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IN RE ASHANTI GOLDFEELDS SECURITIES LITIGATION

United States District Court, E.D. New York


March 30, 2004.

In re ASHANTI GOLDFEELDS SECURITIES LITIGATION

The opinion of the court was delivered by: DAVID TRAGER, District Judge

MEMORANDUM AND ORDER

I. Background*fn1

On March 27, 2000, a group of shareholders in Ashanti Goldfields Company Limited ("Ashanti") brought an action against Ashanti and two of its officers, Mark B. Keatley (CFO and member of the board of directors) and Sam Jonah (CEO and member of the board of directors) ("defendants"), alleging that Ashanti and the officers of Ashanti made fraudulent statements between July 28, 1999 and October 5, 1999 in violation of § 10(b) of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 promulgated thereunder, and § 20(a) of the 1934 Act, concerning commodities futures activity by the company (the "Webster Action"). A similar action was filed on February 3, 2000 (the "Furman Action"). A third complaint was filed on April 19, 2000, asserting claims on behalf of a class of all persons who acquired shares of Ashanti between April 21, 1997 and October 5, 1999 (the "Kuch Action").

  Following consolidation of all three actions, counsel for all parties, including the defendants, agreed by a stipulated stay, "so ordered" by this Court on September 8, 2000 ("the Page 2 Stipulation," "the Stipulated Stay," or "the Stay"), that the proposed class period set forth in the Consolidated Amended Complaint would be limited to the period between July 28, 1999 and October 5, 1999, the period asserted in the Furman and Webster Actions. The parties agreed that the plaintiffs would have the right to seek to lift the stay in the event that the consolidated action is not dismissed in its entirety upon a motion to dismiss. In March 2001, defendants moved to dismiss the First Amended Consolidated Complaint. In February 2002, defendants' motion to dismiss was granted in part and denied in part. In re Ashanti Sec. Litig., 184 F. Supp.2d 247. On March 7, 2002, a Second Amended Consolidated Complaint was filed by lead plaintiffs.

  Lead plaintiffs William Webster, Ron Moore, and Rosemary Valente ("proposed class representatives," "lead plaintiffs," or "plaintiffs") now move for an Order lifting the Stipulated Stay, and for leave to amend plaintiffs' Second Consolidated and Amended Complaint ("SAC") to encompass the claims originally stayed in the September 2000 Stipulation. Defendants cross-move to dismiss the Third Amended Complaint in the event that leave to amend is granted. Lead plaintiffs also move to certify a class pursuant to Rule 23 of the Federal Rules of Civil Procedure.

 

II. Motion to Lift the Stipulated Stay and for Leave to Amend Plaintiffs' Second Consolidated and Amended Complaint
  Plaintiffs move the Court for an Order lifting the Stipulation, and for Leave to Amend Plaintiffs' Second Consolidated and Amended Complaint ("SAC"). The Stipulation states:

  The stay provided for by this Stipulation and Order shall not be lifted without the approval of this Court after prior notice to the defendants and opportunity for the defendants to contest the lifting of the stay. In the event that this action is not dismissed in its entirety, the lead plaintiffs appointed by the Court shall determine whether to seek to lift the stay provided by this Stipulation and Order by no later than 120 days before the close of fact discovery as to the claim in the Proposed Class Period. Page 3

 Yanez Decl. Ex. A. § 4.

  Plaintiffs assert that the Stipulation places no substantive conditions on the lifting of the stay except for requiring that the claims first survive a motion to dismiss. Since the action has not been dismissed in its entirety, with most of the claims actually surviving the motion to dismiss, plaintiffs have chosen to seek to lift the stay. Defendants acknowledge that while plaintiffs waited until the last minute to seek a lifting of the Stay, plaintiffs did move to lift the stay within the time permitted by the Stipulation and Order. Def. Mem. 4. Therefore, there can be no question that plaintiffs' request to lift the stay is timely. The second ground on which defendants contest the lifting of the stay relates to the matter of whether the defendants will be prejudiced by lifting of the stay and a further amendment of the complaint. Since the potential for prejudice rests not with the lifting of the stay but with the amendment of the complaint, this objection will be discussed below in the analysis of the motion to amend. As defendants raise no other objection to the lifting of the stay and there is no other reason why the stay should not be lifted, the stipulated stay is hereby lifted.

  The question that follows is whether plaintiffs should be permitted to amend the complaint to extend the proposed class period and include the claims stayed by the Stipulation. Plaintiffs assert that they should be permitted to amend to include the claims stayed by the Stipulation because these claims are based on misstatements and omissions that are virtually identical, and in most cases verbatim, to those already ruled actionable by this Court's February 2002 Memorandum and Order. As such, plaintiffs argue that the additional changes in the PTAC are not new claims of fraud but simply serve to demonstrate defendants' ongoing fraudulent conduct over an expanded time period. Pl. Mem. 1. Page 4

  Amending of a complaint is governed by Rule 15(a) of the Federal Rules of Civil Procedure, which provides that "leave [to amend] shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). The decision to grant a request for leave to amend a complaint is within the discretion of the Court. Foman v. Davis, 371 U.S. 178, 182 (1962); Ching v. United States, 298 F.3d 174, 180 (2d Cir. 2002). It is well-established in the Second Circuit that leave to amend should be granted freely though the district court may exercise its discretion to deny a motion to amend if there is a good reason for it. Min Jin v. Metro. Life Ins. Co., 310 F.3d 84, 101 (2d Cir. 2002) ("Leave to amend should be freely granted, but the district court has the discretion to deny leave if there is a good reason for it, such as futility, bad faith, undue delay, or undue prejudice to the opposing party.").

  Defendants argue that the motion to amend should be denied on several grounds. First, defendants argue that plaintiffs' undue delay and improper purpose mandates denial of the motion to amend. Second, defendants argue that they will be prejudiced if lead plaintiffs are granted leave to amend the complaint. Third, defendants allege that lead plaintiffs have failed to adequately allege a strong inference of scienter, so that the Proposed Third Amended Complaint ("PTAC") would not survive a motion to dismiss. Fourth, defendants argue that the new claims plaintiffs seek to file are barred by the statute of limitations, and that this would be another basis on which the new complaint would not survive a motion to dismiss.

 1. Undue Delay

  Defendants argue that the motion to amend should be denied because plaintiffs seek to file the PTAC almost three years after the filing of the original complaint on February 3, 2000, Page 5 and that plaintiffs knew about the additional claims proposed in the PTAC since the case first began. Furthermore, defendants argue plaintiffs' motion to amend was filed for an improper purpose in that the claims in the PTAC "are claims that lead plaintiffs have known about prior to every prior iteration of their complaint and chose not to pursue." Def. Mem. 6. The rule in this Circuit with respect to undue delay is that a court may deny a motion for leave to amend "where the motion is made after inordinate delay, no satisfactory explanation is offered for the delay and the amendment would prejudice other parties." Grace v. Rosenstock, 228 F.3d 40, 53-54 (2d Cir. 2000). Defendants' claims of bad faith and undue delay are meritless given that the delay resulted directly from the Stay stipulated to by all parties. As plaintiffs rightly explain, the delay was contemplated by the Stipulation, and defendants have known since the date of the Stipulation that plaintiffs could make a motion to lift the stay and seek to extend the time period covered by the complaint. Pl. Mem. 5-6. Thus, defendants' claims of improper purpose and undue delay are unsupported and do not constitute good reason to deny leave to amend.

