Class Action Countermeasures : Class Action Lawyers & Attorneys : McGuireWoods Law Firm : Complex Litigation, Mass Torts

 As I've written before, guessing at the motives and methods of plaintiffs' lawyers in class actions can be much like old-style Kremlinology. But every once in a while, we get a little more information. The most recent comes from University of Minnesota Law School professor Stephen Meili, who just published his article Collective Justice and Personal Gain? An Empirical Analysis of Consumer Class Action Lawyers and Named Plaintiffs in the Akron Law Review.

Professor Meili's methodology is not ideal: he basically just sent a series of open-ended questions to class-action plaintiffs and their attorneys, asking them about their perceptions of how a given case proceeded, and how fair the process was. As he admits, that means that no one talks about unsuccessful cases. Moreover, the self-reporting means that the plaintiffs' lawyers may try to make themselves sound more noble than they are otherwise. (For example, only 5 of 33 lawyers mentioned making money. There may be that many noble plaintiffs' attorneys, but they seem to disappear around the time they make fee requests.)

Nonetheless, because of its open-ended nature, Professor Meili's survey elicited some revealing statements from the plaintiffs attorneys, and he does not shy away from the implications of what those attorneys told him. Among them:

Unlike conventional plaintiffs' lawyers, class-action lawyers inflate the expectations of their clients.

[C]onsumer class action lawyers often deliberately inflate the expectations of their clients, encouraging them to look beyond individual monetary compensation and focus instead on relief for the entire class, which sometimes includes non-monetary awards. In this way, class action lawyers do more than merely manage their client's expectations, a well-documented process in individual litigation. Instead, they consciously urge their clients to expand those expectations. If their clients refuse to be so encouraged, the lawyers opt not to include them as named plaintiffs.

Class-action lawyers prefer ignorant clients because they are easier to control.

[I]t appears that in choosing a suitable class representative, consumer class action lawyers seek someone willing to represent large numbers of persons but who was unaware of such willingness before they talked to the lawyer. The lawyers find it easier to keep such named plaintiffs focused throughout the typically long class action process.

Class-action lawyers don't communicate with their clients.

This awareness of named plaintiff motivation is particularly noteworthy because most of the lawyers in the study said that they spend less time communicating with named plaintiffs than they do with their clients in individual cases.

What does these findings mean for defendants? They do confirm some of defense lawyers' suspicions. Class actions are usually manufactured cases, and it is really the lawyer driving the case, not the client. But the most disturbing conclusion is not that the lawyers are in the drivers' seat. After all, for many defense lawyers and judges, that is hardly news.   Instead, it is the finding that many class-action lawyers deliberately screen for the most ignorant and malleable clients, so that they'll be easier to control. In the day-to-day conduct of the litigation, this may not mean much. But should the parties try to reach a settlement, this means that the named plaintiff is more likely to serve the plaintiff attorneys' interests than those of the class. And that is exactly what courts try to guard against.

It also means that plaintiffs' counsel continue to treat the adequacy of their clients as a hurdle, rather than a requirement. As a result, as both zealous advocates and officers of the court, it is critical that defense lawyers probe the adequacy of the proposed class representative. In particular, defense attorneys should be asking:

• Was it the client's idea to bring the case as a class action?
• Was the client recruited to the case?
• How often does the client communicate with her lawyer?
• What were the client's expectations at the beginning of the litigation?

Defense counsel have long argued that ignorant plaintiffs are inadequate plaintiffs, often with little success. Professor Meili's study shows that, once again, defendants should not focus on the ignorance itself, but its effects. The reason ignorant plaintiffs are inadequate is not because they are ignorant, but because they lack the independence to stand up to their lawyers.

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Yesterday was the long-anticipated oral argument in Wal-Mart v. Dukes.  I've attached a copy here.  Overall, the Justices were clearly prepared for the argument, although they--like almost everyone else--had trouble keeping all of the facts straight.  A few highlights:

• Justices Ginsburg, Kagan, and Sotomayor took an early lead in questioning Ted Boutrous (who argued for Wal-Mart).  
• Boutrous was clearly having a good day.  He had command of almost all of the facts, and was able to subtly correct various Justices at different points when they got lost in the weeds.
• Justices Kennedy and Scalia each had problems with the coherence of plaintiffs' underlying theory.  As Justice Kennedy put it: "your complaint faces in two directions. Number one, you said this is a culture where Arkansas knows, the headquarters knows, everything that's going on. Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there's an inconsistency there"
• Awarding "back pay" under Rule 23(b)(2) seemed to cause most Justices heartburn.  Justice Ginsburg called it "a very serious problem in this case."  
• Several Justices, including Sotomayor and Scalia, had trouble accepting the legitimacy of the proposed statistical proof.

