In re Sumitomo Copper Litigation

182 F.R.D. 85, 1998 U.S. Dist. LEXIS 14634, 1998 WL 641225
District Court, S.D. New York·Decided September 18, 1998·No. No. 96 Civ. 4584(MP)·Published·Cited by 61 cases

Opinion

OPINION

POLLACK, Senior District Judge.

Plaintiffs, pursuant to Rule 23 of the Federal Rules of Civil Procedure, move for an order certifying this case as a class action. For the reasons set forth herein, the Court will certify the proposed Class.

Background

This action arises out of the alleged manipulation of prices of copper futures contracts traded on the COMEX division of the New York Mercantile Exchange (“Comex”) by the world’s largest commercial dealer in copper, Sumitomo Corporation (“Sumitomo”), and a smaller copper dealer, Global Minerals and Metals Corporation (“Global Minerals”), and aided and abetted by various entities of Merrill Lynch Pierce, Fenner & Smith (“Merrill Lynch”) and Morgan Stanley & Co., Inc. (“Morgan Stanley”). In their Third Amended Consolidated Class Action Complaint (the “Complaint”), dated June 26, 1998, plaintiffs, who are purchasers and sellers of copper futures contracts on the Comex, allege that, between June 24,1994 and June 15,1996 (the “Class Period”), copper futures contract prices rose to artificially high levels by reason of conspiratorial misconduct of defendants. Plaintiffs assert that the artificiality was due to coordinated efforts by Sumitomo and Global Minerals in purchasing a program of copper exchange positions for which they had no need, which they misrepresented to LME and the public to be required by the legitimate commercial needs of their copper businesses.

Plaintiffs claim that the alleged manipulation of copper futures contract prices was accomplished by diverse means, including: building up and holding large long positions in contracts traded on the London Metal Exchange (“LME”), thereby injecting artificial demand and buying pressure into the supply/demand equation for copper exchange contract prices; hoarding the supply of substantially all, or a large portion of, copper for delivery in copper exchange warehouses, thereby artificially restricting supply from the supply/demand equation for copper exchange contract prices; and making false statements to copper market officials and spreading false rumors regarding a commercial need for their massive positions in copper future contracts, thereby facilitating an artificial increase in prices. According to the Complaint, the manipulation ended in June ■1996, when Sumitomo, under intense governmental scrutiny, liquidated forward contracts for thousands of tons of unneeded copper. As a result, the prices of copper futures contracts traded on the Comex declined dramatically.

[88]*88Two separate claims for relief have been asserted by plaintiffs: 1) violation of the Racketeering Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq. 18 U.S.C. § 1962(c) and (d), and 2) violation of the Commodity Exchange Act, 7 U.S.C. § 13(a)(2) (“CEA”). In order to merge the like claims of all plaintiffs similarly situated, certification of the case, as against Global Minerals, Bipin Shah, and R. David Campbell (collectively “Global”), as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure has been requested.

The Proposed Class

For the purposes of this motion, plaintiffs’ proposed Class consists of:

[a]ll persons who purchased Comex copper futures contracts between June 24, 1994 and June 15, 1996, inclusive. Excluded from the class are the defendants herein, any parents, subsidiaries or affiliates thereof, members of the immediate family of each of the individual defendants, any entity in which any of the defendants has a controlling interest, and the legal representatives, heirs, successors or assigns of any of the defendants.

Plaintiffs’ instant motion for class certification is opposed only by Global.1 2The proposed Class consists of two subclasses:

1) A long subclass, represented by plaintiffs CNA Metals, Inc., Benjamin and Maria Westfried, Hybrid Fund, LP, and Vincent MeCrudden, which shall consist of class members who purchased a Comex copper futures contract or contracts as an opening transaction; and
2) A short subclass, represented by plaintiffs Stephen and Judy Carney, Vincent Zuccarelli and Jack Khaz-zam, which shall consist of class members who purchased a Comex copper futures contract or contracts as a closing transaction.

Rule 23

On a motion pursuant to Rule 23, a Court will accept the substantive allegations in plaintiffs’ complaint as true. Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n. 15 (2d Cir.1978). Rules 23(a) and (b)(3) provide that certification is appropriate if:

(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. ... (A)nd in addition: ... (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.

The Second Circuit has directed district courts to apply Rule 23 according to a liberal rather than a restrictive interpretation. Korn v. Franchard Corp., 456 F.2d 1206, 1208-1209 (2d Cir.1972); Green v. Wolf Corp., 406 F.2d 291, 298, 301 (2d Cir.1968), cert. denied sub nom. Troster, Singer & Co. v. Green, 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766 (1969). “[I]f there is to be an error made, let it be in favor and not against the maintenance of the class action, for it is always subject to modification should later developments during the course of the trial so require.” Green, 406 F.2d at 298 (quoting Esplin v. Hirschi, 402 F.2d 94 (10th Cir. [89]*891968), cert. denied, 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459 (1969)).

Courts have consistently noted that important public policy benefits arise from class certification in an appropriate case:

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In re Sumitomo Copper Litigation, 182 F.R.D. 85, 1998 U.S. Dist. LEXIS 14634, 1998 WL 641225 (S.D.N.Y. 1998).

182 F.R.D. 85 (In re Sumitomo Copper Litigation) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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