A trio of notable appellate decisions have been issued in the last ten days.
(1) In In re Mercury Interactive Corp. Sec. Litig., 2010 WL 3239460 (9th Cir. Aug. 18, 2010), the court addressed the common settlement practice of requiring attorneys' fees objections to be filed prior to the filing of the actual fees motion and supporting papers. The court found that "the practice borders on a denial of due process because it deprives objecting class members of a full and fair opportunity to contest class counsel's fee motion." Accordingly, courts must set a schedule that allows objections to made after the class has an adequate opportunity to review its counsel's fees motion.
(2) In Malack v. BDO Seidman, 2010 WL 3211088 (3rd Cir. Aug. 16, 2010), the court considered the validity of the fraud-created-the-market theory. Under this theory, a presumption of reliance is established if "the defendants conspired to bring to market securities that were not entitled to be marketed." The plaintiff must allege both that the existence of the security in the marketplace resulted from the successful perpetration of a fraud on the investment community and that he purchased in reliance on the market. In a long and thorough opinion, the court declined to endorse the theory, finding that common sense and a lack of empirical support "calls for rejecting the proposition that a security's availability on the market is an indication of its genuineness and is worthy of an investor's reliance."
(3) In In re Aetna, Inc. Sec. Litig., 2010 WL 3156560 (3rd Cir. Aug. 11, 2010), the court found that the PSLRA's safe harbor for forward-looking statements mandated the dismissal of the case. In particular, the statements were accompanied by meaningful cautionary language and were too vague to be material to investors. The 10b-5 Daily's summary of the lower court decision can be found here.Posted by Lyle Roberts at August 20, 2010 11:47 PM | TrackBack