Opinion
MASTER FILE 02 Civ. 3288 (DLC)
January 20, 2004
Max W. Berger, John P. Coffey, Steven B. Singer, Beata Gocyk-Farber, John C. Browne, Jennifer L. Edlind, Bernstein Litowitz Berger Grossman LLP, New York, for Plaintiff
Leonard Barrack, Gerald J. Rodos, Jeffrey W. Golan, Mark R. Rosen, Jeffrey A. Barrack, Pearlette V. Toussant, Barrack Rodos Bacine, Philadelphia, for Plaintiff
William S. Lerach, Darren J. Robbins, Spencer Burkholz, Michael J. Dowd, Randall Baron, Thomas E. Egler, Milberg Weiss Bershad Hynes Lerach LLP, San Diego, CA, for Plaintiff
Melvyn I. Weiss, Steven G. Schulman, Sol Schreiber, Milberg Weiss Bershad Hynes Lerach LLP, New York, NY, for Plaintiff
Patrick J. Coughlin, Milberg Weiss Bershad Hynes Lerach LLP, San Francisco, CA, for Plaintiff
Bernard J. Ebbers, David Wertheimer, Lyndon Tretter, Hogan Hartson, New York, NY, for Defendant
Bernard J. Ebbers, R. David Kaufman, M. Patrick McDowell, Brunini Grantham Grower Hewes PLLC, Jackson, MS, for Defendant
Paul Curnin, David Elbaum, Simpson Thacher Bartlett LLP, New York, NY, for Defendant
Eliot Lauer, Michael Moscato, Michael Hanin, Curtis, Mallet — Prevost, Colt Mosle LLP, New York, NY, for Defendant Arthur Anderson LLP
Jay B. Kasner, Susan L. Saltzstein, Steven J. Kolleeny, Skadden Arps Slate Meagher Flom LLP, New York, NY, for Underwriter Defendants
Martin London, Richard A. Rosen, Brad S. Karp, Eric S. Goldstein, Walter Rieman, Marc Falcone, Joyce S. Huang, Paul Weiss Rifkind Wharton Garrison LLP, New York, NY, for Defendants Citigroup Global Markets, Inc. f/k/a Salomon Smith Barney, Inc., Citigroup Inc., and Jack Grubman
Robert McCaw, Peter K. Vigeland, Wilmer Cutler Pickering, New York, NY, for Defendant
OPINION ORDER
Through a motion made on November 10, 2003 ("November 10 Motion"), certain plaintiffs ("Plaintiffs") who have filed Individual Actions ("Milberg Weiss Actions") and are represented by Milberg Weiss Bershad Hynes Lerach ("Milberg Weiss") requested that the Court stay certain proceedings in this consolidated securities litigation ("Securities Litigation"), which has arisen from the collapse of WorldCom, Inc. ("WorldCom"). In a letter dated December 19 ("December 19 Letter"), Milberg Weiss requested, inter alia, that the Court defer ruling on certain motions to dismiss.
The background to this Securities Litigation and to these applications can be found in prior Opinions of this Court. For the following reasons, the requests have been and are denied.
The Opinions most relevant to these applications include those addressing the motions to remand Individual Actions, In re WorldCom, Inc. Securities Litig., Nos. 02 Civ. 3288 (DLC), 02 Civ. 8981(DLC), 293 B.R. 308 (S.D.N.Y. 2003); to dismiss the class action complaint, In re WorldCom, Inc. Securities Litig., 02 Civ. 3288 (DLC), 2003 WL 21219049 (S.D.N.Y. May 19, 2003); to consolidate the class and Individual Actions, In re WorldCom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21242882 (S.D.N.Y. May 29, 2003); to certify a class, In re WorldCom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22420467 (S.D.N.Y. Oct. 24, 2003); for redress in light of Milberg Weiss' misleading communications with the class, In re WorldCom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22701241 (S.D.N.Y. Nov. 17, 2003); to dismiss claims in one Milberg Weiss Action, In re WorldCom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22738546 (S.D.N.Y. Nov. 21, 2003); to certify an interlocutory appeal, In re WorldCom, Inc. Securities Litig., No, 02 Civ. 3288 (DLC), 2003 WL 22953644 (S.D.N.Y. Dec. 16, 2003); and to dismiss claims in thirty-one Milberg Weiss Actions, In re WorldCom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), ___ WL ___ (S.D.N.Y. Jan. 20, 2004).