So where does that leave the case?  The "more question" rule doesn't provide much guidance in this case.  But it does appear that the Justices were wrestling with the questions of how to prove commonality and whether 23(b)(2) certification is appropriate.  If I had to predict, I'd say that Wal-Mart's probably in better shape than the plaintiffs at this point.  Of course, we'll find out in June.

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The confidential witness is the bane of the securities defendant's existence. While there may be some legitimate reasons to keep a witness confidential, the words "Confidential Witness #1" can also hide problems with the plaintiffs' case, like sloppy research or outright misrepresentation.

How do we know this is the case? Well, many defendants have "Confidential" horror stories, but more importantly, these problems are sometimes revealed in the case proper. Case in point:City of Livonia Employees' Retirement System v. Boeing Co.  As the Northern District of Illinois puts it in its opinion, the case reads like an airport thriller.

At the center of this drama is the purported confidential source, who had a series of fateful conversations with plaintiffs' investigators and months later with defense counsel. The confidential source did not meet plaintiffs' counsel until he was recently deposed, months after plaintiffs' counsel used information purportedly provided by the confidential source to survive dismissal of this lawsuit. The confidential source now denies the information attributed to him in plaintiffs' pleadings and in their representations to the court. Plaintiffs assert their confidential source is presently lying, while the confidential source claims it is plaintiffs' investigators who are the liars.

The case was a traditional securities fraud case. The plaintiffs accused Boeing of lying to is investors about the delivery schedule for the 787 Dreamliner, a much-hyped and heavily-anticipated commercial jet model. In doing so, they relied heavily on information from "confidential witnesses."

The trial court had dismissed plaintiffs' amended complaint without prejudice, holding that there were not enough facts present to support a "strong inference" of scienter. In particular, it noted that

Plaintiffs' generalized reliance on confidential source information was insufficient to establish Boeing's scienter. Allegations by confidential sources are discounted, "usually steeply," because information from anonymous sources is not regarded as compelling or supportive of plausible inferences.

[Emphasis added.]  Nonetheless, the court offered the plaintiffs the chance to replead naming no more than one confidential source for their information about what Boeing knew and when it knew it. Plaintiffs' second amended complaint contained four paragraphs (139-42) that relied on confidential witness testimony. Boeing moved to dismiss this complaint as well, but the court denied its motion, relying heavily on the four new paragraphs.

So Boeing served discovery asking for the identity of the confidential witness. Then they interviewed him and took his deposition. And what they uncovered was--at least to the court--surprising:

[Former confidential witness] Singh has consistently denied that he was the source of the information attributed to him in the second amended complaint. Indeed, he denies he was employed by Boeing. Rather, he attests he worked for an outside contractor at Boeing starting in late August 2009, months after the events at issue in this suit; he denies personal knowledge of the 787-8 testing documents or their circulation to Boeing executives in April and May 2009; he claims he never met plaintiffs' counsel until his deposition on November 17, 2010; nor was he ever shown the allegations attributed to him in the second amended complaint until he met with defense counsel on November 2, 2010.

Deposition transcript in hand, Boeing filed for reconsideration on the grounds that plaintiffs had committed a fraud on the court. The plaintiffs opposed, arguing that their confidential witness was the liar, not their investigators. At this point, the trial court threw up its hands:

It matters not whether, as plaintiffs argue, Singh told their investigators the truth, but he is lying now for ulterior motives. The reality is that the informational basis for paragraphs 139-42 is at best unreliable and at worst fraudulent, whether it is Singh or plaintiffs' investigators who are lying.

Since the key four paragraphs weren't reliable, the court dismissed the second amended complaint, this time with prejudice.

So what can we learn from this case? First, always chase down the "confidential sources" on which the plaintiffs rely. Once the complaint has been filed, there is no reason for sources in a civil lawsuit to be confidential. Second, take the confidential witness's deposition. The confidential witness is a way for plaintiffs' counsel to sidestep the tighter restrictions of the PSLRA without having to do their actual homework. Deposing the witness keeps them accountable.

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 It's been a busy week, so please accept another set of links to class-related news in lieu of a full-fledged post.  Regular posting will resume next week.  