 2. Prejudicial Effect

  Defendants also argue that they will be prejudiced if lead plaintiffs are granted leave to file the PTAC. However, in their briefing on the issue defendants fail to make a convincing argument. The only basis for a claim of prejudice asserted by defendants is that they would have to conduct discovery and prepare for trial on the new claims. Since discovery is still ongoing in this case, it is hard to see how expansion of the class period would prejudice the defendants other than simply expanding the scope of discovery. In this instance, there is no undue prejudice to the defendants from amendment of the complaint since the amended claim arises from the same Page 6 conduct set forth in the original pleading and the original complaint gave the defendant fair notice of the newly alleged claims. See Wilson v. Fairchild Republic Co., 143 F.3d 733, 738 (2d Cir. 1998) (holding that a district court may grant leave to amend so long as "the original complaint gave the defendant fair notice of the newly alleged claims."); O'Hara v. Weeks Marine, Inc., 294 F.3d 55, 68 (2d Cir. 2002) (quoting Fed.R.Civ.P. 15(c)(2)) (holding that a plaintiff generally may amend the complaint to include a claim if it "arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading.").

 3. Scienter

  A third ground advanced by defendants in opposition to the motion to amend is that plaintiffs have failed to adequately allege a strong inference of scienter, and amendment would therefore be fufile because the PTAC would not survive a motion to dismiss. This court has previously decided that plaintiffs adequately pled scienter with respect to the claims in the Second Amended complaint ("SAC"). In re Ashanti Goldfields Sec. Litig., 184 F. Supp.2d 247, 270 (E.D.N.Y. 2002). Plaintiffs attempt to argue that defendants' scienter challenge is barred by the law of the case doctrine since it has already been held that plaintiffs adequately pleaded scienter with regard to statements alleged in the SAC. The law of the case doctrine "posits that when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case. Law of the case directs a court's discretion, it does not limit the tribunal's power. . . ." Arizona v. California, 460 U.S. 605, 618 (1983) (citations omitted). Since this court did not have the claims advanced in the PTAC before it when it Page 7 decided the defendants' motion to dismiss the SAC, the law of the case doctrine does not bar defendants' scienter challenge.

  While defendants' scienter challenge is not barred, the court's decision with respect to scienter in the SAC informs its analysis of the issue of scienter with respect to the PTAC. Defendants argue that: (1) plaintiffs have alleged no facts giving rise to a strong inference of intent to defraud; (2) plaintiffs have failed to allege motives giving rise to a strong inference of intent to defraud; and (3) alternative explanations for defendants' conduct preclude sustaining a scienter allegation based on a strong inference of intent to defraud. Def. Mem. 8-16. This court has already clearly stated that a `"strong inference that the defendant[s] acted with the required state of mind' . . . may be established by either alleging facts to show that defendants had both motive and opportunity to commit fraud, or alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness." Ashanti, 184 F. Supp.2d at 269 (citing Novak v. Kasaks, 216 F.3d 300, 307 (2d Cir. 2000)). As was the case with the previous scienter challenge, with respect to the present scienter challenge "[t]he shareholders only attempt to show scienter under the second category, conscious misbehavior or recklessness." Ashanti, 184 F. Supp.2d at 269. That being the case, plaintiffs are not required to show motive for fraud. Thus, defendants' objections that plaintiffs have failed to adequately allege a strong inference of intent to defraud are inapposite.

  As was already stated in the previous opinion: "If a plaintiff is attempting to prove scienter by showing conscious misbehavior or recklessness, it is not sufficient to merely allege that such behavior took place. Recklessness in this context is conduct which is `highly unreasonable representing an extreme departure from the standards of ordinary care . . . to the Page 8 extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it.'" In re Ashanti, 184 F. Supp.2d at 269-70 (quoting Rothman v. Gregor, 220 F.3d 81, 90 (2d Cir. 2000)). Based on the facts alleged in the SAC, it has already been concluded that defendants "were aware of the nature of the transactions in the hedge book" and that plaintiffs established a "strong inference that Ashanti knew that its characterization[s] of its futures activity as hedging and not speculation were false." Ashanti, 184 F. Supp.2d at 270.

  The claims advanced in the PTAC merely bolster the prior finding. Ashanti's public filings during the extended class period indicated that the company's sales and hedging policy was set at quarterly meetings and was subject to strict internal controls. PTAC ¶¶ 13-14, 16. Moreover, plaintiffs have already been granted leave to amend their complaint to include the transcript of Keatley's July 28, 1999 conference call after finding that "Keatley's statements regarding the hedge book's ability to withstand a price rise shows that he and Ashanti were aware of the nature of the transactions in the hedge book." Ashanti, 184 F. Supp.2d at 270. Similarly, plaintiffs allege that in statements made during the April 29, 1999 conference call, which plaintiffs seek to add to the complaint, defendant Keatley assured investors of the hedge book's ability to withstand a price rise. PTAC ¶¶ 21-22. Thus, the scienter analysis with respect to the July 28, 1999 conference call applies to the April 29, 1999 conference call as well. In short, as with the claims asserted in the SAC, the additional claims put forward in the PTAC "lead to the strong inference that Ashanti knew that its characterizations of its futures activity as hedging and not speculation were false." Ashanti, 184 F. Supp.2d at 270.

  Defendants also argue that lead plaintiffs' claims cannot be reconciled with the fact that defendants engaged in significant repurchases of their own securities during the proposed class Page 9 period. Def. Mem. at 9-12; Def. Rep. Mem. at 2. While net purchases or sales of stock may be relevant with respect to a motive for fraud claim, when the claim is based on conscious misbehavior or recklessness net purchases of stock by defendants do not necessarily negate an inference of scienter on a motion to dismiss. See, e.g., In re Seebeyond Techs. Corp. Secs. Litig., 266 F. Supp.2d 1150, 1169 (C.D. Cal. 2003) (holding on a motion to dismiss that even though defendants argued that "purchases of stock negate an inference of scienter because they are inconsistent with a motive to maximize his personal benefit from an artificial inflation of the stock price. . . . [T]aking the allegations together, the plaintiff has presented sufficient allegations to raise the strong inference of scienter [in the form of] a strong inference that the defendants acted with deliberate or conscious recklessness.")-Since in this case the scienter claims are based upon conscious misbehavior, whether defendants were net buyers or net sellers of Ashanti is irrelevant. Ashanti, 184 F. Supp.2d at 269. Once again this court concludes that "[t]aken together, [the] facts pleaded by the shareholders lead to the strong inference that Ashanti knew that its characterizations of its futures activity as hedging and speculation were false." Id. at 270.

