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IN RE WORLDCOM

January 26, 2004.

IN RE WORLDCOM, INC. SECURITIES LITIGATION, This Document Relates to: 02 Civ. 3288 (DLC); ALASKA ELECTRICAL PENSION FUND, Plaintiff -v- CITIGROUP, INC., et al., Defendants; ALASKA PERMANENT CAPITAL MANAGEMENT COMPANY, Plaintiff -v- CITIGROUP, INC., et al., Defendants; LOCALS 302 AND 612 OF THE INTERNATIONAL UNION OF OPERATING ENGINEERS-EMPLOYERS CONSTRUCTION INDUSTRY RETIREMENT TRUST, Plaintiff -v- BERNARD J. EBBERS, et al., Defendants;ALASKA TEAMSTER-EMPLOYER PENSION TRUST, Plaintiff -v- CITIGROUP, INC., et al., Defendants; DISTRICT NO. 9, I.A. OF M. & A.W.PENSION TRUST and DISTRICT NO. 9, I.A. OF M. & A.W. WELFARE TRUST, Plaintiffs -v- BERNARD J. EBBERS, et al., Defendants; THE NATIONAL ASBESTOS WORKERS PENSION FUND, Plaintiff -v- BERNARD J. EBBERS, et al., Defendants


The opinion of the court was delivered by: DENISE COTE, District Judge

OPINION AND ORDER

Plaintiffs in six actions ("Plaintiffs" and "Six Actions") filed by Milberg Weiss Bershad Hynes & Lerach ("Milberg Weiss") request the voluntary dismissal of their actions in order to participate in the securities class action arising out of the collapse of WorldCom, Inc. ("WorldCom"). On January 20, 2004, the defendants' motions to dismiss the Six Actions in their entirety as barred by the statute of limitations were granted. For the following reasons, the Plaintiffs' requests for a voluntary dismissal are granted, and these actions will be dismissed with prejudice with the following exception. Plaintiffs will be permitted to remain as members of the WorldCom class action without prejudice with respect to any claims brought on behalf of the class.*fn1 Page 5

  Background

  The following presents the background to this litigation relevant to the statute of limitations issues that affect these Six Actions and to the pending motions for their voluntary dismissal. On June 25, 2002, WorldCom declared that it would undertake a massive restatement of its financial statements for 2001 and the first quarter of 2002. Beginning with the June 25 announcement, a series of public disclosures revealed, in essence, that WorldCom had misrepresented its financial condition since 1999. See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21219049, at *4 (S.D.N.Y. May 19, 2003)(opinion denying, in large part, motions to dismiss the class action complaint). By late July 2002, WorldCom had filed the largest bankruptcy in United States history.

  Even before the June 25 announcement, the first class action alleging WorldCom claims had been filed in this district. The class actions were consolidated by an Order of August 15, 2002. Numerous actions alleging individual, as opposed to class, claims ("Individual Actions") were also filed in venues across the country, many by Milberg Weiss ("Milberg Weiss Actions"). Page 6

  The Judicial Panel on Multi-District Litigation ("MDL Panel") transferred WorldCom litigation pending in other federal district courts, either because it was filed there originally or because it was removed by defendants to federal court, to this Court for pretrial proceedings. This Court's Order of December 23, 2002 found that the Individual Actions and the securities class actions (collectively, Securities Litigation) involve common questions of law and fact, and that consolidation of these actions for pretrial proceedings was necessary. See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2002 WL 31867720 (S.D.N.Y. Dec. 23, 2002). A Consolidation Order of May 28, 2003, set out the framework for consolidation, and provided that "the requirement that any defendant named and served in an Individual Action must move, answer, or otherwise respond in that action is stayed." In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 21242882, at *2 (S.D.N.Y. May 29, 2003).

  The first Milberg Weiss Action was filed on July 5, 2002. Each Milberg Weiss Action was filed in a state court and pleaded solely federal securities law claims under the Securities Act of 1933 ("Securities Act"). By the Fall of 2003, Milberg Weiss had filed at least forty-seven Individual Actions on behalf of over one hundred and twenty pension funds, many of them public employee or union pension funds. All of the Milberg Weiss Actions were removed by defendants on the ground that they were related to the WorldCom bankruptcy. While six of the removed Milberg Weiss Actions were remanded before their transfer to this Page 7 Court by the MDL Panel, the rest were transferred and have been consolidated in the Securities Litigation for pre-trial purposes. The Six Actions were each filed more than one year after the June 25, 2002 WorldCom announcement. The first of the Six Actions was filed on June 27, 2003; the last on August 13.*fn2

  On May 19, 2003, the motions to dismiss the class action were largely denied. In re WorldCom, Inc. Sec. Litig., 2003 WL 21219049. An amended consolidated class action complaint was filed on August 1. The class action complaint in the Securities Litigation pleads claims under both the Securities Act and the Securities Exchange Act of 1934. By October 14, 2003, virtually all defendants had filed answers to the amended consolidated class action complaint. The motion to certify a class was granted on October 24, 2003. In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22420467 (S.D.N.Y. Oct. 24, 2003).