The November 10 Motion requested that the Court (1) not rule on the defendants' October 3 motion to dismiss one of the Milberg Weiss Actions, (2) not rule on the October 29 motion by Lead Plaintiff in the class action that asserted that Milberg Weiss had made misrepresentations to class members, and (3) not permit the notice (which was approved on December 11) to be issued to the class. The Plaintiffs requested that each of these matters be deferred until after the Court of Appeals for the Second Circuit reviews or finally declines to review this Court's rulings from May 2003 that there is subject matter jurisdiction over the Milberg Weiss Actions brought on behalf of forty-one plaintiffs, and denying the motions to remand those actions to state court. Each of the defendants in this consolidated Securities Litigation against whom litigation has not been stayed, as well as the Lead Plaintiff in the WorldCom class action, have opposed the requests for a stay.
A recent Opinion certified for interlocutory review by the Court of Appeals one of two jurisdictional questions posed by forty-one plaintiffs in Milberg Weiss Actions. In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22953644 (S.D.N.Y. Dec. 16, 2003).
The defendants requested that their time to respond to Plaintiffs' motion be extended sine die. A November 19 Order provided that any party opposing the November 10 Motion should so inform the Court by December 1.
The December 19 Letter requested that the Court (1) defer ruling on December 2 motions to dismiss brought against thirty-one Milberg Weiss Actions, (2) "defer" the class notice which was approved on December 11, and (3) "delay" the opt out period for the WorldCom class action, which is scheduled to close on February 20, 2004. Again, each of the defendants who is actively participating in the Securities Litigation has opposed this application, as has the Lead Plaintiff in the class action.
The parties opposing this application submitted their responses on December 29 and January 5.
The principal reason given by Plaintiffs for a stay is their contention that a ruling by the Second Circuit that Milberg Weiss Actions should have been remanded to state court and that there is no federal jurisdiction over them, would mean that this Court lacked jurisdiction to determine each of the motions to dismiss brought against the Milberg Weiss Actions, or in the case of the class notice, might require the issuance of a second notice at enormous cost. These arguments are evaluated in the context of the three separate applications for relief.
1. Motions to Dismiss
The November 10 Motion was untimely with respect to the October 3 motion to dismiss. The motion to dismiss was scheduled through an Order of September 22, 2003, brought against a single Milberg Weiss Action, fully submitted on October 31, and decided on November 21. In re WorldCom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22738546 (S.D.N.Y. Nov. 21, 2003)("November 21 Opinion"). In the November 21 Opinion, the Court declined to delay a decision to await the completion of the briefing on the Plaintiffs' November 10 Motion.Id. at *1 n. 2.
The December 19 Letter also came after motion practice had already begun. The motions to dismiss claims in thirty-six Individual Actions, including thirty-one Milberg Weiss Actions, based on the rulings made in the November 21 Opinion, were brought on December 2, and opposition was due on December 23. These motions were fully submitted on January 9, and were addressed in an Opinion of January 20, 2004. In re Worldcom, Inc. Securities Litig., No. 02 Civ. 3288 (DLC), ___WL___ (S.D.N.Y. Jan. 20, 2004).
The Plaintiffs argue that deciding motions to dismiss before the Court of Appeals rules on the jurisdictional issue risks wasting judicial resources. They also contend that the Court's rulings will be nothing more than either advisory opinions or the law of the case, and that they will seek to re-litigate the Court's rulings in the various state courts to which they hope their cases will be remanded after a favorable decision in the Court of Appeals.
Section 1292(b) of Title 28, United States Code, provides that the certification of an interlocutory appeal to the Court of Appeals "shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order." 28 U.S.C. § 1292(b). There is no reason to issue a stay here.
The motions to dismiss raise issues of law that apply to many of the Individual Actions filed in the Securities Litigation. Rulings on these issues help the parties to evaluate the strength of the claims and defenses at issue in this litigation, facilitate the ongoing settlement discussions, and assist plaintiffs as they decide whether to opt out of the class, a decision which must be made by February 20, 2004.
Even if Individual Actions are remanded to state court, and assuming for purposes of discussion that the legal rulings entered to date are not considered binding on those state courts, it will nonetheless be of assistance to those various state courts, and to the parties, to have as many legal issues as possible addressed by this Court. For example, the November 21 Opinion resolved, among other things, the statute of limitations that applies to the claims brought under the Securities Act of 1933 in a Milberg Weiss Action. The federal law that controls that issue was described in the November 21 Opinion and federal law will continue to control that issue whether the case is litigated in a federal or state forum, and whether or not the November 21 Opinion itself is considered binding. Far from wasting judicial resources, decisions by this Court on such overarching legal issues will save judicial resources and assist the parties should they ever need to address the same issues in other venues. This is particularly true when the issue is one of federal law.
While this Court has certified one jurisdictional issue to the Court of Appeals, it remains firmly of the view that the jurisdictional issues have been correctly decided and that a remand is not appropriate.
The Plaintiffs' applications do not present any occasion for this Court to rule on the precedential effect of the orders issued in this case in the event of a remand of an action to state court.