 4. Statute of Limitations

  A fourth ground advanced by defendants in opposition to the motion to amend is that the claims relating to the expanded portion of the proposed class period are barred by the statute of limitations. A claim under Section 10(b) and Rule 10b-5 must be brought within one year after discovery of the facts constituting the violation, and that one year period begins to run once a Page 10 plaintiff is on "constructive" or "inquiry" notice.*fn2 15 U.S.C. § 78i(e); Kahn v. Kohlberg, Kravis, Roberts & Co., 970 F.2d 1030, 1042 (2d Cir. 1992) (the one-year limitations period applicable to discovery of the violation begins to run after the plaintiff "obtains actual knowledge of the facts giving rise to the action or notice of the facts, which in the exercise of reasonable diligence, would have led to actual knowledge."); Menowitz v. Brown, 991 F.2d 36, 41-42 (2d Cir. 1993) (referring to discovery of facts giving rise to the violation as "constructive or inquiry notice."). Defendants argue that the claims regarding the expanded portion of the proposed class period were not raised until April 19, 2000, and that plaintiffs were on inquiry notice of their expanded claims prior to April 19, 1999. Thus, defendants allege that the statute of limitations began to toll prior to April 19, 1999 and that the expanded claims are time-barred.

  Plaintiffs counter defendants' argument that the expanded claims are time-barred by asserting that defendants waived their right to object on statute of limitations grounds when they consented to the Stipulation. PL Rep. Mem. at 6. Specifically, plaintiffs claim that "the stay tolled the Statute of Limitations" with respect to the claims asserted in the Kuch Action. Id. Plaintiffs also argue that "defendants specifically waived their right to raise the a [sic] defense of the statute of limitations." Id. Page 11

  A plain reading of the Stipulation reveals that plaintiffs mischaracterized the terms of the Stipulation. The Stipulation explicitly states that defendants did not waive their statute of limitations defense:

This Stipulation and Order shall act to toll completely any applicable statutes of limitation, the defense of laches, and all other time-bar defenses (such as the defense of failure to prosecute) as to the Stayed Claims, but only during the time the stay provided by this Stipulation and Order is in effect; in particular, the defendants expressly reserve and shall not be deemed to have waived any arguments that any of the claims in the Furman, Webster, or Kuch Actions, whether or not stayed by this Stipulation and Order, were time-barred as of the time the complaints in the Furman, Webster, and Kuch Actions were filed.
Stipulation ¶ 5. Furthermore, plaintiffs and defendants agreed to the following language:
Nothing in this Stipulation and Order shall be deemed to operate as a waiver by the defendants of any defenses to the Stayed Claims other than those described in paragraph 5. In the event that the stay provided by this Stipulation and Order is lifted by the Court, the defendants shall be permitted to raise any defenses preserved by this paragraph 7 by pre-answer motion.
Id. ¶ 7. From these two provisions of the Stipulation, there is no question that defendants preserved the statute of limitations defense with respect to arguments that any of the claims in the Kuch Action were time-barred as of the time the complaint in the Kuch action was filed.

  Plaintiffs also incorrectly argue that defendants can no longer raise a statute of limitations argument since defendants did not plead the statute of limitations in their answer. This argument is directly controverted by the provision of the Stipulation which states that "defendants shall be permitted to raise any defenses preserved by this paragraph 7 by pre-answer motion." Id. ¶ 7.

  Since the Stipulation preserved defendants' right to raise the instant statute of limitations challenge by means of a pre-answer motion, it must be determined whether the previously stayed claims now being advanced in the PTAC were time-barred as of the filing of the Kuch action on Page 12 April 19, 2000, i.e. whether plaintiffs were on constructive or inquiry notice prior to April 19, 1999.

  Defendants argue that plaintiffs have been on inquiry notice no later than the fourth quarter of 1998 due to various "storm warnings" to which investors should have paid attention, and that, therefore, the applicable date for starting the clock for statute of limitations purposes is sometime in late 1998, which would make plaintiffs' claims time-barred. Defendants cite LC Capital Partners, LP v. Frontier Ins. Group, 318 F.3d 148 (2d Cir 2003), for the holding that a securities fraud claim was time-barred because plaintiffs were placed on "inquiry notice" of their claims by "storm warnings." Id. at 154-55. The case involved an action against an insurance company in which the plaintiffs alleged that the company implemented reserve policies with the deliberate purpose and systematic effect of under-reserving for claims, and that in order to cover the revenue shortfalls created by its failure to reserve adequate sums and price policies correctly, it engaged in a pyramid scheme to generate income to pay claims on existing policies. Id. at 150. In determining when the statute of limitations began to run, the LC Capital court focused on "three substantial reserve charges taken within a brief period of time: $17.5 million in 1994, $40 million in 1997, and $139 million in 1998," and held that the plaintiffs were on inquiry notice immediately after the last of those charges. Id. at 152. Although the company had taken another reserve charge in 1999 and did not make the announcement the plaintiffs claimed alerted the market to the company's troubles until 2000, id. at 152, the court, nevertheless, held that all the storm warnings existing by December 1998 put the plaintiffs on inquiry notice regarding all of their claims by that date, and that the consolidated claims filed on February 5, 2001 were therefore time-barred. Id. at 156. Page 13

  LC Capital is easily distinguishable from the case at bar. First, the defendant in that case took three successive and increasing reserve charges within a short period of time, which obviously points to a pattern of under-reserving that would suggest a serious problem for an insurance company. Second, the reserve problems were discussed in a widely disseminated news article in the National Underwriter, published on December 21, 1998. Third, there was a previously filed litigation in 1994 in the Eastern District of New York in which the very same allegations were raised against the company. These facts provide little guidance for the instant case, in which defendants' exposure to risk only became evident when the price of gold began to rise in September 1999. This distinction is a fundamental one.

  In LC Capital, the Second Circuit found that plaintiffs' reliance on reassuring statements by Frontier's management was unreasonable given the combination of the three factors discussed above. Id. at 155-56. In the instant case, Ashanti repeatedly stated that it was properly protected against increases in the price of gold. Absent an actual increase in the price of gold, Ashanti's statements provided sufficient comfort to investors such that even if an investor might have suspected that there was speculation, the Company's statements would have allayed any concerns to the average investor. As the LC Capital court stated, "reassuring statements will prevent the emergence of a duty to inquire or dissipate such a duty only if an investor of ordinary intelligence would reasonably rely on the statement to allay the investor's concern . . . Whether reassuring statements justify reasonable reliance that apparent storm warnings have dissipated will depend in large part on how significant the company's disclosed problems are, how likely they are of a recurring nature, and how substantial are the `reassuring' steps announced to avoid their recurrence," Id. at 155. In the case at bar, Ashanti's reassuring statements certainly could be Page 14 viewed as justifying reasonable reliance until the rise in the price of gold in September and October 1999 exposed those statements for what they were.

  Accordingly, as there were no "storm warnings" that put plaintiffs on inquiry notice prior to October 1999, plaintiffs' claims are not time-barred.

