Fogarazzo v. Lehman Bros.

232 F.R.D. 176, 2005 U.S. Dist. LEXIS 15570
CourtDistrict Court, S.D. New York
DecidedJuly 27, 2005
DocketNo. 03 Civ. 5194(SAS)
StatusPublished
Cited by31 cases

This text of 232 F.R.D. 176 (Fogarazzo v. Lehman Bros.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fogarazzo v. Lehman Bros., 232 F.R.D. 176, 2005 U.S. Dist. LEXIS 15570 (S.D.N.Y. 2005).

Opinion

OPINION AND ORDER

SCHEINDLIN, District Judge.

I. INTRODUCTION

Plaintiffs, a class of investors who bought shares of RSL Communications, Inc. (“RSL”), allege that defendants, three investment banks, fraudulently manipulated the price of RSL stock by issuing materially misleading analyst reports. Plaintiffs now move for class certification and defendants oppose the motion, asserting that individual questions of law and fact predominate over common questions.

II. FACTS

On May 21, 2004, I issued an Opinion denying defendants’ motions to dismiss and summarizing plaintiffs’ claims.1 Familiarity with that Opinion is assumed.

Plaintiffs assert that defendants Lehman Brothers, Inc. (“Lehman”), Goldman Sachs & Co. (“Goldman”) and Morgan Stanley & Co. (“Morgan”) engaged in a fraudulent scheme “to distort, falsify, or otherwise manipulate them equity analyst reports on RSL Communications, Inc. (‘RSL’ []), in exchange for lucrative investment banking business, fees, and other [] profits as a result of then-relationships with RSL.”2 “In sum, the Banks, knowing that RSL was actually in decline, inflated the price of RSL shares and then worked doubly hard to conceal or obfuscate the meaning of every fact that would have revealed that decline to the investing public.”3

Plaintiffs seek certification of a purported class that includes “all persons who purchased or otherwise acquired shares of RSL equities during the period from April 30, 1999 through December 29, 2000, both dates inclusive.” 4 Plaintiffs assert that “hundreds, if not thousands, of geographically dispersed members” belong to the proposed class.5 Plaintiffs seek appointment of the named plaintiffs as class representatives and assert that the named plaintiffs have claims “virtually identical to [ ] those of the members of the Class.”6 Plaintiffs also assert that the named plaintiffs “have been actively committed to litigating this case for at least two years,” “are committed to conducting the vigorous prosecution required to remedy those damages [ ] suffered,” and are subject to no unique defenses.7

III. LEGAL STANDARD

A. Standard of Review

The Second Circuit requires a “liberal” construction of Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”).8 Thus, “to deny a class action simply because all of the allegations of the class do not fit together like pieces in a jigsaw puzzle [ ] would de[179]*179stroy much of the utility of Rule 23.”9 Notwithstanding the general liberality in this circuit towards class certification motions, the Supreme Court unequivocally requires district courts to undertake a “rigorous analysis” that the requirements of Rule 23 have been satisfied.10

In ruling on class certification, a district court may not simply accept the allegations of plaintiffs’ complaint as true.11 Rather, it must determine, after a “rigorous analysis,” whether the proposed class comports with all of the elements of Rule 23. “[S]ometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question____ [A]ctual, not presumed, conformance with Rule 23(a) remains ... indispensable.”12 “In order to pass muster, plaintiffs — who have the burden of proof at class certification — must make ‘some showing’” that the proposed class comports with Rule 23.13 That showing may take the form of, for example, expert opinions, evidence (by document, affidavit, live testimony, or otherwise), or the uncontested allegations of the complaint. However, “a district court is forbidden to weigh the evidence on class certification [and] plaintiffs need not establish the elements of Rule 23 by a preponderance of the evidence.”14

B. The Requirements of Rule 23

Rule 23 governs class certification. To be certified, a putative class must meet all four requirements of Rule 23(a) as well as the requirements of one of the three subsections of Rule 23(b). In this case, as in most cases seeking money damages, plaintiffs bear the burden of demonstrating that the class meets the requirements of Rule 23(a) — referred to as numerosity, commonality, typicality, and adequacy15 — and that the action is “maintainable” under Rule 23(b)(3).16 Under Rule 23(b)(3) — the only applicable subsection of Rule 23(b) — “common” issues of law or fact must “predominate over any questions affecting only individual members,” and a class action must be demonstrably “superior” to other methods of adjudication.17

1. Rule 23(a)

a. Numerosity

Rule 23 requires that the class be “so numerous that joinder of all members is impracticable.” 18 “Impracticability does not mean impossibility of joinder, but refers to the difficulty or inconvenience of joinder.”19 Although precise calculation of the number of class members is not required, and it is permissible for the court to rely on reasonable inferences drawn from available facts, numbers in excess of forty generally satisfy the numerosity requirement.20

b. Commonality

Commonality requires a showing that common issues of fact or law affect all class members.21 A single common question may be sufficient to satisfy the commonality re[180]*180quirement.22 “The critical inquiry is whether the common questions are at the core of the cause of action alleged.”23

The commonality requirement has been applied permissively in securities fraud litigation.24 In general, where putative class members have been injured by similar material misrepresentations and omissions, the commonality requirement is satisfied.25

c. Typicality

The typicality requirement “is not demanding.”26 A named plaintiffs claims are “typical” pursuant to Rule 23(a)(3) where each class member’s claims arise from the same course of events and each class member makes similar legal arguments to prove the defendants’ liability.27 “The rule is satisfied ... if the claims of the named plaintiffs arise from the same practice or course of conduct that gives rise to the claims of the proposed class members.”28

In addition, a putative class representative’s claims are not typical if that representative is subject to unique defenses.29 The test is whether the defenses will become the focus of the litigation, overshadowing the primary claims and prejudicing other class members.30

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Cite This Page — Counsel Stack

Bluebook (online)
232 F.R.D. 176, 2005 U.S. Dist. LEXIS 15570, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fogarazzo-v-lehman-bros-nysd-2005.