For the same reasons, the Plaintiffs have not shown that the Court should have deferred addressing the December 2 motions to dismiss. As noted, those motions sought to apply the rulings in the November 21 Opinion to thirty-six Individual Actions. In addition, to the extent that the parties raised any new arguments in opposition to the motions to dismiss, it was important for those arguments to be addressed as promptly as possible so that all parties to the Securities Litigation could have the benefit of a ruling on the issues.
2. Solicitation of the Class
On October 29, 2003, Lead Counsel in the class action wrote to inform the Court of evidence which it had recently obtained that, it argued, provided a basis to believe that Milberg Weiss was soliciting absent class members with misleading statements about the Securities Litigation. Following receipt of written submissions from Milberg Weiss and Lead Counsel, a hearing was held on November 13. At that hearing, the Court outlined its findings based on the parties' submissions. Mr. William Lerach of Milberg Weiss made no objection at the hearing to any of those findings.
At the November 13 hearing, the Court also proposed that a curative notice should be sent to each plaintiff who had filed an Individual Action. Mr. Lerach endorsed that solution. The findings regarding the misleading solicitation efforts and the necessity for a curative notice are set forth in an Opinion of November 17. In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22701241 (S.D.N.Y. Nov. 17, 2003).
The Plaintiffs make no developed argument as to why the Court was not required to address immediately the allegation that Milberg Weiss was soliciting class members with misleading information. As described in the Opinion of November 17, Milberg Weiss had provided inaccurate and incomplete information to class members regarding both the individual action and class action options. It was essential that class members be provided as quickly as possible with accurate information. On December 11, the Court approved a document entitled "Court — Ordered Notice to All Investors Who Have Filed Individual WorldCom Actions" that has been disseminated to those investors along with the class notice providing for an opt out period to end on February 20, 2004.
Although the motion for a stay was dated November 10, it had not yet been received by Lead Counsel for the class before the hearing on November 13, and Milberg Weiss made no reference to it at the hearing.
Since the issuance of the November 21 Opinion and the dissemination of the December 11 Notice to plaintiffs who have filed Individual Actions, several plaintiffs in Milberg Weiss Actions have made applications for the voluntary dismissal of their lawsuits with the intent to join the class action. At least one other plaintiff in a Milberg Weiss Action has amended its complaint to add securities fraud claims. With this amendment, that plaintiff has essentially abandoned its effort to litigate its lawsuit in state court. These applications and this amendment illustrate the need for plaintiffs to be provided with accurate information regarding the class action, the law, and their legal options.
3 Class Notice
Lead Plaintiff sought and received permission from the Court to issue a class notice. The class notice, approved on December 11, has been disseminated, and as already noted, informs class members that the period to opt out of the class ends on February 20, 2004. Since settlement discussions are ongoing and since fact discovery is scheduled to end on June 18, 2004, it is important to know who is and who is not a member of the class.
The Plaintiffs argue that an additional class notice may have to be mailed if the Court of Appeals rules that this Court had no jurisdiction over, or the power to rule on matters affecting, the Milberg Weiss Actions. They argue that this will cost a great deal and create confusion among class members. They also point out that the language of the class notice has important ramifications for the Milberg Weiss Actions. In their December 19 Letter they assert without explanation that the notices sent to the class and to plaintiffs who filed Individual Actions is "now misleading."
The Plaintiffs were given a full opportunity to submit written and oral objections to the proposed class notice, as well as the notice sent to those who had filed Individual Actions. They did not point out any inaccuracy in those final notices or explain why any supplemental notice would have to be sent if any Individual Actions are remanded to state court. Whether the Individual Actions are being litigated in federal or state court, and several are currently being litigated in state court, their opportunity and right to opt out of the class action is identical.
In its December 19 Letter, the Plaintiffs still fail to identify any statement in the class notice that would require an additional notice to the class in the event that Individual Actions are remanded to state court. The notice sent to the plaintiffs who had filed Individual Actions advised them that certain Milberg Weiss Actions had made a motion for certification of the remand Opinion for interlocutory review by the Court of Appeals, that the motion was opposed by the defendants, and that it was then pending before the Court. Each plaintiff who has filed an Individual Action is represented by counsel. In the event the Court of Appeals decides that there is no federal jurisdiction over certain Individual Actions currently pending in federal court, their counsel can advise them of the ruling and about their options at that time.
While the December 19 Letter mentions in passing that the time to opt out of the class action should be "delayed", it does not make any developed argument in this regard. The Plaintiffs did not show at the time that the notice to the class was prepared that an opt out period beyond February 20 was warranted, and the December 19 Letter does not present any reason to alter the length of the opt out period.
Conclusion
The November 10, 2003 motion and the December 19 letter application by certain plaintiffs in Milberg Weiss Actions to stay certain proceedings in the WorldCom Securities Litigation are denied.
SO ORDERED.