  III. Defendants' Cross-Motion to Dismiss

  In the event that plaintiffs' motion for leave to file a third amended complaint is granted-which motion is granted-Ashanti cross-moves to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6).

  In order to state a claim under Section 10(b), a plaintiff must allege that "the defendant, in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that the plaintiff's reliance on the defendant's action caused injury to the plaintiff." Ganino v. Citizens Utilities Co., 228 F.3d 154, 161 (2d Cir. 2000). A motion to dismiss must be denied "unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99 (1957). The duty of a court in ruling on a 12(b)(6) motion "is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities Inc., 748 F.2d 774, 779 (2d Cir. 1984). In ruling on a 12(b)(6) motion, a court must accept as true all well-pleaded facts alleged in the complaint and draw all reasonable inferences in the pleader's favor. See Jackson Nat. Life Ins. Co. v. Merrill Lynch & Co., Inc., Page 15 32 F.3d 697, 699-700 (2d Cir. 1994); Liberty Ridge LLC v. Real Tech Sys. Corp., 173 F. Supp.2d 129, 134 (S.D.N.Y. 2001).

  Defendants make the following arguments in support of their cross-motion to dismiss: (1) lead plaintiffs have failed to adequately allege a strong inference of scienter; and (2) lead plaintiffs' new claims are barred by the statute of limitations. Def. Mem. at 8-20. Both grounds have been considered above as they were simultaneously argued in opposition to plaintiffs' motion for leave to amend and in support of the instant cross-motion to dismiss. As discussed above in sections (II)(3) ("Scienter") and (II)(4) ("Statute of Limitations"), plaintiffs' adequately pled scienter in the PTAC and their new claims are not barred by the statute of limitations. Accordingly, these grounds for dismissal advanced by defendants are rejected.

  However, following oral argument, in response to a request by the court, defendants filed a letter arguing that even if the court grants the motion to amend, several allegations in the PTAC should be dismissed on the ground that they are identical to claims dismissed previously in the February 2002 Memorandum and Order. January 14, 2004 Letter from Douglas W. Henkin. The allegations that defendants seek to dismiss on this ground relate to: Ashanti's alleged duty to disclose the details of the hedge book (PTAC ¶¶ 19, 20, 23(a), 30, 31, 36(a), 41(c)); the statement contained in the September 29, 1999 press release which characterized Ashanti's trading activity as "contingency planning" (PTAC ¶ 40(a)); and the statement contained in the September 29, 1999 press release which described Ashanti's hedge book as "actively managed" and "tightly controlled" (PTAC ¶¶ 40(c), 41(b)). January 14, 2004 Letter from Douglas W. Henkin; January 23, 2004 Letter from Douglas W. Henkin. Page 16

  In a reply letter dated January 21, 2004, plaintiffs concede that the statements of "contingency planning" and "actively managed" and "tightly controlled" contained in PTAC paragraphs 40(a), 40(c), and 41(b) are not actionable as affirmative misrepresentations. January 21, 2004 Letter from Paul D. Young. Since plaintiffs concede that the claims in these paragraphs have already been dismissed in the court's prior decision, defendants' cross-motion to dismiss is granted with respect to paragraphs 40(a), 40(c), and 41(b).

  In their reply letter, plaintiffs counter defendants' argument that PTAC paragraphs 19, 20, 23(a), 30, 31, 36(a), and 41(c) relate to Ashanti's alleged duty to disclose the details of the hedge book by arguing that these paragraphs "do not simply allege that Ashanti did not specifically outline the details of the hedge book, but rather allege that Ashanti misstated the very nature of the `hedge book,'" and that therefore these paragraphs should not be dismissed. January 21, 2004 Letter from Paul D. Young. The claims in the paragraphs in question are as follows:

Paragraph 19: Plaintiffs claim that "statements in the October 1997 6-K materially falsely and misleadingly represented the nature and purpose of the Company's purported `hedge' book," that Ashanti did not mention in its 1996 20-F, 1997 20-F, or October 1997 6-K the nonstandard options contracts with modified terms, sometimes called "exotics" that were the alleged source of the company's exposure to "catastrophic liability and margin calls," and that the public filings failed to disclose certain details of the options contracts. PTAC ¶ 19.
Paragraphs 20 and 31: Plaintiffs claim that the material risk from the "hedge" book, and in particular the call options and "exotics," was concealed from and misrepresented to investors. PTAC ¶¶ 20, 31.
  Paragraph 23(a): Plaintiffs claim that in Ashanti's October 1997 6-K and the April 29, 1999 investor conference call "[t]he Company did not set forth `full details' but omitted to disclose numerous derivative transactions that increased the risk for Ashanti and failed to disclose the amount of future gold production that Ashanti had entangled in its risky derivatives transactions." PTAC ¶ 23(a). Page 17

 

Paragraph 30: Plaintiffs claim that "statements in the July 1999 6-K materially falsely and misleadingly represented the nature and purpose of the Company's purported `hedge' book," that Ashanti did not mention in its 1996 20-F, 1997 20-F, 1998 20-F, or October 1997 6-K the call options contracts and "exotics" that were the alleged source of the company's exposure to "catastrophic liability and margin calls," and that the public filings failed to disclose certain details of the options contracts. PTAC ¶ 30.
Paragraph 36(a): Plaintiffs claim that in Ashanti's July 1999 6-K and defendant Keatley's July 28, 1999 interview, and defendants' July 28, 1999 investor conference call, defendants' failed to disclose and misrepresented the fact that "the Company was employing option contracts in order to increase revenue, i.e. by selling call options and exotic options and receiving premium income from the buyers rather than in order to protect itself against market fluctuations, and these contracts exposed the Company to margin calls should the price of gold rise suddenly." PTAC ¶ 36(a).
Paragraph 41(c): Plaintiffs claim that the statements in the September 29, 1999 press release failed to disclose the fact that "the Company's disclosures excluded the terms of its `exotic' option contracts, which would have permitted investors to recognize the speculative nature of the Company's purported `hedge' book." PTAC ¶ 41(c).
Although plaintiffs are correct that the court's prior decision found statement omissions concerning the nature and purpose of the hedge book to be actionable, defendants are correct in arguing that claims relating to Ashanti's alleged duty to disclose the details of the hedge book should be dismissed since they were previously dismissed by this court's February 2002 Memorandum and Order. See In re Ashanti Sec. Litig., 184 F. Supp.2d at 266 ("to the extent that the shareholders are pursuing claims for failing to include certain details of the hedging instruments, those claims are dismissed"). However, paragraphs 20, 31, and 36(a) state actionable claims relating to the nature and purpose of the hedge book, while paragraphs 19, 23(a), 30, and 41(c) state claims relating to Ashanti's failure to disclose details of the hedge book. Thus, paragraphs 19, 23(a), 30 and 41(c) must be dismissed to the extent that they state claims relating to Ashanti's failure to disclose details of the hedge book. Page 18

  Accordingly, the cross-motion to dismiss is denied, except as to the claims in paragraphs 40(a), 40(c), and 41(b), which shall be dismissed in their entirety, and as to the claims in paragraphs 19, 23(a), 30, and 41 (c), which shall be dismissed to the extent that they state claims relating to Ashanti's failure to disclose details of the hedge book.

