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In Re Barclays Bank Plc Securities Litigation

May 31, 2011

IN RE BARCLAYS BANK PLC SECURITIES LITIGATION


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

USDC SDNY DOCUMENT ELECTRONICALLY FILED

DOC #:

ORDER

On January 5, 2011, the Court entered an Order granting Defendants' motion to dismiss the Consolidated Amended Complaint ("CAC") in its entirety. Along with dismissing most of Lead Plaintiffs' claims as time barred and for lack of standing, the Court dismissed all claims because the CAC failed to state claims under Section 11 or 12(a)(2). Lead Plaintiffs now move for reconsideration of the Order, requesting that the court modify the dismissal so that it is without prejudice and allow Lead Plaintiffs to file their proposed Second Consolidated Amended Complaint ("SCAC"). Lead Plaintiffs claim that the additional allegations with respect to the Series 5 offering found in the SCAC address the deficiencies that the Court noted in the Order.*fn1 In response, Defendants argue that Lead Plaintiffs motion is untimely and procedurally improper. Additionally, Defendants claim that there is no valid basis for the reconsideration and remedy Lead Plaintiffs seek. For the following reasons, Lead Plaintiffs' motion is DENIED.

LEGAL STANDARD

"Reconsideration of a previous order by the court is an extraordinary remedy to be employed sparingly in the interests of finality and conservation of scarce judicial resources." Hinds County, Miss. v. Wachovia Bank N.A., 700 F. Supp. 2d 378, 407 (S.D.N.Y. 2010) (citation and quotation marks omitted). "A motion to amend or alter a judgment under Rule 59(e) of the Federal Rules of Civil Procedure is held to [this] same strict standard." Sampson v. Robinson, No. 07 Civ. 6890, 2008 WL 4779079, *1 (S.D.N.Y. Oct. 31. 2008) (citation omitted). This standard also "appl[ies] in full force to a motion for reconsideration of a denial of leave to replead." In re Gildan Activewear, Inc. Sec. Litig., No. 08 Civ. 5048, 2009 WL 4544287, at *2 (S.D.N.Y. Dec. 4, 2009) (citation omitted). "[R]econsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked . . . ." Shrader v. CSX Transp., 70 F.3d 255, 257 (2d Cir. 1995). "The major grounds justifying reconsideration are 'an intervening change in controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.'" Hinds County, 700 F.Supp.2d at 407 (quoting Virgin Atl. Airways, Ltd. v. National Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.1992)).

ANALYSIS*fn2

The background facts of this case are stated in full in the Order. See In re Barclays Bank PLC Securities Litigation, No. 09 Civ.1989, 2011 WL 31548 (S.D.N.Y. January 5, 2011). Familiarity with these facts is presumed.

Lead Plaintiffs begin by contending that the Court's Order "did not acknowledge" Lead Plaintiffs' request for leave to amend. (Pl. Mem. 1.) That is not accurate. The Court explicitly addressed Lead Plaintiffs' request, finding that granting leave to replead would be futile in light of the fact that many of Lead Plaintiffs' claims were time barred and the fact that the CAC failed to adequately state claims under Sections 11 and 12(a)(2). Lead Plaintiffs' contention that the Court's leave to amend statement referred only to Section 12 claims is baseless - Sections III and IV of the Order clearly reference claims both under Section 11 and Section 12(a)(2). Accordingly, as the Court did not "overlook" Lead Plaintiffs' request for leave to amend, reconsideration on this basis is not available. In addition, because Lead Plaintiffs do not provide any new evidence supporting their claims, reconsideration is barred on this basis as well. Indeed, the only viable avenues for reconsideration of the Order are an intervening change in controlling law or a clear error on the part of the Court.

A. Intervening Change in Controlling Law -- Litwin v. Blackstone Group, L.P.

In their reply, Lead Plaintiffs cite Litwin v. Blackstone Group, L.P., 634 F.3d 707 (2d Cir. 2011), arguing that the case "strongly supports reconsideration." In Blackstone, the Second Circuit found that the district court erred in dismissing the plaintiff's complaint where the defendants failed to disclose trends and uncertainties in the market under Item 303 of SEC Regulation S-K. Blackstone, 634 F.3d at 716. Lead Plaintiffs argue that because, in Blackstone, the Second Circuit "gave teeth to an otherwise long-dormant SEC regulation - namely, SEC Regulation S-K[,]" Lead Plaintiffs have "adequately alleged that [D]efendants violated applicable accounting standards and SEC and other regulations." (Pl. Repl. Mem. 7.)

In light of Lead Plaintiffs' arguments regarding Blackstone, the Court requested that Defendants provide their views on the effect, if any, of Blackstone on the instant case. Unsurprisingly, Defendants disagreed with Lead Plaintiffs' view, noting that Lead Plaintiffs allege that Defendants failed to comply with Item 503 of Regulation S-K, not Item 303, as was discussed in Blackstone. (Def. May 18, 2011 Ltr. 1.) Additionally, defendants argue that Blackstone dealt solely with the disclosure of trends or uncertainties in the market, and how those trends could affect Blackstone in the future, rather than with the riskiness of a particular security and the financial instruments held by the issuer of that security, as in the instant case. (Id. n.1.) Stated differently, this case is about Barclays' subjective valuation of its mortgage-related assets, not overall market trends. (Id. 2.) Indeed, Defendants note that Barclays disclosed overall market trends in the Series 5 prospectus. (Id.)

The Defendants' arguments carry greater weight. The Second Circuit's opinion in Blackstone dealt solely with objective trends and uncertainties in the real estate market that the plaintiff alleged were material to the transaction at hand. As the valuations at issue in this case were subjective, and as the type of information at issue in Blackstone was disclosed by Barclays, the teachings of Blackstone, although possibly relevant ...


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