Opinion
Civil Action No. 00-621 (JAP)
May 7, 2002
LETTER OPINION AND ORDER
Dear Counsel:
The Court writes to address a matter brought before the Court on the correspondence of the parties concerning a discovery dispute in the above-captioned case. Specifically, defendants (hereinafter collectively referred to as "Lucent") seek to compel all named plaintiffs to produce documents in response to Lucent's Third Request for Production of Documents and Things ("Third Request"). Lead plaintiffs have submitted a letter in opposition to this request. For the reasons discussed below, the Court denies Lucent's request to compel discovery of all named plaintiffs.
Lucent's Third Request seeks documents concerning plaintiffs' investment history. Lucent takes the position that the decision of plaintiffs' counsel to limit the response to the Third Request to documents from the files of Lead plaintiffs only shirks the discovery obligations owed by the 41 other named plaintiffs. See In re Folding Carton Antitrust Litigation, 83 F.R.D. 260, 264 (N.D. Ill. 1979). It argues that discovery as to the investment history and background of all named plaintiffs is necessary to rebut the presumption that arises in a fraud on the market case of an investor's reliance on misrepresentations as reflected in the market. See Basic v. Levinson, 485 U.S. 224, 246-47 (1988). Lucent also contends that this discovery is relevant to any opposition that Lucent may flue to a motion by plaintiffs for class certification.
In opposition, Lead plaintiffs contend that the named plaintiffs from whom discovery is sought are not proposed as class representatives and as such, remain on equal footing with absent class members, who are not generally not subject to discovery. See In re Carbon Dioxide Industry Antitrust Litigation, 155 F.R.D. 209, 211-12 (M.D. Fla. 1993). Discovery with respect to the behavior of this handful of plaintiffs, they contend, cannot shed any light on the overall issue of liability, in particular on whether the entire class acted in reliance on the market price of Lucent stock.
The Court agrees with Lead plaintiffs' position. Though one way to rebut the presumption of reliance involves "proving that an individual plaintiff purchased the stock despite knowledge of the falsity of a representation," Jaroslawicz v. Engelhard Corp., 724 F. Supp. 294 at 301 (D.N.J. 1989) (quoting Blackie v. Barrack, 524 F.2d 891, 906 (9th Cir. 1975)), individualized questions of reliance will not in this case illuminate a determination of class-wide liability or bear on the inquiry into whether the class representative's claims are typical of the entire class. See Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir. 1985). In other words, discovery as to the investment behavior of the 41 named, non-lead plaintiffs is not be probative of the question of class-wide reliance on the market. Conclusions drawn from the experience of this handful of named parties cannot be extrapolated to represent the experience of a class of hundreds of thousands of individuals of which the putative class is comprised.
The situation presented in this case is distinct from that in Easton Co. v. Mutual Benefit Life Ins. Co., No. 91-4012, 92-2095, 1994 WL 248172 (D.N.J. May 18, 1994). In Easton, the court allowed defendants to take discovery of absent class members' investment history and background in order to rebut the presumption of fraud-on-the-market reliance. In stark contrast to this case, Easton involved a total of 160 class members. The small class size established a strong possibility that discovery of individual class members would be probative of the overall class experience. This factor undoubtedly influenced the Easton court's finding that such discovery would be relevant to the issue of class-wide reliance.
In the Lucent matter, there is no basis for concluding that the 41 non-representative named plaintiffs could fulfill the same purpose as to a class of thousands. The discovery sought by Lucent instead may be appropriate at a later stage in the case, in which individualized rebuttal proceedings may be pursued to determine whether a claimant may recover, once the matter of liability has been adjudicated. See Eisenberg, 766 F.2d at 786; Jaroslawicz, 724 F. Supp. at 302-303.
Therefore, for the aforementioned reasons, the Court will treat the non-lead named plaintiffs as absent class members and will not compel them to respond to Lucent's Third Request.
ORDERED that Lucent's request to compel the production of documents in response to the Third Request for Production of Documents and Things is DENIED.