  IV. Motion for Class Certification

  Proposed class representatives move to certify a class consisting "of all persons who purchased or otherwise acquired [Global Depository Receipts ("GDRs")*fn3 of Ashanti] during the period between April 21, 1997 and October 5, 1999, inclusive, (the "Class Period"), and who were damaged thereby."*fn4 Pl. Mem. Class cert. at 1.

  Plaintiffs argue that "this open-market securities fraud action satisfies all applicable requirements for class certification under Rule 23 of the Federal Rules of Civil Procedure," Pl. Mem. Class Cert. at 3, and, among other things, that all members of the class relied upon defendants' "materially false and misleading statements during the Class Period . . . about Ashanti's purported `hedge' book" and that defendants "failed to disclose material adverse facts." Pl. Mem. Class Cert. at 7; see also PTAC ¶ 59, at 34-35 ("plaintiffs and other members of Page 19 the Class purchased or otherwise acquired Ashanti common stock relying upon the integrity of the market price of Ashanti common stock and market information relating to Ashanti").

  Defendants oppose class certification, arguing that (1) lead plaintiffs' claims are atypical of the proposed class; (2) lead plaintiffs have failed to demonstrate that they will be adequate representatives of the proposed class; (3) common questions of law do not predominate because the market for Ashanti GDRs was not efficient and presumption of reliance under the fraud-on-the-market-theory does not apply, or alternatively, if the market for Ashanti GDRs could be deemed efficient, the presumption of reliance is rebutted in this case; and (4) there is a significant risk of intra-class conflicts. Def. Mem. Class Cert. at 1-29. Defendants also argue that "any class must be limited to domestic investors." Def, Mem. Class Cert. at 30-33.

  For the reasons set forth below, the Court grants plaintiffs' motion for class certification as modified in the Conclusion to this Memorandum and Order and appoints proposed class representatives William Webster, Ron Moore, and Rosemary Valente as Class Representatives.

 1. The standard guiding Rule 23 motions

  Class certification is governed by Rule 23 of the Federal Rules of Civil Procedure. Fed.R.Civ.P. 23. The requirements of Rule 23 are to be applied liberally, not restrictively. In re Blech Sec. Litig., 187 F.R.D. 97, 102 (S.D.N.Y. 1999) (citing Korn v. Franchard Corp., 456 F.2d 1206, 1208-09 (2d Cir. 1972)). A liberal standard is in accord with the Second Circuit's preference for the use of class actions in securities law claims. In re Avon Sec. Litig., No. 91-2287, 1998 WL 834366, at *4 (S.D.N.Y. Nov. 30, 1998) (noting importance of class actions in enforcing securities laws where numerous investors have been injured but not to the point of Page 20 pursuing suit individually) (citing Green v. Wolf Corp., 406 F.2d 291, 298 (2d Cir. 1968)); see also Blech, 187 F.R.D. at 102 ("Class action treatment of related claims is particularly appropriate when plaintiffs seek redress for violations of the securities laws."). Accordingly, in securities cases, "when a court is in doubt as to whether or not to certify a class action, the court should err in favor of allowing the class to go forward." Blech, 187 F.R.D. at 102.

 2. The requirements of Fed.R. Civ. P. 23(a)

  In order to certify a class, a litigant must satisfy the four requirements of Rule 23(a) of the Federal Rules of Civil Procedure and demonstrate that the proposed class action fits into one of the three categories described in Rule 23(b). Green v. Wolf Corp., 406 F.2d at 298 (2d Cir. 1968). Although the plaintiff bears the burden of proving that its proposed class is appropriate for certification, Harrison v. Great Springwaters of Am., Inc., No. 96-5110, 1997 WL 469996, at *3 (E.D.N.Y. June 18, 1997), the plaintiff is not obliged to make an extensive evidentiary showing in support of its motion. Follette v. Vitanza, 658 F. Supp. 492, 505 (N.D.N.Y. 1987), vacated in part on other grounds, 671 F. Supp. 1362 (N.D.N.Y. 1987). Moreover, in considering a motion for class certification, a court must assume the truth of the plaintiffs' allegations. In re AMF Bowling Sec. Litig., No. 99-3023, 2002 WL 461513, at *3 (S.D.N.Y. Mar. 25, 2002) ("Although a court must conduct a rigorous inquiry in determining whether the requirements of Rule 23 have been satisfied, it must accept plaintiffs' allegations as true and refrain from conducting an examination of the merits when determining the propriety of class certification."). See also Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n.15 (2d Cir. 1978); Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 291 (2d Cir. 1999); DeAllaume v. Page 21 Perales, 110 F.R.D. 299, 305 (S.D.N.Y. 1986); Ventura v. New York City Health and Hosps. Corp., 125 F.R.D. 595, 598 (S.D.N.Y. 1989).

  In pertinent part, Rule 23(a) of the FRCP provides that:

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claim or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). Each of these requirements will be addressed in turn.

  First, the numerosity requirement is satisfied when the class is numerous enough to make ordinary joinder of all members impractical. "Impracticability means difficulty or inconvenience of joinder; the rule does not require impossibility of joinder," Blech, 187 F.R.D. at 103. Furthermore, "[i]n securities fraud actions brought against publicly owned and nationally listed corporations, the numerosity requirement may be satisfied by a showing that a large number of shares were outstanding and traded during the relevant period." In re Frontier Ins. Group, Inc. Sec. Litig., 172 F.R.D. 31, 40 (E.D.N.Y, 1997). See also Dietrich v. Bauer, 192 F.R.D. 119, 123 (S.D.N.Y. 2000); Gerber v. Computer Assocs. Int'l, No. 91-3610, Fed. Sec. L. Rep. (CCH) P 98, 722, at 92, 398-99, 1995 WL 228388, at *2 (E.D.N.Y. Apr. 7, 1995) ("[defendants'] common stock was listed and actively traded on the New York Stock Exchange; therefore, it is likely that [defendants'] stockholders are not concentrated in any one geographic location, but rather, are widely dispersed. Hence, given that there will be a variety of residences and numerous claims, joinder would be impractical."),

  In this case, plaintiffs point to the following for support of their numerosity claim: (1) during the Class Period, Ashanti had more than 100 million Shares outstanding; (2) millions of Page 22 these shares were actively traded on the New York Stock Exchange ("NYSE"); and (3) during the Class Period, Ashanti's shares traded between $5.50 and a little over $13.00 per share on a daily trading volume between 37,000 and 4,541,600 shares. Though plaintiffs have not yet ascertained the precise number of members of the class, based on the above alleged facts, they claim that "in light of the daily and total trading volume during the Class Period, proposed class representatives believe that there are thousands of Class members." Pl. Mem. Class cert. at 10. Accordingly, plaintiffs provided sufficient evidence to support a finding of numerosity.

