Monday, May 28, 2007

Second Circuit Denies Rehearing for IPO Class Action Certification

BNA's Class Action Litigation reported in Vol. 8, No. 7 (April 13, 2007) on the case In re Initial Public Offering Securities Litigation, --- F.3d ----, 2007 WL 1097892 (2d Cir. Apr. 06, 2007). Below is an excerpt from that decision:

The Plaintiffs-Appellees ("Petitioners") have petitioned for rehearing of our December 5, 2006, decision reversing the District Court's grant of their motion for class certification. See Miles v. Merrill Lynch & Co. (In re Initial Public Offering Securities Litigation), 471 F.3d 24 (2d Cir.2006). The petition asserts three grounds: (1) our initial decision adopted incorrect standards that a district court must apply in determining whether to grant class certification, (2) the decision erred in concluding that the predominance criterion of Rule 23(b)(3) of the Federal Rules of Civil Procedure could not be satisfied with respect to the Petitioners' class, and (3) a remand is appropriate to enable the District Court to reconsider the class certification motion under the standards we set forth. We requested and received a response from the Defendants-Appellants with respect to points (2) and (3).

We see no reason to revisit or revise what we said in our initial decision concerning the standards for class certification, see id. at 32-42. The Petitioners' second and third points require some discussion, which will assume familiarity with our initial decision. The Petitioners contend that the major flaw in our initial decision was the ruling that individual issues with respect to class members' reliance and knowledge precluded a finding that issues common to class members "predominate over any questions affecting only individual members." Fed.R.Civ.P. 23(b)(3).

. . .

The Petitioners, having sought a broad class, are essentially complaining that we failed to narrow their class definition to an extent that might have satisfied Rule 23 requirements. Whatever authority we might have had to undertake that task, we did not think it appropriate to provide legal advice to experienced class action litigators. However, our ruling rejected class certification only of the class as certified by the District Court. Nothing in our decision precludes the Petitioners from returning to the District Court to seek certification of a more modest class, one as to which the Rule 23 criteria might be met, according to the standards we have outlined. District courts have ample discretion to consider (or to decline to consider) a revised class certification motion after an initial denial.

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