is inappropriate because the Court would have to apply the laws of all the states where plaintiffs reside. Defendant again argues that the fact that part of this case concerns the IPO means that plaintiffs will be subject to individualized questions of reliance. Defendant presses its contention that the individual questions applicable to plaintiffs, the antagonism of plaintiffs to the class and the plaintiffs' state law claims all make this case an inappropriate candidate for class action. Def. Class Mem. at 33-38.
Plaintiffs respond that there is no difficulty with applying the fraud on the market theory to common law fraud. Plaintiffs contend that a class can be certified even where there are plaintiffs from many states and, if necessary, the class can be divided into subclasses. Plaintiffs repeat that individualized questions of reliance do not predominate. Plaintiffs reject defendant's arguments that class treatment is inappropriate and note that they successfully prosecuted the class action in In re Matthews & Wright. Plain Class Reply Mem. at 29-31.
Under the second sentence of Rule 23(b)(3) the Court, in determining whether common questions predominate and whether class action is a superior method of adjudication, should consider:
(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
As the Second Circuit has held, "if a class action is markedly superior to all the alternatives, then, at least at the early stages of the litigation, we should construe broadly the other elements of Rule 23, to permit the efficient enforcement of 10b-5 through class actions with appropriate safeguards." Green v. Wolf Corp., 406 F.2d 291, 301 (2d Cir.), cert. denied, 395 U.S. 977, 23 L. Ed. 2d 766, 89 S. Ct. 2131 (1968); see In re Am Intern., Inc. Securities Litigation, 108 F.R.D. 190, 198 (S.D.N.Y. 1985).
The common questions of law and fact in this case predominate over individual questions. The issue of the fraud on the market theory in the New York courts is open, see Minpeco, S.A. v. Hunt, 718 F.Supp. 168, 175-76 (S.D.N.Y. 1989), but that is no reason to deny class certification. Class certification of pendent state law claims is appropriate where plaintiffs' "state law claims are predicated upon the same fraudulent acts and material misrepresentations and omissions that underlie their federal claims." In re Energy Systems Equip. Leasing Sec. Litigation, 642 F.Supp. 718, 753 (E.D.N.Y. 1986). The fact that plaintiffs reside in numerous states does not mean that class action is not the superior method for proceeding with this case. See Bresson v. Thomson McKinnon Securities, 118 F.R.D 339, 343-44 (S.D.N.Y. 1988); In re Lilco Securities Litigation, 111 F.R.D. 663, 669-70 (E.D.N.Y. 1986). As common questions predominate over any individual questions, the last question is whether class action is a superior method of adjudication in this case.
In this wide ranging securities action with thousands of potential class members, class action is the superior method for adjudicating the case. The other litigation surrounding the failure of M & W is already before this Court as a class action and this case can proceed on the same course. For the same reason, this forum is particularly well-suited for this case. As far as manageability, this question overlaps with the question of common issues, and I have already concluded that this action will be manageable despite the large number of plaintiffs from different states. Courts have noted the superiority of class action litigation in federal securities actions, see, e.g., Somerville v. Major Exploration, Inc., 102 F.R.D. 500, 505-06 (S.D.N.Y. 1984), and that superiority exists in this case.
As I have found that plaintiffs have met all of the requirements of Rule 23(a) and Rule 23(b)(3), plaintiff's motion for class certification is granted.
Defendant's motion to dismiss is denied in its entirety. Plaintiffs' motion for summary judgment dismissing defendant's statute of limitations defense is granted. Defendant's motion to strike material from the complaint is denied. Defendant's motion opposing consolidation with In re Matthews & Wright is denied. Plaintiff's motion for class certification is granted.
Counsel for the parties are directed to attend a status conference at 2:00 p.m. on September 25, 1992 in Room 307 of the United States Courthouse.
Dated: New York, New York
July 28, 1992
CHARLES S. HAIGHT, JR.