  Second, to satisfy the requirement of commonality, the plaintiff must demonstrate that common questions of law or fact are at the core of the cause of action alleged by the plaintiff. "The commonality requirement is met if plaintiffs' grievances share a common question of law or of fact." Robinson v. Metro-North Commuter R.R., 267 F.3d 147, 155 (2d Cir. 2001). "The commonality requirement of Rule 23(a)(2) has been applied permissively by the courts in the context of securities fraud litigation." In re Blech, 187 F.R.D. at 104; see also In re Frontier, 172 F.R.D. at 40. Here, plaintiffs allege that the following questions of fact or law are common to members of the Class: (1) whether the federal securities laws were violated by defendants' acts and omissions; (2) whether defendants participated in and pursued the fraudulent scheme or course of conduct; (3) whether the company's publicly disseminated releases and statements during the Class Period omitted and/or misrepresented material facts; (4) whether defendants acted willfully, with knowledge or recklessly, in omitting and/or misrepresenting material facts; (5) whether the market price of Ashanti shares during the Class Period was artificially inflated due to defendants' wrongful conduct; and (6) whether the members of the class have sustained damages and, if so, the proper measure of damages. Defendants do not dispute commonality. Page 23 Plaintiffs have adequately demonstrated that these claims are common to all members of the proposed class, and thus the commonality requirement is satisfied,

  Third, plaintiff must demonstrate typicality. In this case, proposed class representatives' claims arise out of the alleged misrepresentations by defendants concerning Ashanti's hedge book. Proposed class representatives argue that they stand in precisely the same position as do other purchasers of Ashanti's shares during the Class Period because "[t]he damages that proposed class representatives and other members of the Class seek arise from the purchase of Ashanti's shares at prices artificially inflated as a result of defendants' false and misleading statements in documents filed with the SEC and in statements publicly disseminated by defendants during the Class Period." PL Mem. Class Cert. at 13.

  Defendants dispute proposed class representatives' claims that they satisfy the typicality requirement because "the presence of a unique defense destroys typicality." Def. Mem. Class Cert. at 19. Specifically, defendants argue that "[a] plaintiffs' claim is not typical if the plaintiff did not rely on the integrity of the market in making his or her [securities] purchases." Id. Defendants further allege that since plaintiffs' reliance on the integrity of the market will be a focal point of this litigation, plaintiffs "are subject to differing and divergent defenses because of their individual lack of reliance on the alleged misrepresentations." Id. at 19-20.

  The typicality requirement "is satisfied when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997) (per curiam) (quoting In re Drexel Burnham Lambert, 960 F.2d 285, 291 (2d Cir. 1992)); see also In re Blech, 187 F.R.D. at 106 ("[T]he typicality requirement is satisfied because, as set forth in the Page 24 Complaint, the plaintiffs' claims of fraud arise from the same course of conduct."). Because "`reliance' is clearly alleged" (see, e.g., PTAC ¶ 59, at 34-35 ("plaintiffs and other members of the Class purchased or otherwise acquired Ashanti common stock relying upon the integrity of the market price of Ashanti common stock and market information relating to Ashanti")), and "because a jury may conclude" that investing in a publicly traded stock whose price is inflated due to material misrepresentations "entails reliance," proposed class representatives satisfy the typicality requirement. In re Nortel Networks Corp. Sec. Litig., No. 01-1855, 2003 WL 22077464, at *3 (S.D.N.Y. Sept. 8, 2003) (rejecting defendants' argument that class representative failed to satisfy typicality requirement because class representative allegedly did not rely on the integrity of the market). Moreover, the presumption of reliance/efficiency of the market is an issue to be decided at the trial of the matter, not at the class certification stage of this case. Cromer Fin. Ltd. V. Berger, 205 F.R.D. 113, 133 (S.D.N.Y. 2001); see also discussion below in section (IV)(3) of this Memorandum and Order.

  Additionally, "[t]he rule barring certification of plaintiffs subject to unique defenses is not `rigidly applied in this Circuit.'" Nortel, 2003 WL 22077464, at *4 (quoting In re Frontier, 172 F.R.D. at 41). Thus, minor variations among individual plaintiffs' fact patterns do not undermine the typicality requirement. Robidoux v. Celani, 987 F.2d 931, 936-37 (2d Cir. 1993) ("When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met irrespective of minor variations in the fact patterns underlying individual claims."). Additionally, even in cases where a unique defense might exist, "[a] plaintiff subject to a unique defense is not an appropriate class representative only if that unique defense might draw the focus of the Page 25 litigation away from common legal or factual issues," In re Arakis Energy Corp. Sec. Litig., No. 95-3431, 1999 WL 1021819, at *6 (E.D.N.Y. Apr. 27, 1999); see also In re Indep. Energy Holdings PLC Sec. Litig., 210 F.R.D. 476, 481 (S.D.N.Y. 2002) ("While the extent of non-reliance on [plaintiffs'] part will certainly be a fact question to be decided at trial, it is unlikely to significantly shift the focus of the litigation to the detriment of the absent class members.").

  Defendants also argue that lead plaintiffs are atypical because they are individual investors while most of Ashanti's stock was owned by insiders and institutional investors. Def. Mem. Class Cert. at 25. Defendants fail to cite a single case that actually supports this argument*fn5, and in fact "there is no requirement in Rule 23 concerning the amount of loss either in gross or compared with the losses of others, necessary to qualify as a class representative." In re Oxford Health Plans, Inc. Sec. Litig., 191 F.R.D. 369, 375 (S.D.N.Y. 2000). Typicality is satisfied where, as here, "claims of representative plaintiffs arise from same course of conduct that gives rise to claims of the other class members, where the claims are based on the same legal theory, and where the class members have allegedly been injured by the same course of conduct as that which allegedly injured the proposed representatives." Id. (citing In re Drexel Burnham, 960 F.2d at 291). Accordingly, plaintiffs have met the requirement of typicality.

  Finally, to satisfy the fourth requirement of Rule 23(a), plaintiffs must demonstrate that "the representative parties will fairly and adequately protect the interests of the class." The Page 26 "adequate representation" inquiry has two prongs: "first, class counsel must be qualified, experienced and generally able to conduct the litigation. Second, the class members must not have interests that are antagonistic to one another." Harrison, 1997 WL 469996, at *5 (quoting D'Alauro v. GC Servs. Ltd. P'ship, 168 F.R.D. 451, 457 (E.D.N.Y. 1996)).

  Regarding the first prong, there is no dispute. The proposed class representatives have selected and retained the law firms of Milberg Weiss Bershad Hynes & Lerach, LLP, and Cauley Geller Bowman Coates & Rudman, LLP, as co-lead counsel for the proposed Class. Both firms are well-respected and have extensive experience with securities class actions. Defendants do not contest this fact.

