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IN RE INITIAL PUBLIC OFFERING SECURITIES LITIGATION

United States District Court, S.D. New York


July 20, 2004.

IN RE: INITIAL PUBLIC OFFERING SECURITIES LITIGATION. This Document Relates to: IN RE CORVIS CORP. INITIAL PUBLIC OFFERING SECURITIES LITIGATION. IN RE ENGAGE TECHNOLOGIES, INC. INITIAL PUBLIC OFFERING SECURITIES LITIGATION. IN RE FIREPOND, INC. INITIAL PUBLIC OFFERING SECURITIES LITIGATION. IN RE Ix1 ENTERPRISES, INC. INITIAL PUBLIC OFFERING SECURITIES LITIGATION. IN RE SYCAMORE NETWORKS, INC. INITIAL PUBLIC OFFERING SECURITIES LITIGATION. IN RE VA LINUX CORP., formerly known as VA LINUX SYSTEMS, INC. INITIAL PUBLIC OFFERING SECURITIES LITIGATION.

The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge

MEMORANDUM OPINION AND ORDER

On July 12, 2004, plaintiffs' expert, Dr. Daniel Fischel, submitted a supplemental report in further support of plaintiffs' motion for class certification in six focus cases in accordance with this Court's June 21, 2004 Order. By letter dated July 15, 2004, Underwriters' liaison counsel requested that the Court order plaintiffs to immediately produce information sought by defendants in a letter addressed to plaintiffs' liaison counsel dated July 13, 2004. This letter seeks nine categories of documents. The thrust of defendants' request is that they are entitled to examine "the data or other information considered by the witness in forming [his] opinions." Fed.R.Civ.P. 26(a)(2)(B).

By letter dated July 16, 2004, plaintiffs opposed defendants' request, arguing that "the requested discovery is neither contemplated by the Order, nor necessary to enable the Underwriter defendants to submit a response that, as directed by the Order, shall be `addressed solely to whether Dr. Fischel's methodology is "so flawed that it would be inadmissible as a matter of law. . . ."'" 7/16/04 Letter from Robert Wallner, plaintiffs' liaison counsel, to the Court (quoting June 21 Order at 2 (quoting In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 135 (2d Cir. 2001))) (emphasis added).

  After reviewing the submissions of counsel and Dr. Fischel's Supplemental Report, I conclude that plaintiffs are not required to supply the requested information at this time. At the appropriate time, when the parties are engaged in reciprocal discovery regarding the final opinions of their experts, they will be required to provide "all of the data or other information considered by the witness in forming the[ir] opinions."*fn1 This disclosure is not required, however, for the purpose of responding to the supplemental report submitted in support of the class certification motion.

  A close review of Dr. Fischel's supplemental report and the exhibits thereto reveals why this is so. Defendants' first request, calling for all of the "data provided by plaintiffs' counsel" is overly broad. In his first report, Dr. Fischel asserted that he reviewed the "empirical evidence and the relevant disclosures." 1/20/04 Fischel Report ¶ 10. Defendants were fully able to respond to this report (and Dr. Fischel's rebuttal report), challenging both their substance and methodology, with expert submissions of their own. Defendants did not then ask plaintiffs to identify the material on which Dr. Fischel relied.

  The second request calls for the "data regarding allocants that were allegedly required to engage in tie-in agreements," as referenced in paragraph four of the supplemental report. This information would not affect Dr. Fischel's analysis and methodology. Indeed, Dr. Fischel notes in paragraph four of his supplemental report that defendants' own documents reveal examples of allocants' promises to buy in the aftermarket.

  Defendants' third request calls for the information compiled by plaintiffs' counsel on which Exhibit A to the supplemental report is based. For the purpose of addressing Dr. Fischel's methodology, defendants should assume that the number of allocants with tie-in agreements is accurate. Once that assumption is made, all of the remaining data in Exhibit A is drawn from defendants' own records. Defendants should be capable of attacking the methodology used by Dr. Fischel in relying on the statistics cited in Exhibit A without knowing the identities of the allocants. The number of allocants with alleged tie-in agreements, not their identities, is the important information.

  The fourth request, seeking the identity of each of the allocants with tie-in agreements, is not required for the same reason. The fifth request, seeking "information on pre-opening orders" by allocants with tie-in agreements, provided to Dr. Fischel by plaintiffs' counsel, raises the same issue. For the purpose of responding to Dr. Fischel's methodology, the numbers reflected in Exhibit B are presumed to be true. The question remains whether the analysis of the data can support the conclusion. The sixth request, regarding "Trading Databases," calls for information provided by the defendants. In Exhibits D-1 through D-6, Dr. Fischel specifically notes his source as "[Underwriter's] trading database." Accordingly, defendants have this information.*fn2 Similarly, the eighth request, calling for "the data relied upon in creating Exhibit G" must already be in defendants' possession, as all of the information in that exhibit is in the public domain. The ninth, and final request, calling for "any and all" other data and information relied on by Dr. Fischel, is repetitious and cumulative of all of the earlier requests.

  That leaves the seventh request, calling for the "entire regression analysis" conducted by Dr. Fischel including "all of the variables considered and all of the data relied upon." This request will be honored if and when Dr. Fischel submits a final report and counsel engage in reciprocal discovery including expert depositions. At this time, defendants know that Dr. Fischel conducted an analysis of "allocation and trading data provided by defendants." Fischel Supplemental Report ¶ 15. Defendants obviously have that information and have access to experts perfectly capable of conducting their own analysis of that information. However, such an analysis, if the defendant choose to offer it, is irrelevant to the issue now before the Court. As noted in the June 21 Order, the only issue now is: "whether Dr. Fischel's methodology is `so flawed that it would be inadmissible as a matter of law. . . .'" June 21 Order at 2 (quoting In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d at 135). The defendants have the tools to argue, as they previously did, that the methodology is so flawed.

  In sum, while defendants are entitled to the data considered by an expert at the appropriate time, this is not the appropriate time. The Court has been inundated by voluminous submissions addressing class certification. If defendants opposing class certification were entitled to the extensive disclosure sought by counsel here — with the accompanying escalation of the battle of the experts — then certification could only be considered at the end of discovery. The Federal Rules, to the contrary, direct courts to consider certification "at an early practicable time." Fed.R.Civ.P. 23(c)(1)(A). Accordingly, defendants' request is denied. The defense submission, if any, is due by the close of business on Friday, July 23, 2004.

  SO ORDERED.


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