• Dukes discussion - On Tuesday, the Washington Legal Foundation hosted a panel on the upcoming Wal-Mart v. Dukes argument.  Panelists included Mike Murphy, Rachael Weinfeld, and yours truly.  It was an interesting discussion, especially Mike's take on how the Supreme Court would rule, and Rachael's discussion of the importance of the Daubert inquiry to class certification.  
• Dukes discussion II - Today, the American Constitution Society is hosting a panel on the same topic.  It's moderated by Michael Selmi, and panelists will include Marcia Greenberger, Adam Klein, Suzette Malveaux, and me.  It should also be a very interesting discussion.
• Lessons from Google Books - On Tuesday afternoon, the Southern District of New York refused to approve the Google Books settlement.  Glenn Lammi of the WLF has taken the opportunity to--like Judge Alsup--draw some lessons about what its opinion means for best settlement practices.
• More on circularity - Remember the circularity problem?  Securities class actions take money from a shareholder-owned corporation and return it to shareholders, minus attorneys' fees.  Why doesn't this critique apply to company-to-company litigation?  Amanda Rose and Richard Squire have a theory.  
• One shameless self-plug: recent searches that have led to this site include  "adequacy of counsel" "collective vs. class action conflict," "environmental class action," "motion to strike class allegations," "class acton interrogatories," "named plaintiff deposition," and "All Writs Act."  As well as on this blog, you can information about those subjects in the Class Action Playbook by me and Brian Anderson.  (Sections 2.8, 3.1.2, 3.1.6, 4.2.5, 4.5.4.1, 4.5.4.4, and 9.1.3 respectively.)

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King Architectural Metals manufactured metal building components, which it needed to sell. It made the mistake of faxing an advertisement to CE Design. It probably seemed like a good idea at the time. CE Design was a small, Chicago-area civil engineering firm, and it had checked a box in the Blue Book of Building and Construction (a directory of building-industry firms) that indicated it was OK to contact it with advertisements. But it also had a sideline in Telephone Consumer Protection Act class actions. It filed at least 150 of them, and its president had testified in at least 20 of those.

In the course of his deposition in the case, the company president (John Pezl) testified that he had not authorized King to contact CE Design; hard to believe given the Blue Book listing. So King opposed class certification on the grounds that CE Design was not typical of class members who had not consented, and that the discrepancy in Pezl's testimony made him an inadequate class member.

The district court certified the class anyway, so King appealed to the Seventh Circuit, which reversed. Judge Posner wrote the opinion. In doing so, he focused in on one requirement that does not get much attention--typicality--and one that does--adequacy. And he explained the importance of enforcing the typicality requirement:

A class is disserved if its representative's claim is not typical of the claims of the class members, for then if his claim fails, though claims of other class members may be valid, the suit will at the least be delayed by the scramble to find a new class representative. Alternatively, a class representative's atypical claim may prevail on grounds unavailable to the other class members, leaving them in the lurch.

He also explained why credibility is important to a named plaintiff's adequacy.

A named plaintiff who has serious credibility problems or who is likely to devote too much attention to rebutting an individual defense may not be an adequate class representative.

CE Design's Blue Book listing made it atypical of class members who had not consented to communication by fax. And Pezl's inconsistent testimony compounded the problem, ensuring that any classwide trial would focus on his credibility rather than the claims of the class.

While the opinion is helpful for challenging adequacy and typicality, Judge Posner did end the opinion with a warning note for defendants.

We don't want to be misunderstood, however, as extending an invitation to defendants to try to derail legitimate class actions by conjuring up trivial credibility problems or insubstantial defenses unique to the class representative. Serious challenges to typicality and adequacy must be distinguished from petty issues manufactured by defendants to distract the judge from his or her proper focus under Rules 23(a)(3) and (4) on the interests of the class, as emphasized in Dubin v. Miller, 132 F.R.D. 269, 272 (D. Colo. 1990), where the judge, while decertifying the class, remarked that "few plaintiffs come to court with halos above their heads; fewer still escape with those halos untarnished. For an assault on the class representative's credibility to succeed, the party mounting the assault must demonstrate that there exists admissible evidence so severely undermining plaintiff's credibility that a fact finder might reasonably focus on plaintiff's credibility, to the detriment of the absent class members' claims."

Warning aside, the opinion is still useful for defendants.  It provides clear explanations of the typicality requirement and the "unique defense" aspect of both typicality and adequacy.  This is why the deposition of the named plaintiff is so important: it allows the defendant to determine whether it's worth taking the risk to challenge the named plaintiff's credibility.  