  However, defendants strongly contest the adequacy of the prospective class representative under the second prong of the adequacy inquiry. Defendants argue that the proposed class representatives do not meet the adequacy requirement because they are only minimally involved in this case and that the litigation has been lawyer-driven. Def. Mem. Class Cert. at 25-29. However, defendants' adequacy challenge is inappropriate. See In re Frontier Ins. Group, 172 F.R.D. at 46 ("In the context of complex securities litigation, attacks on the adequacy of the class representative based on the representative's ignorance or credibility are rarely appropriate.") (citing County of Suffolk v. Long Island Lighting Co., 710 F. Supp. 1407, 1416 (E.D.N.Y. 1989) (Weinstein, J.)).

  Moreover, "[c]ourts that have denied class certification based on the inadequate qualifications of plaintiffs have done so only in flagrant cases, where the putative class representatives display `an alarming unfamiliarity with the suit,' display an `unwillingness to learn about' the facts underlying their claims, or are so lacking in credibility that they are likely Page 27 to harm their case." In re Frontier Ins. Group, 172 F.R.D. at 47 (citations omitted). None of these circumstances is present here, and there is no basis to deny the class on inadequacy grounds.

  Class action plaintiffs are not required to understand complex legal terms or to direct litigation strategy, as long as they are "aware of the basic facts underlying the lawsuit as alleged in the complaint and [do] not abdicate [their] obligations to fellow class members." Id. A review of the deposition transcripts reveals that lead plaintiffs have satisfied this requirement. See Appendix of Exhibits in Support of Memorandum of Law in Support of Plaintiffs' Motion for Class Certification ("PL Class Cert. App."), Ex. 1 (Webster Dep.) 61:19-64:2, 79:16-85:2; Ex. 2 (Moore Dep.) 88:6-95:13, Ex. 3 (Valente Dep.) 59:12-63:20. Thus, proposed class representatives satisfy the adequacy requirement.

 3. The requirements of Fed.R.Civ.P. 23(b)(3)

  In addition to satisfying the requirements of Rule 23(a), a potential class action must qualify under one of the categories set forth in Rule 23(b). Plaintiffs rely on Rule 23(b)(3), which allows class certification if "the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Plaintiffs contend that both prongs of the (b)(3) category of Rule 23 are satisfied here.

  With respect to the first prong, plaintiffs argue that "[w]here, as here, the complaint alleges that defendants have made false representations, the issues of law and fact that flow from that activity predominate over any individual issues rendering class treatment appropriate." Pl. Page 28 Mem. Class Cert. at 18, Defendants counter by arguing that class certification should be denied because individual issues predominate. Specifically, defendants argue that the fraud-on-the-market theory ("FOMT"), under which plaintiffs' reliance on alleged misrepresentations is presumed, does not apply. Def. Mem. Class Cert. at 11. According to the FOMT, "an individual plaintiff need not show that he actually read or heard a misrepresentation" but rather "is presumed to have relied on it by virtue of his reliance on a market that fully digests all available material information about a security and incorporates it into that security's price," Cromer Fin. Ltd. v. Berger, 205 F.R.D. 113, 128 (S.D.N.Y. 2001) (citing the seminal case on the FOMT, Basic Inc. v. Levinson, 485 U.S. 224, 108 S.Ct. 978 (1988)).

  Defendants argue that the "market for Ashanti's Global Depository Receipts ("GDRs") was likely not efficient, making the fraud-on-the-market doctrine inapplicable in the first instance." Def. Mem. Class Cert. at 11. Defendants make the argument that the market for Ashanti securities was not efficient based on an expert report by Professor Paul A. Gompers of Harvard Business School, which defendants filed with the court. First, defendants explain that based on an analysis of the trading of Ashanti securities on the New York Stock Exchange ("NYSE") and the London Stock Exchange ("LSE"), Professor Gompers concluded that there were (1) significant differences between the prices at which Ashanti shares and GDRs traded on the LSE and (2) between the prices at which Ashanti GDRs traded on the NYSE and the LSE at similar times. Id. at 12. Second, in studying how Ashanti's trading price moved in relation to news announcements, Gompers observed that there were a number of significant price changes for Ashanti in the absence of new information, which he concluded cast doubt on the efficiency of the market for Ashanti securities. Id. Third, Gompers observed that the fact that price of Page 29 Ashanti securities did not drop in response to the August 1999 Hathaway Report,*fn6 which stated that Ashanti would face margin calls should there be an upward spike in gold prices, indicates either that the market for Ashanti securities was not efficient or that the price of Ashanti's stock was inflated because the market was efficient but had already incorporated the Hathaway report's analysis in the stock price. Id. at 13. Fourth, Professor Gompers observed that the possibility that Ashanti securities were inefficiently traded is bolstered by the fact that there was very little short interest in Ashanti, possibly due to the fact that a significant proportion of Ashanti stock was owned by Lonmin plc, the Government of Ghana, and institutional investors during the proposed class period. Id.

  Defendants also argue that even if the market for Ashanti GDRs could be deemed efficient, the presumption of reliance under the FOMT is rebuttable and is in fact rebutted in this case. Id. at 11, 13-16. First, defendants contend that even if one were to assume that the risks faced by Ashanti in the event of a gold price spike such as actually occurred were not understood by the market, the Hathaway Report made those risks clear. Id. at 14. Second, defendants argue that Ashanti, in its public filings, disclosed the relative contribution of its hedge book to its revenues and profits. Id. at 14-15. Third, defendants contend that lead plaintiffs, in their deposition testimony, rebutted any presumption of reliance that might exist. Defendants allege that at least one lead plaintiff indicated that he would have purchased Ashanti GDRs even if the truth had been disclosed, and that another lead plaintiff made significant purchases of Ashanti GDRs after the fraud alleged by plaintiffs was revealed. Id. at 15. Defendants argue that any one Page 30 of these factors is sufficient to rebut any presumption of reliance. In addition, defendants argue that the majority of Ashanti stock was held by institutional investors and insiders, some of who had or had the opportunity to have discussions with Ashanti about its gold hedge book, and that "[t]his is precisely the sort of situation in which individual reliance issues preclude certification even if a stock trades efficiently and any presumption is not deemed rebutted." Id. at 16.

  Although defendants are correct in arguing that the presumption of reliance is generally rebuttable, see Basic, 485 U.S. at 248, 108 S.Ct. at 992 ("Any showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at a fair market price, will be sufficient to rebut the presumption of reliance."); Cromer, 205 F.R.D. at 129 ("The presumption provided by the FOMT . . . is not absolute and may be rebutted where a defendant casts doubt on the causal connection at issue."), proof of market inefficiency, as presented in Professor Gompers' expert report, or rebuttal of the presumption of reliance is best left to the trial phase of litigation, Basic, 485 U.S. at 248, 108 S, Ct. at 992 n.29 ("Proof [rebutting a presumption of reliance] is a matter for trial, throughout which the District Court retains the authority to amend the certification order as may be appropriate."); RMED Int'l Inc. v. Shan's Supermarkets, 94-5587, 2002 WL 31780188, at *4 (S.D.N.Y. Dec. 11, 2002) ("Whether or not a market for a stock is open and efficient is a question of fact. . . . The jury will ultimately decide whether the market is efficient and defendants are entitled to put on evidence in that respect."); Cromer, 205 F.R.D. at 133 ("While [defendant] has identified evidence and arguments it may use at trial to rebut the presumption, it remains true that it is logical and fair to presume reliance here."); In re Laser Arms Corp. Sec. Litig., 794 F. Supp. 475, 490 (S.D.N.Y. 1989) ("Whether in fact [defendant] traded in an Page 31 efficient market is a question of fact. Therefore, resolution of that issue must await presentation of further proof at trial."), aff'd, 969 F.2d 15 (2d Cir. 1992). Accordingly, defendants' attempt to prove market inefficiency or to rebut the presumption of reliance is a matter properly left for trial. The first prong of Rule 23(b)(3) is satisfied in this case.

