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Darquea v. Jarden Corp.

March 6, 2008


The opinion of the court was delivered by: Brieant, J.

Memorandum and Order

Before the Court in this consolidated federal securities fraud action is a motion, filed September 11, 2007 (Doc. No. 58), for class action and lead plaintiff certification, and to appoint lead counsel, pursuant to Fed. R. Civ. Pro 23. Opposition papers were filed on November 21, 2007 (Doc. No. 64). Reply papers were filed on December 12, 2007 (Doc. No. 66). Oral argument was heard on January 11, 2007.


The following facts are presumed true for the purposes of this motion only. The action is brought on behalf of all persons who purchased or otherwise acquired the common stock of Jarden between June 29, 2005, and January 11, 2006 (the "Class Period"), and alleges violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 ("the Act"), and of Rule 10b-5. Plaintiffs claim that Defendants made materially false and misleading statements concerning the financial impact of Jarden's acquisition of a privately-held company, The Holmes Group. Plaintiffs allege that these misrepresentations caused Jarden's stock price to artificially inflate over the six-month Class Period. Class members purchased Jarden shares at the inflated prices during this time and allege to have subsequently suffered damages due to the drop in stock price that occurred once the fraud was revealed.

Plaintiffs move to certify the class and appoint Lead Plaintiffs as Class Representative and appoint Lead Plaintiffs' counsel as counsel for the class. Defendants argue that Plaintiffs have not satisfied the four criteria of Rule 23(a) because Plaintiffs rely solely on allegations in the complaint. Defendants further argue that Plaintiffs have failed to establish "loss causation" and are, thus, not entitled to use the fraud-on-the-market presumption to satisfy Rule 23(b)(3). Additionally, Defendants argue that Plaintiffs' motion to certify Lead Plaintiffs as Class Representative should be denied because the Lead Plaintiffs played no role in the decision to purchase Jarden stock and did not rely on statements made by Defendants and thus, their claims are atypical and subject to a unique defense of non-reliance.


Under Rule 23(a) of the Federal Rules of Civil Procedure, "[o]ne or more members of a class may sue . . . as representative parties on behalf of all only if" the following four prerequisites are met: "(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 claims 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). Rule 23(b)(3) requires in addition that "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).

The court must receive "enough evidence, by affidavits, documents, or testimony, to be satisfied that each Rule 23 requirement has been met." In re Initial Pub. Offering Sec. Litig., 471 F.3d 24, 41 (2d Cir. 2006). In determining whether Plaintiffs have satisfied Rule 23(a), the court must refrain from considering the merits of substantive claims. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974).


The prerequisite of numerosity is satisfied if "the class is so numerous that joinder of all members is impracticable." Fed. R. Civ. Pro. 23(a)(1). Evidence of the exact number of class members is not required, however, our Court of Appeals has held that "numerosity is presumed at a level of 40 members." Consolidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995). The corporate records provide the names, addresses and number of shares held on the relevant date, for each Jarden shareholder. There is no dispute that the numerosity requirement is met.


For an action to be maintain as a class action pursuant to Rule 23(a)(2), there must be common issues of law or fact. The commonality requirement is designed to test "whether the named plaintiff's claims and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence." General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 157 n.13 (1980). This prong only requires that there be a "common nucleus of operative fact." Port Authority Police Benevolent Ass'n v. Port Authority, 698 F.2d 150, 153-54 (2d Cir. 1983). If common question predominate over individual questions, the requirement of commonality is satisfied. The alleged misrepresentation leading to artificially inflated stock prices relate to all the investors and the existence and materiality of such misstatements or omissions present important common issues. Since Defendants' liability is the threshold inquiry, and proof of such liability must be proved by all members of the class in order to recover for any injury suffered, the pre-condition of commonality has been met.


Plaintiffs argue that the proposed class representatives are all typical class members because their claims arise from the same course of conduct by Defendants and are based upon the same legal theory as those of the proposed class. Defendants argue that the proposed Lead Plaintiffs' claims are atypical and unrepresentative, on the ground that there are unique defenses which can be asserted against them, that could unnecessarily prejudice the class. Defendants claim that Plaintiffs', by delegating investment decision making authority to their investment advisors, did not rely on the misrepresentations alleged. Defendants base their argument ...

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