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Last year, class-action plaintiffs' lawyer (and author of the New Jersey Appellate Law Blog) Bruce Greenberg published an article in the St. John's Law Review on "Restricting Objectors." (The cite is 84 St. John's L. Rev. 949; the Law Review appears to be a few issues behind in posting articles on its site.) Not surprisingly, Greenberg has a few objections to objectors. As he puts it:

In at least two ways, professional objectors harm the class members whose interests they claim to represent. First, professional objectors' almost invariably groundless objections delay the provision of relief to class members who, in most instances, have already waited years for resolution. Second, by feeding off the fees earned by class counsel who took the risk of suing defendants on a purely contingent basis, as is the normal practice in class actions, professional objectors create a disincentive for class counsel to take on such risky matters. That disincentive clashes with the public interest, repeatedly recognized by courts, to incentivize class counsel to handle such cases.

Greenberg's article is well-written and informative, but there's one issue he has trouble overcoming. Greenberg's criticisms of objectors sound remarkably like some defendants' ' criticisms of plaintiffs' counsel. Specifically:

• He assumes that objectors' arguments are always baseless.
• He argues that objectors actually undermine the interests of their clients.
• He assumes that the objectors' adversaries (in this case, plaintiffs' counsel) are largely blameless.
• His rhetoric implies that objectors provide little benefit.

This kind of rhetoric can be very useful (and even accurate) in a brief, directed against a single opponent. It's less so in a scholarly article describing an entire category of lawyers.

The article has the same problems as many practitioners' articles about class actions--by plaintiffs or defendants. It assumes the worst about the authors' opponents. (Something I've been accused of myself..) Strategically, it's important for a lawyer to maintain a three-dimensional picture of his adversaries. And, from a scholarly standpoint, nuanced portraits are of far more use than two-dimensional ones.

In short, it's best if we treat our opponents as just as human as we are: capable of both admirable and less-admirable actions.

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A group of Florida landowners sued Raytheon Company, accusing it of contaminating their groundwater by improperly disposing of hazardous waste. The plaintiffs put up an expert who testified that he could construct a statistical model that would demonstrate liability and damages on a classwide basis.  Raytheon put up its own experts, who argued that plaintiffs' method of defining the affected area was not consistent with "applicable professional standards," and that their expert's statistical method was unsound as well.  

The district court threw up its hands.  Declaring 

[i]t is not necessary at this stage of the litigation to declare a proverbial winner in the parties' war of the battling experts or dueling statistics and chemical concentrations

it certified the proposed class, and left the Daubert question for trial.

Raytheon appealed.  The Eleventh Circuit--in an opinion not designated for publication--reversed the trial court. Its primary reason to do so was 

Here, in its Rule 23 analysis, we find that the district court erred as a matter of law by not sufficiently evaluating and weighing conflicting expert testimony on class certification. It was error for the district court to decline to declare a proverbial, yet tentative winner. The Plaintiffs are required to prove, at the class certification stage, more than just a prima facie case, i.e., more than just a pretty good case.

Here the district court refused to conduct a Daubert-like critique of the proffered experts's qualifications. This was error. As we have noted, a district court must make the necessary factual and legal inquiries and decide all relevant contested issues prior to certification. The district court has not determined facts, from the often conflicting evidence, sufficient to determine whether class certification is or is not appropriate. The court erred in granting class certification prematurely. Tough questions must be faced and squarely decided. Such tough questions were side-stepped by the district court in this case. That was error.

The Eleventh Circuit remanded the case for further proceedings, and declined to express an opinion about whether certification would ultimately prove appropriate.  

It's interesting that the Eleventh Circuit has chosen not to publish the opinion.  It relied heavily on the Seventh Circuit's opinion in American Honda Inc. v. Allen, and this ruling aligns it with the Second and Third Circuits as well. And this opinion would put the Eleventh Circuit opposite the Ninth's opinion in Dukes v. Wal-Mart.  Since the Supreme Court is hearing that case next week, it's entirely possibly that, rather than picking a winner itself, the Eleventh Circuit decided to hedge its bets.

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If you'll forgive the second piece of self-promotion in a week: the Washington Legal Foundation (which keeps the always-interesting Legal Pulse blog) has just published a Legal Opinion Letter evaluating several of the arguments in favor of overturning the 9th Circuit's Dukes v. Wal-Mart decision, written by yours truly.  