  As to the second prong, which requires that the court determine whether a "class action is superior to other available methods for the fair and efficient adjudication of the controversy," the court considers the following factors:

(A) the interest of members of the class in individually controlling the prosecution or defenses 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.
Fed.R.Civ.P. 23(b)(3).

  In this litigation, the interest of members of the class in individually controlling the prosecution of separate actions is minimal, as the costs and expenses of bringing individual suits would far exceed any individual recoveries. See In re Blech, 187 F.R.D. at 107 ("In general, securities suits such as this easily satisfy the superiority requirement of Rule 23. Most violations of the federal securities laws, such as those alleged in the Complaint, inflict economic injury on large numbers of geographically dispersed persons such that the cost of pursuing individual litigation to seek recovery is often not feasible. Multiple lawsuits would be costly and inefficient, and the exclusion of class members who cannot afford separate representation would neither be `fair' nor an adjudication of their claims. Moreover, although a large number of individuals may have been injured, no one person may have been damaged to a degree which would induce him to institute litigation solely on his own behalf."). Page 32

  Additionally, proposed class representatives have stated that they are not aware of any individual suits pending against defendants, and defendants have not challenged this assertion. PL Mem. Class Cert. at 20. Ashanti is subject to jurisdiction within the United States by virtue of its listing on the NYSE and other domestic exchanges, making this court a desirable forum for concentrating the litigation of class members' claims. Finally, the court does not expect any significant difficulties to be encountered in the management of this case as a class action.

  In sum, because class action treatment is superior to any other available method for the "fair" and "efficient" adjudication of this case, the requirements of Rule 23(b)(3) are fully satisfied. If insurmountable management problems were to develop at any point, class certification can be revisited at any time under Fed.R.Civ.P. 23(c)(1). Accordingly, this class action qualifies under Rule 23(b)(3).

 4. Potential Intra-class conflicts

  Defendants also challenge class certification on the ground that "there is a significant risk of intra-class conflicts" because the "economic environment in which Ashanti operated changed significantly over the course of the proposed [29 month] class period." Def. Mem. Class Cert. at 17. Moreover, defendants argue that no proposed class representative purchased Ashanti GDRs prior to August 1999, the very end of the proposed class period. Thus, defendants argue, "lead plaintiffs purchased Ashanti GDRs in one economic environment, whereas the vast majority of the potential members of the proposed class purchased in an entirely different economic environment." Id. at 18. Page 33

  Defendants do not clearly state which applicable section of Rule 23 should be a basis for denying certification due to "a significant risk of intra-class conflict," nor do the cases they cite (all from district courts in other circuits) to argue that this risk merits denial of the motion persuade the court that certification should be denied due to potential and unspecified intra-class conflicts. Moreover, "[i]t does not defeat Typicality or Adequacy if it appears that the Class Representative did not purchase the stock at the beginning of the period sought to be litigated, so long as the beginning date of the period has a rational basis." In re Oxford Health Plans, Inc. Sec. Litig., 191 F.R.D. 369, 378 (S.D.N.Y. 2000). Furthermore, even if conflicts among class members, such as those suggested by defendants, were to arise in this case, such potential but yet unrealized conflicts would not require the denial of certification or disqualification of the class representatives, because the Court has "substantial discretion to create sub-classes," Cromer, 205 F.R.D. at 127, or, alternatively, because the class can be modified as the litigation goes forward. In re Oxford Health Plans, 191 F.R.D. at 378.

 5. Limitation of Class to purchasers of Ashanti securities in U.S. securities markets

  Finally, defendants also oppose certification on the ground that purchasers of Ashanti GDRs during the proposed class period included "residents of foreign countries and/or who purchased on foreign exchanges." Def. Mem. Class Cert. at 30. In their Reply brief, plaintiffs clarified that they "are only seeking to represent the class of purchasers of Ashanti securities in the U.S. securities markets" and that they "are not seeking to represent the claims of investors who purchased Ashanti securities on foreign exchanges." Pl. Reply Class Cert. at 19. There can be no doubt-and defendants do not contest-that this court has jurisdiction over U.S. citizens or Page 34 residents investing on the NYSE. This leaves open the question of whether the class should include non-U.S. residents or citizens investing in the NYSE. Plaintiffs correctly argue that the "conduct test" applies. Pl. Reply Class Cert. at 19. "Under the `conduct' test, a federal court has subject matter jurisdiction if the defendants' conduct in the United States was more than merely preparatory to the fraud, and particular acts or culpable failures to act within the United States directly caused losses to foreign investors abroad." Alfadda v. Fenn, 935 F.2d 475, 478 (2d Cir. 1991) (citing Psimenos v. E.F. Hutton & Co., 722 F.2d 1041, 1046 (2d Cir. 1983) (citing Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 993 (2d Cir. 1975))). Defendants offer no convincing arguments against inclusion in the class of foreign investors investing in stock exchanges in the United States. Accordingly, while plaintiffs' request for class certification is modified to exclude investors on foreign exchanges, the motion for certification of the class will cover all investors, including foreign citizens, investing in stock exchanges in the United States who meet the other requirements of the class.

  V. Conclusion

  Accordingly, plaintiffs' motion for an Order lifting the Stipulation and Order Staying Certain Claims, So Ordered by this Court on September 8, 2000, is granted. Plaintiffs' motion for Leave to Amend plaintiffs' Second Consolidated and Amended Complaint is granted. Defendants' cross-motion to dismiss is denied, with the exception of the claims in paragraphs 40(a), 40(c), and 41(b), which shall be dismissed in their entirety, and the claims in paragraphs 19, 23(a), 30, and 41(c), which shall be dismissed to the extent that they state claims relating to Ashanti's failure to disclose details of the hedge book. Plaintiffs shall amend the SAC as Page 35 indicated in the Proposed Third Amended Complaint on file with the court, except for those claims that have been dismissed.

  Having satisfied the Rule 23(a) requirements of numerosity, commonality, typicality and adequate representation and having qualified under the Rule 23(b)(3) category, plaintiff class is certified, and the following class definition is adopted:

All persons who purchased or otherwise acquired the Global Depository Receipts of Ashanti Goldfields Company Limited listed on stock exchanges in the Unites States during the period between April 21, 1997 and October 5, 1999, inclusive, and who were damaged thereby.*fn7
SO ORDERED.


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