(1) The "group pleading" doctrine allows plaintiffs to rely on a presumption that statements in corporate documents are the collective work of individuals with direct involvement in the everyday business of the company. In its Tellabs decision, the U.S. Supreme Court declined to address whether this presumption is permissible under the PSLRA's heightened pleading standards, but noted that there is "a disagreement among the circuits" on the issue. The New York Law Journal has a column (March 12 - subscrip. req'd) discussing the circuit split and recent "group pleading" decisions.
Quote of note: "Ultimately, as is clear from Tellabs, [the issue] is likely to be resolved by the Supreme Court. As suggested by Tellabs, the odds are the Supreme Court will conclude that a generalized assumption based on a defendant's 'title' with no supporting evidence cannot constitute the particularity required by the PSLRA."
(2) While the U.S. Supreme Court considers the National Australia Bank case, decisions in foreign-cubed cases are still being issued. In Copeland v. Fortis, 2010 WL 569865 (S.D.N.Y. Feb. 18, 2010), the plaintiffs alleged that Fortis, a Belgium-based provider of banking and insurance services, mislead investors concerning its financial condition. The primary markets for Fortis securities, however, were overseas (the only alleged trading in the U.S. was American Depository Shares on the over-the-counter market). In apply the "conduct" and "effects" tests for subject matter jurisdiction, the court found: (a) that any U.S. conduct was "ancillary to the fraud committed in Belgium," and (b) the plaintiffs had failed to provide sufficient allegations about the number and percentage of U.S. investors to establish that the effect of the fraud on the U.S. was substantial. The court dismissed the complaint.
Quote of note: "I have no doubt that some Fortis investors are U.S. residents, and that Fortis's alleged fraud had some effect upon U.S. investors and the U.S. securities market. From the allegations in the complaint, however, I cannot determine that the effect was 'substantial.' Plaintiffs bear the burden of demonstrating that subject matter jurisdiction exists, and these plaintiffs have not met that burden."Posted by Lyle Roberts at March 12, 2010 9:42 PM | TrackBack