I'll be participating in a briefing for the WLF on this issue in a few weeks (specific details when I get them), and another one a few days later for the American Constitution Society.   

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Enron.  The Toyota sudden acceleration MDL.  The Microsoft antitrust class actions.  There are no shortage of class actions that have arisen from government investigations of various kinds.  But while seeing a class action complaint arrive on top of a government subpoena can be stressful, it's not necessarily the end of the world.  In fact, the defenses of each can harmonize in surprising ways.

On Tuesday, my colleague John Adams and I presented a CLE session on how to defend class actions that arise from government investigations of various kinds.  In it, we explained:

• best practices for handling government investigations, and how they contribute to an effective class action defense;
• why class action plaintiffs' attorneys find government investigations so attractive; and 
• strategies for coordinating discovery; and
• the best class certification opposition arguments.  

You can download the slides from the presentation here.  

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I don't usually say whether I think a class-action opinion is good or not.  For one thing, this blog has been about strategy rather than policy.  For another, I'm a practicing attorney, and I'd rather not try to second-guess judges who have to sort through layers of contentious briefing in order to decide issues in class actions.

But I'm going to make an exception for an opinion I just ran across by Judge Alsup of the Northern District of California.  This is a good settlement opinion; moreso for the fact that it has been issued before the parties have made a settlement proposal.  To highlight just three of the areas Judge Alsup warns both parties about before they've entered negotiations:

On adequacy of representation:

Is the plaintiff an adequate representative with standing? Is plaintiff motivated to and qualified to act on behalf of those he or she seeks to represent? Are there shortcomings in the plaintiff that would be advanced to defeat a class certification motion? What is the litigation history, criminal history, and relationship to plaintiff's counsel? In an employment case, how long did the plaintiff work for the employer? The opinion of the lead plaintiff as to the fairness of the settlement to absent class members must be provided to the Court, along with an opinion by counsel. Adequacy of counsel is not a substitute for adequacy of the representative.

On expansion of the class:

Typically, defendants vigorously oppose class certification and/or argue for a narrow class. In settling, however, defendants often seek to expand the class, either geographically (i.e., nationwide) or claim-wise (including claims not in the complaint) or person-wise (e.g., multiple new categories). Such expansions will be viewed with suspicion. If an expansion is to occur it must come with an adequate plaintiff and one with standing to represent the add-on scope and with an amended complaint, not to mention due diligence as to the expanded scope. The settlement dollars must be sufficient to cover the old scope plus the new scope. Personal and subject-matter jurisdiction over the new individuals to be compromised by the class judgment must be shown.

On incentive payments to class members:

If the proposed settlement by itself is not good enough for the named plaintiff, why should it be good enough for absent class members similarly situated? Class litigation proceeded well for many decades before the advent of requests for "incentive payments," which too often are simply ways to make a collusive or poor settlement palatable to the named plaintiff. A request for an incentive payment is a red flag.

What makes this such a good opinion?  It's clearly written, and provides real guidance on thorny issues that actually come up in settlement negotiations.  But most importantly, it shows that Judge Alsup thinks hard and clearly about the strategic incentives both plaintiffs and defendants face when settling a class action.  For all of the appellate opinions out there discussing the various factors that can spring from Rule 23(e)'s requirement that settlements be "fair, reasonable, and adequate," this may be the single best opinion I have read on classwide settlement.   I usually hope my clients don't have to end up in court litigating a class action, but if they do, they could do a lot worse than Judge Alsup.

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Last year, Vanderbilt professor Brian Fitzpatrick made the bold argument that class action plaintiffs' attorneys aren't paid enough. Now, the University of Pennsylvania Law Review's online presence, PENNUmbra, has a response by University of Arizona professor David Marcus. 

Marcus levels several criticisms against Fitzpatrick's proposal. I'm going to ignore the easy ones and focus on two of his more interesting arguments. First, Marcus focuses on the effect of the Rules Enabling Act:.

Fitzpatrick believes that Federal Rule of Civil Procedure 23(h), which licenses "reasonable" fee awards in class actions, permits courts to do what he urges. But the REA prohibits rules of procedure that "abridge, enlarge or modify any substantive right," and this limitation might preclude an interpretation of "reasonable" to include such all-encompassing fee awards. An order giving the lawyer everything would effectively assign class members' claims to their counsel without their consent. Doctrine that regulates claim assignment is substantive law, and the Federal Rules themselves may not modify these assignments. Although the issue is quite complicated, Rule 23(h) might violate the REA's substantive rights limitation if applied in the manner Fitzpatrick desires.

