UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
March 2, 2009
IN RE PARMALAT SECURITIES LITIGATION
The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
This document relates to: 04 Civ. 0030
Deloitte Touche Tohmatsu ("DTT"), Deloitte & Touche, LLP, and James E. Copeland (collectively, "Deloitte") previously moved for summary judgment dismissing the complaint on the ground that there is no basis for holding them vicariously liable for the alleged fraud of their affiliate, Deloitte & Touche S.p.A. ("Deloitte Italy"). The Court denied the motions in opinions familiarity with which is assumed, holding in substance that there are genuine issues of material fact as to whether Deloitte Italy was an agent or subagent of and/or controlled by the moving defendants and that Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc.,*fn1 does not foreclose liability on an agency theory.*fn2 Deloitte now moves for an order, pursuant to Section 1292(b) of the Judicial Code,*fn3 certifying for interlocutory appeal the following questions: (1) whether DTT may be held liable under Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act")*fn4 based on a common law theory of vicarious liability after Stoneridge and (2) whether plaintiffs must prove that Deloitte "culpably participated" in the alleged Section 10(b) violation by Deloitte Italy in order to succeed at trial on the claims under Section 20(a) of the Exchange Act.*fn5
Section 1292(b) provides that a district judge may certify an order for interlocutory appeal if the judge (1) is "of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion," and (2) "an immediate appeal from the order may materially advance the ultimate termination of the litigation." Not every order that satisfies this standard, however, should be certified.*fn6 Determination of when certification should be granted, assuming satisfaction of the Section 1292(b) criteria, is committed to the discretion of the district court.
This Court is not satisfied either that the criteria of Section 1292(b) are satisfied in this instance or, even if they were, that this would be an appropriate case for certification.
As an initial matter, the effect of Stoneridge on common law vicarious liability in the circumstances of this case is not, in this Court's view, a controlling question as to which there is a substantial ground for difference of opinion. It is not controlling because its resolution in Deloitte's favor would leave Deloitte potentially subject to vicarious liability under Section 20(a) of the Exchange Act. And it is not, at least present circumstances, one as to which there is a substantial ground for difference of opinion. The common law principle under which Deloitte has been sued has been established for centuries and applied in federal securities cases for decades. Stoneridge did not purport to alter that state of affairs. The fact that the question tendered by Deloitte is, in a technical sense, one of first impression is not dispositive.*fn7 At least in the absence of persuasive authority to the contrary, the Court does not regard the question as one as to which there is significant room for disagreement. At the moment, the only disagreement on this point is between Deloitte and the Court's ruling*fn8 although, to be sure, that could change if other courts see things differently in the future.
Second, while district courts in this Circuit differ as to whether a plaintiff seeking to impose control person liability under Section 20(a) for Exchange Act liability must prove culpable participation by the putative control person in order to withstand a motion to dismiss,*fn9 there is no need for an interlocutory appeal in this case. That issue will reach the Court of Appeals soon enough on an appeal from a final judgment in one of the many other cases in which the issue arises at the pleading stage. There is no need to add to the Court of Appeals' docket to ensure that the issue is presented.
Third, certification here would not offer a signficant likelihood of an appellate ruling that would material advance the ultimate termination of this litigation even as to Deloitte. A ruling in its favor on the Stoneridge point would leave the Section 20(a) claim for trial. A ruling in its favor on the Section 20(a) claim would do no more than affect the burden of proof and jury instructions at trial. Even if Deloitte were to hit the daily double*fn10 by prevailing on both issues, the case would remain for trial with its scope and duration largely unaffected.
Fourth, Deloitte's contention that an appellate ruling on the Section 20(a) issue alone, whichever way it were decided, would materially advance the trial by resolving issues as to the burden of proof on that claim is unpersuasive. This case can be submitted to the jury for a special verdict that would result in findings dispositive of the Section 20(a) claims regardless of whether plaintiffs' or Deloitte's view of their respective burdens ultimately were to prevail on appeal.*fn11
Finally, Deloitte's reliance on Zakrzewska v. The New School*fn12 is misplaced. The question certified in that case was whether the affirmative defense to employer liability articulated in Faragher v. City of Boca Raton*fn13 and Burlington Industries, Inc. v. Ellerth*fn14 applies to sexual harassment and retaliation claims under the New York City Human Rights Law. While the issue is analogous to the questions on which Deloitte seeks certification here, the posture in which it arose was quite different. In Zakrzewksa, the Court first concluded that the defendant was entitled to summary judgment of dismissal if Faragher-Ellerth applied but not otherwise. Thus, an appellate ruling in favor of the defendant on the certified question would terminate the lawsuit against it. In this case, however, an appellate ruling in favor of Deloitte would not end or significantly change the scope or duration of this case as to Deloitte.
In all the circumstances, the motion to certify questions to the Court of Appeals [04 MD 1653 docket item 1670, 04 Civ. 0030 docket item 1041] is denied.