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In re Initial Public Offering Securities Litigation


August 25, 2011


The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.


By orders dated May 17, 2011 and July 12, 2011, *fn1 the Second Circuit remanded to this Court three appeals of James J. Hayes - the sole remaining objector to the $586 million global settlement reached in this case after nearly a decade of litigation, and approved by this Court in October of 2009.*fn2 The Second Circuit directed this Court "to determine whether pro se objector Hayes is a class member."*fn3

In order to be a class member, Hayes must have "purchased or otherwise acquired any of the Subject Securities at issue in such case during the Settlement Class Period applicable to such Action and [have been] damaged thereby."*fn4 Hayes originally objected to the settlement based on his assertion of membership in three IPO settlement classes: (1) In re JNI Corp. IPO Securities Litigation ("JNI"),*fn5 (2) In re Ticketmaster Online IPO Securities Litigation ("Ticketmaster"),*fn6 and (3) In re deCode Genetics, Inc. IPO Securities Litigation ("deCode").*fn7 However, he now confesses -- for the first time in over two years -- that he did not purchase the stock of JNI or Ticketmaster during the class period.*fn8

As for deCode, his (untimely) submission of a "CSFBDIRECT brokerage statement[]"*fn9 shows that he suffered no loss in association with his alleged purchase of 300 shares of that stock.*fn10 Because he was not "damaged" by his purchase of deCode stock, he falls outside the definition of a class member, and therefore lacks standing to object to the settlement on that basis.*fn11

However, Hayes now asserts that he is a class member based on his alleged purchase of stock in Tut Systems, Inc. ("Tut Systems"), another of the 309 issuers whose securities are at issue in this litigation.*fn12

As noted above, in his original objections to the proposed settlement, Hayes did not assert membership in the Tut Systems class. Only after this Court ordered Hayes to show cause "why an Order should not be issued dismissing his motion to reduce the Appeal Bond for lack of standing" and to "furnish proof to the Court that he is in fact a class member"*fn13 did he submit "proof of membership for the Tut Systems class."*fn14 That "proof" consisted of a "portion[] of his 1999 personal income tax form reporting a $2,317 trading loss in Tut Systems, Inc. during the class period."*fn15

Hayes' proof fails to establish his class membership for two reasons.

First, it is untimely. Although Hayes timely objected to the JNI, Ticketmaster, and deCode settlements -- all of which he lacked standing to object to -- he failed to "identify" Tut Systems among the "securities [he] purchased," as required by the Notice of Pendency and Proposed Global Settlement.*fn16 Nor did he submit a proof of claim form for Tut Systems.*fn17 Although this Court considered Hayes' objections on the merits, he lacked standing to assert those objections on the basis of membership in the JMI, Ticketmaster, and deCode classes at the time he objected. His after-the-fact assertion of membership in a wholly different class cannot cure this deficiency in standing.*fn18 The time to object to the Tut Systems settlement has long passed. Because Hayes submitted no evidence whatsoever of the sole basis for his alleged class membership until roughly two years after the deadline to do so -- nor referenced that alleged class membership in his objections -- he has given up his "legal rights and options in this settlement."*fn19 He is not a member of any class.

Second, even if Hayes' proof of class membership were timely, it is insufficient.Not only does Hayes' unsigned, unsworn, unauthenticated 1999 tax form fall short of the documentation required to support a proof of claim;*fn20 it also falls short of establishing Hayes' class membership by a preponderance of the evidence.*fn21 "Allowing someone to object to settlement in a class action based on this sort of weak, unsubstantiated evidence would inject a great deal of unjustified uncertainty into the settlement process."*fn22 For all of these reasons, I hold that Hayes is not a class member.


Copy to: James J. Hayes (pro se) 4024 Estabrook Drive Annadale, Virginia 22003 James J. Hayes (pro se) 200 Homewood Ave. Greensboro, NC 27403

Appendix A

[Editor's Note: Appendix unavailable]

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