(Footnotes omitted, emphasis added.)

His second critique is even more interesting: it appears Fitzpatrick may have made a basic math mistake and overestimated the deterrent effect of imposing 100% attorney fees. As Marcus explains:

[F]ee awards of the ilk Fitzpatrick prefers might cause a net deterrence loss. His proposal would apply in all cases involving minor per capita recoveries. But a case's aggregate value determines whether the game is worth the candle for the plaintiffs' lawyer. As a recent case illustrates, potential damages of three dollars per class member would hardly thwart litigation if the case as a whole might win $ 9.5 million. n25 Fitzpatrick's proposal might produce a greatly diminished settlement in this sort of case. Presently, if an attorney wants $ 2.5 million in fees, she must obtain a $ 10 million settlement. But if the lawyer gets 100% of the recovery, a $ 2.5 million settlement would earn her the same amount. The defendant could take advantage of class counsel's higher rate of return and discount a settlement offer by $ 7.5 million. A risk-averse plaintiffs' lawyer might accept such an offer, and there are reasons to think that risk aversion would be likely in this context. Whatever additional deterrence the eschewed $ 7.5 million might have created vanishes.

(Footnotes omitted, emphases added.)

What does this mean for day-to-day class-action practice? Not much, because realistically, there's not much chance that courts will adopt Fitzpatrick's proposal. But then, I suspect Fitzpatrick didn't make the argument in order to get it adopted; I suspect he wanted to kick off a robust debate about attorneys' fees. He's certainly done that, and Marcus's has provided a thought-provoking response.

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Last year, a jury in New York City decided one of the few securities class actions ever to go to trial. Lest anyone think that a jury verdict is ever the end of a piece of complex litigation, the Southern District of New York released a post-trial opinion last week. The opinion is worth reading for several reasons--one of the best being that it contains one of the few accounts of how a securities class trial actually gets conducted. But, in addition, it also provides a look into how international securities class actions will be treated going forward.

Back in 2003, the defendants had moved to dismiss the original Vivendi complaint because--they argued--the federal court lacked subject-matter jurisdiction over "foreign-cubed" class actions. The trial court denied the motion to dismiss, citing the Second Circuit's well-settled "conduct and effects" test.

So the case proceeded through certification to trial, where the jury rendered a verdict against Vivendi.  Once the trial was conducted, the defendants moved for reconsideration of both the foreign plaintiffs' claims and the claims of various American buyers in light of the Supreme Court's decision in Morrison v. Australia National Bank, which prohibits "foreign-cubed" class actions. The plaintiffs opposed, arguing that due to some technicalities of SEC registration, all of Vivendi's shares had been "listed" on the New York Stock Exchange, even though many of those shares had not traded there. While the trial court sympathized with plaintiffs' position (it discussed in depth how the Supreme Court's opinion was not as clear as it could be), it found a "technical flaw" with their argument:

It is true that the registration of any shares under Section 12 of the Exchange Act extends registration to the entire class of securities. And when a foreign company registers ADRs with the SEC, it must also register the underlying ordinary shares, necessarily resulting in the registration with the SEC of all ordinary shares. But registration with the SEC is not the same as listing (registering) on an exchange. The sample NYSE listing application provided to the Court at argument indicates that only a discrete number of ordinary shares are listed; this being the number of ordinary shares needed to back-up the ADRs being listed. Thus while all ordinary shares of a foreign issuer are deemed to be registered with the SEC, a lesser fixed amount of shares are actually listed with the Exchange. And ordinary shares that are not listed on an exchange (for any purpose) would fall outside plaintiffs' literalist reading of the Morrison bright-line test as well as the underlying language of Section 10(b).

(Emphasis added.)  The court also found that

Though the Supreme Court in Morrison did not explicitly define the phrase "domestic transactions," there can be little doubt that the phrase was intended to be a reference to the location of the transaction, not to the location of the purchaser and that the Supreme Court clearly sought to bar claims based on purchases and sales of foreign securities on foreign exchanges, even though the purchasers were American.

(Emphasis in original.) As a result, it dismissed the claims of all class members--foreign or American--who bought ordinary shares. So what can we learn from this ruling?

* Plaintiffs will not take adverse Supreme Court rulings lying down.
* In a class trial, it is always worth preserving all issues, no matter how often one loses them.

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