July 17, 2008

Clueless

While a proposed class representative does not have to possess "expert knowledge" of the case, there are some limits on how clueless it can be. In the Monster Worldwide, Inc. securities class action before the S.D.N.Y., the court has rejected a proposed class representative (a pension fund) that put forward a witness (the co-chairman of the fund) who "did not know the name of the stock at issue in this case, did not know the name of either individual defendant, did not know whether [the pension fund] ever owned Monster stock, did not know if an amended complaint had been filed, did not know whether he had ever seen any complaint in the action, did not know that [a defendant] had moved to dismiss the complaint, and did not know that [the pension fund] had moved for pre-discovery summary judgment." Following this testimony, the pension fund put forward a second witness who "admitted that he had mostly learned about the substance of the litigation only in the week before his deposition."

The court rejected the pension fund as a class representative, but approved the appointment of the other lead plaintiff to that role. Despite its concerns that the counsel for the pension fund "may not have fulfilled their professional responsibilities in proposing [the pension fund] as a class representative," the court nevertheless appointed the firm as class counsel. The New York Law Journal has an article on the decision.

Quote of note (opinion): "The Court will not be a party to this sham. The foregoing events establish beyond a doubt that [the pension fund] has no interest in, genuine knowledge of, and/or meaningful involvement in this case and is simply the willing pawn of counsel."

Posted by Lyle Roberts at July 17, 2008 11:06 PM | TrackBack
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