone are fatal to plaintiffs' objections.
I
Plaintiffs argue first that the R R "recommends dismissal of Plaintiffs' Period 3 claims . . . because the `Gordon Plaintiffs have not submitted an expert report on damages in opposing defendants' summary judgment motion.' Report at 25. According to the Report, an expert report containing an event study, and nothing less, is required to defeat summary judgment." P1. Obj. 11 (emphasis added). The entire fragment of the R R quoted in the foregoing statement is taken out of context. The italicized statement in plaintiffs' objections is inaccurate.
In fact, Judge Peck recommended dismissal of the federal securities fraud claim concerning Period 3 purchases "[b]ecause the Gordon plaintiffs have not provided this Court with any evidence as to what their true damages are and therefore caimot show loss causation," not because they failed to submit an expert report containing an event study. What he said was this:
R R at 28 (emphasis added).
"`[D]amages in a securities fraud case are measured by the difference between the price at which a stock sold and the price at which the stock would have sold absent the alleged misrepresentations or omissions.' [citation omitted] Determining the difference between those prices typically requires `elimination of that portion of the price decline that is the result of forces unrelated to the wrong.' [citation omitted] `Such forces can be broadly categorized into: (1) company risk — the unique risk that is peculiar to the particular stock at issue, and (2) market risk — the risk associated with market wide variations generally.' [citation omitted] An accepted method for calculating damages based on these principles is an `event study' which `uses regression analysis and other statistical techniques to model the effect that public statements have on a particular company's trading experience and normalizes that experience to factor out performance of the stock market generally or of stocks in relevant related indices.' [citation omitted]
"Because the Gordon have not provided this Court with any evidence as to what their true damages are and therefore cannot show loss causation, defendants are entitled to summary judgment as to the remaining Period 3 claims. * * *
"Summary judgment is the time to `put up or shut up.' * * * The Gordon plaintiffs have offered no event study or similar analysis to show whether any loss (and if so how much) was caused by defendants' conduct as opposed to other market factors. In the absence of proof of loss causation, defendants are entitled to summary judgment dismissing the Gordon plaintiffs' § 10(b) and Rule l0b-5 claims." R R at 26-28 (emphasis added) (footnote omitted).
Thus, Judge Peck did not say that summary judgment was appropriate because plaintiffs had not submitted an event study. He said that it was appropriate because plaintiffs had submitted no evidence on the issue of loss causation.
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,248 (1986); White v. ABCOEng'g Corp., 221 F.3d 293,300 (2d Cir. 2000); see also Fed.R.Civ.P. 56(c). Where the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Virgin At. Airways Ltd. v. British Airways PLC, 257 F.3d 256, 273 (2d Cir. 2001). In that event, the nonmoving party must come forward with admissible evidence, see, e.g., Nora Beverages, Inc. v. Perrier Group of Am., Inc., 269 F.3d 114, 123-24 (2d Cir. 2001); Raskin v. Wyatt Co., 125 F.3d 55, 65-66 (2d Cir. 1997), sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment, e.g., Nebraska v. Wyoming, 507 U.S. 584, 590 (1993) (holding that when the nonmoving party bears the burden of proof at trial, the moving party is entitled to summary judgment if the nonmovant fails to make a showing on an essential element of its claim); Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995) ("In moving for summary judgment against a party who will bear the ultimate burden of proof at trial, the movant's burden will be satisfied if he can point to an absence of evidence to support an essential element of the nonmoving party's claim.") (citing Celotex, 477 U.S. at 322-23).
Loss causation is an issue on which plaintiffs would have had the burden of proof at trial. Once defendants questioned their ability to raise a genuine issue of fact, plaintiffs were obliged to come forward with admissible evidence that, if credited, would be sufficient to justify a finding in their favor on that issue. This they completely failed to do, either by expert or competent lay evidence.
This would have been true even if defendants had not submitted their own expert report on the issue, as defendants were not obliged to "prove the negative" to put plaintiffs to their proof. Accordingly, even serious questions as to the admissibility or credibility of the evidence of defendants' expert, and I see none, would be insufficient to create a genuine and material issue for trial. I note also that plaintiffs' objections to the defendants' expert's report (docket item 68, at 21-24) were without merit.
I agree entirely with Judge Peck's rejection of plaintiffs' contention that the adverse inference sanctions Judge Peck imposed on defendants for spoliation of evidence suffices to raise an issue of fact as to loss causation. R R 28 n. 8.
II
As Judge Peck pointed out, SLUSA provides in substance that no "covered class action" based upon state law and alleging misrepresentations or omissions in connection with the purchase or sale of covered securities may be maintained in any court. R R 31-32. He recommended dismissal of plaintiffs' state law claims on the ground that they are foreclosed by this statute.Plaintiffs apparently acknowledge that this is a "class action" within the meaning of SLUSA, but object that it is not a "covered class action." Once again, however, the argument is based upon a distortion, this time of the statutory language.
The statute defines a "covered class action" in relevant part as:
"any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which —
(I) damages are sought on behalf of more than 50 persons; and
(II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose." 15 U.S.C. § 78bb(f)(5)(B) (emphasis added).
This action is based principally upon the same underlying facts alleged by class action plaintiffs against NTL and the individual defendants in In re NTL, Inc., Secur. Litig., No. 02-3013 (LAK). While this action includes some allegations not found in the class action complaint, the overlap between the two is extensive. The class action concededly was brought on behalf of more than 50 people. The cases quite plainly involve common questions of law and fact. See generally In re NTL, Inc., Sec. Litig., 347 F. Supp.2d 15. Hence, the question whether this case is part of a "covered class action" turns on whether it is "joined, consolidated, or otherwise proceed[s with the class action] as a single action for any purpose."
As Judge Peck pointed out, the Gordon plaintiffs stipulated to the consolidation of this action with the class action for pretrial purposes. R R 34. In consequence, the plain language of the statute compels the conclusion that plaintiffs' state law claims are precluded by SLUSA.
Plaintiffs nevertheless argue that I should ignore the language of the statute in favor of their interpretation of the legislative history. But it is the plain language of the statute that controls.
III
I have considered all of plaintiffs' objections, regardless of whether I thought it necessary to discuss them here. All are without merit. The defendants' motion for summary judgment dismissing the complaint [docket item 59] is granted and plaintiffs' objections overruled.SO ORDERED.