  A Clarification Order of November 5, provided that "for purposes of Rule 41(a) only, defendants are deemed to have filed an answer in each Individual Action as of the date the Individual Page 8 Action arrives on this Court's docket." In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22508508 (S.D.N.Y. Nov. 5, 2003). Parties were given until November 21 to object to the Clarification Order. None of the Milberg Weiss Actions made any objection. The objections that were made were denied. In re WorldCom, Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 23095478 (S.D.N.Y. Dec. 1, 2003).

  At a conference on September 12, defendants gave notice of an intent to bring, in two tranches, motions to dismiss claims common to many Individual Actions. Among the grounds they identified was the contention that some Securities Act claims were barred by the applicable statute of limitations and would not be able to rely on American Pipe tolling. See American Pipe & Construc. Co. v. Utah, 414 U.S. 538 (1974). At a conference on September 22, the Court proposed and the parties agreed that the defendants would initially address their motions to dismiss to one or two of the complaints among the Individual Actions. The plaintiffs in those actions would oppose the motions and the plaintiffs in other Individual Actions would be permitted to file a single, joint amicus brief in opposition. An Order of September 22 provided that when a decision on the motion to dismiss was issued, the parties in the other Individual Actions in which the same legal issue arose would be given an opportunity to show cause "why the decision does not apply to those actions." ("September 22 Order"). See In re WorldCom, Inc. Sec. Litig., Page 9 No. 02 Civ. 3288 (DLC), 2004 WL 77879, at *3 (S.D.N.Y. Jan. 20, 2004)(describing procedure for motion practice).

  The first motion to dismiss, filed on October 3, included a motion addressed to a single, representative Milberg Weiss Action, an action which has been described as the MW Alaska Action. It sought dismissal of certain claims on the ground, inter alia, that they were barred by the statute of limitations contained in the Securities Act.

  On October 29, the Lead Plaintiff in the WorldCom securities class action advised the Court that it had reason to believe that Milberg Weiss was soliciting absent class members with misleading statements about the Securities Litigation. It submitted solicitation materials from Milberg Weiss in support of its accusation. At a hearing held on November 13, the Court gave its preliminary observations and findings based on the submissions received from Milberg Weiss and Lead Plaintiff. Of particular pertinence to the instant motion are the following:
Every investor has a right to bring an individual action if it chooses to do so. Every investor will have the right to opt out of the certified class action.
  Milberg Weiss has engaged in an active campaign to encourage penion funds not to participate in the class action and instead to file Individual Actions with Milberg Weiss as their counsel. . . . Milberg Weiss has targeted a relatively sophisticated audience with important and serious fiduciary duties to its membership and beneficiaries. . . . There is no reason to believe that the funds that have filed Individual Actions have done so with any but the best of intentions to obtain the maximum recovery for their constituency. . . . [B]ehind the lawyers and the pension fund officers stand the many individual state, local, Page 10 public and private employees whose lost retirement savings and benefits the funds seek to recover. . . .
 
The communications with Milberg Weiss have resulted in some confusion and misunderstanding of the options available to putative class members. . . . Milberg Weiss does not appear to have presented a forthright description of the advantages and disadvantages of both the individual action and class action options. . . . The potential statute of limitations impediments to bringing certain of the more recently filed Individual Actions do not appear to have been described. This could be a very serious problem for a litigant who chooses to opt out of the class, only to learn that the Individual Action it had filed was barred by the statute of limitations and it had lost all right to recovery. This very issue in now sub judice. . . .
See In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288 (DLC), 2003 WL 22701241, at *6-7 (S.D.N.Y. Nov. 17, 2003)(describing hearing and the findings)(emphasis supplied).

  Milberg Weiss made no objection at the hearing to any of the findings and endorsed the Court's solution,*fn3 which was to send a separate, curative notice to all plaintiffs who had filed Individual Actions, in addition to the notice to be provided to all class members to advise them of their right to opt out of the WorldCom securities class action (respectively "Individual Action Notice" and "Class Notice").*fn4 At the hearing held on November Page 11 13, ...


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