The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
This is a putative securities fraud class action on behalf purchasers of securities of the international dairy conglomerate, Parmalat Finanziaria S.p.A., and its subsidiaries and affiliates (collectively "Old Parmalat") during the period January 5, 1999 through December 18, 2003 (the "Class Period"). The Court has described plaintiffs' allegations in several prior opinions, familiarity with which is assumed. In broad terms, plaintiffs allege that defendants made false and misleading representations and structured transactions that operated to defraud investors in violation of Sections 10(b)*fn1 and 20(a)*fn2 of the Securities Exchange Act of 1934 and Rule 10b-5*fn3 thereunder. The case is before the Court on plaintiffs' motion for class certification pursuant to Fed. R. Civ. P. 23(a) and 23(b)(3).*fn4
I. The Proposed Class Representatives
The Court in May 2004 appointed (1) Hermes Focus Asset Management Europe Limited ("HFAME"), a British and Welsh fund management company owned 51 percent by the BT Pension Scheme and 49 percent by Hermes Focus Asset Management, Ltd., (2) Cattolica Partecipazioni, S.p.A. ("Cattolica"), (3) Solotrat, (4) Societe Moderne des Terrassements Parisiens ("SMTP"), and (5) Capital & Finance Asset Management S.A. ("CFAM") to serve as lead plaintiffs.*fn5 They are joined by (1) Hermes European Focus Fund I ("HEFF I"), a limited partnership of which the general partner and manager is HFAME, (2) Hermes European Focus Fund II, a limited partnership of which the general partner and manager is HFAME ("HEFF II"), (3) Hermes European Focus Fund III, a limited partnership of which the general partner and manager is HFAME and the limited partner is California Public Employees Retirement System ("HEFF III"), (4) Laura Sturaitis, (5) Arch Sturaitis, and (6) Margery Louise Kronengold as additional named plaintiffs. HFAME, HEFF I, II, and III, and Laura and Arch Sturaitis allegedly purchased Old Parmalat ordinary shares during the proposed Class Period. The remaining lead plaintiffs and Kronengold allegedly purchased Old Parmalat bonds during that same period.*fn6 All plaintiffs collectively seek certification as representatives of the proposed class.
Plaintiffs seek to certify a class "consisting of all those who purchased or otherwise acquired the securities of [Old] Parmalat during the period January 5, 1999 and December 18, 2003, inclusive . . . , and who were damaged thereby."*fn7 They propose to exclude from the class (1) the defendants, (2) any person who served during the Class Period as an officer or director of Old Parmalat or its parent, or as an officer or director of any of the other corporate defendants, (3) any entity in which any of the defendants have or had a controlling interest, (4) any of the defendants' liability insurance carriers and any affiliates or subsidiaries thereof, and (5) immediate family members, legal representatives, heirs, successors, or assigns of these excluded persons.*fn8
A court may certify a class only if it determines that "(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"*fn9 and that one of the subdivisions of Fed. R. Civ. P. 23(b) also is satisfied. Where, as here, plaintiffs propose to certify the class pursuant to Rule 23(b)(3), "the court [must] find that the questions of law or fact common to the 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."*fn10 In making that determination, the court should consider
"(A) the class members' interests in individually controlling the prosecution or defense of separate actions; "(B) the extent and nature of any litigation concerning the controversy already begun by or against class members; "(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and "(D) the likely difficulties in managing a class action."*fn11
The party seeking to certify a class bears the burden of establishing that the Rule 23 criteria are met.*fn12 Although the requirements of Rule 23 are construed liberally,*fn13 the Court "must receive enough evidence, by affidavits, documents, or testimony"*fn14 to conduct a "rigorous analysis" to determine whether plaintiffs have shown that each is satisfied.*fn15 The Second Circuit has defined certain standards to guide the Court's analysis. In relevant part,
"(1) a district judge may certify a class only after making determinations that each of the Rule 23 requirements has been met; (2) such determinations can be made only if the judge resolves factual disputes relevant to each Rule 23 requirement and finds that whatever underlying facts are relevant to a particular Rule 23 requirement have been established and is persuaded to rule, based on the relevant facts and the applicable legal standard, that the requirement is met; (3) the obligation to make such determinations is not lessened by overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement; [and] (4) in making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement[.]"*fn16
II. Scope of the Proposed Class
The Court already has dismissed the claims of the foreign plaintiffs as against various defendants, in essence on the ground generally that the United States securities laws do not reach the alleged conduct.*fn17 Plaintiffs' proposed class, however, would encompass all persons worldwide who acquired Parmalat securities during the Class Period. While the Court already has granted preliminary certification to the proposed class for settlement purposes, the fact that claims of the foreign plaintiffs are subject to an obstacle or impediment not shared by the domestic plaintiffs warrants consideration at the outset.*fn18
Assuming that the requirements of Rule 23 were satisfied, there would be no obstacle to certifying both domestic plaintiff and foreign plaintiff classes or subclasses, each with an appropriate class representative or representatives, and perhaps even a single class. In light of the fact that the Court already has dismissed claims of foreign plaintiffs on grounds common to all such members of such a class or subclass, however, there is a substantial question whether any useful purpose would be served by certifying any class including foreign purchasers for any purpose other than settlement.
For one thing, the inclusion of foreign purchasers in any class inevitably would lead to motions to dismiss their claims. Given the previous rulings in this case, there would be a substantial likelihood that such motions would be granted, in which event inclusion of the foreign purchasers would have accomplished little if anything.
For another, the inclusion of foreign purchasers in any class would be likely to create additional difficulties. In view of the apparent weakness of their legal position, the notice presumably would have to inform them of the unlikelihood of any recovery in this case and of the risk, if any, that an adverse judgment in this case could have preclusive effect abroad unless they opted out.*fn19 Such a notice likely would lead substantial numbers of such class members to opt out.
A district court has broad discretion in defining the class*fn20 and "is not bound by the class definition proposed in the complaint."*fn21 Given the strong likelihood that the inclusion of foreign plaintiffs in any non-settlement class would accomplish little good and create practical difficulties, the Court exercises its discretion to modify the proposed class to include only domestic parties who purchased or otherwise acquired Old Parmalat securities during the Class Period. In the unlikely event that any of the named foreign purchaser plaintiffs sees any point in persisting with respect to a non-settlement class or subclass including foreign purchasers, they may renew this motion to that extent.
Focusing on the claims of domestic plaintiffs, the only named plaintiffs who are members of the proposed class as modified are Arch and Laura Sturaitis.*fn22 As only class members have standing to bring claims on behalf of a class,*fn23 they are the only relevant proposed class representatives. The Sturaitises, moreover, during the Class Period bought only Parmalat ordinary shares, as opposed to debt. Accordingly, they lack standing to bring claims on behalf of those class members who purchased Parmalat debt notwithstanding the allegations that the same general course of conduct allegedly engaged in by defendants caused injury to all putative class members.*fn24 ...