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Kottler v. Deutsche Bank AG

March 29, 2010

MARK KOTTLER, KAREN S. LONG AND ROBERT E. LONG, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
DEUTSCHE BANK AG, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge

OPINION & ORDER

The facts of this case are fully set forth in Kottler et al., v. Deutsche Bank AG et al., 607 F.Supp.2d 447 (S.D.N.Y. 2009). Briefly stated, in the late 1990s and early 2000s, KPMG, an accounting firm, and Brown & Wood, a law firm, created and sold an illegal tax shelter known as Bond-Linked Issue Premium Structure ("BLIPS") to a group of high net-worth clients seeking to shelter at least $20 million in capital gains. Following this Court's Opinion and Order dated January 9, 2009, Plaintiffs' maintain claims of: (i) conspiracy to defraud; (ii) aiding and abetting fraud; (iii) aiding and abetting breach of fiduciary duty; and (iv) unjust enrichment. Id. at 469-70.

Plaintiffs Mark Kottler, Karen S. Long, and Robert E. Long ("Plaintiffs") now move for: (i) class certification pursuant to Fed. R. Civ. P. Rules 23(a) and 23(b)(3), consisting of all persons and entities who entered into BLIPS transactions in which KPMG and/or Brown & Wood issued opinion letters on the tax consequences of the transactions, and (ii) an order appointing Cohen Milstein Sellers & Toll PLLC ("Cohen Milstein") as Class Counsel under Fed. R. Civ. P. 23(g). The Court denies the motion for class certification, mooting the motion to appoint Class Counsel.

Class Certification Requirements

To certify a class, a plaintiff must satisfy the four requirements of Rule 23(a): numerosity, commonality, typicality, and adequacy of representation. Two additional showings must be made by plaintiffs under Rule 23(b)(3): predominance (whether law or fact questions common to the class predominate over questions affecting individual members) and superiority (whether class action is superior to other methods). Fed. R. Civ. P. 23(b)(3).

The current standards for Rule 23 class certification in this Circuit are set forth in In re Initial Public Offering Securities Litigation, 471 F.3d 24 (2006):

(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 to a Rule 23 requirement; (4) in making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement; and (5) a district judge has ample discretion to circumscribe both the extent of discovery concerning Rule 23 requirements and the extent of a hearing to determine whether such requirements are met in order to assure that a class certification motion does not become a pretext for a partial trial of the merits.

Id., at 39.

a. Rule 23(a) Factors

Plaintiffs satisfy the four requirements of Rule 23(a): numerosity, commonality, typicality and adequacy of representation.

i. Numerosity

A class of more than 40 members presumptively satisfies the numerosity requirement of Rule 23(a). Torres v. Gristede's Operating Corp., 2006 U.S. Dist. LEXIS 74039, at *38-39 (S.D.N.Y. Sept. 28, 2006). Plaintiffs point to over 180 members allegedly injured as a result of their participation in BLIPS; in fact, the U.S. Senate conducted an investigation of the fraud underlying the claims in this case and found that there are at least 186 persons who may fall within the definition of the proposed class. See Report pf the Permanent Subcommittee on Investigations of the U.S. Senate Homeland Security and Governmental Affairs Committee on "The Role of Professional Firms in the U.S. Tax Shelter Industry", at 16, 22 (April 13, 2005) (the "Senate Report"). Accordingly, Plaintiffs' action satisfies the numerosity requirement of Rule 23(a).

ii. Commonality

"The commonality requirement is met if plaintiffs' grievances share a common question of law or fact." Gristede's, 2006 U.S. Dist. LEXIS 74039, at *39. Plaintiffs and all Class members were allegedly victimized by a fundamentally identical scheme to sell BLIPS, and each Class member was similarly injured as a result of participation in that scheme. Defendants' promotions were based on fraudulent misrepresentations and omissions common throughout the Class. This common factual nucleus ...


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