The opinion of the court was delivered by: Walls, District Judge
Ernst & Young ("E&Y") moves to certify this Court's May 7, 2001 opinion for immediate appeal under 28 U.S.C. § 1292(b). That opinion held that under the standard delineated by the Third Circuit in Semerenko v. Cendant Corp., 223 F.3d 165 (3d Cir. 2000), plaintiffs in the above-consolidated cases had sufficiently established the "in connection with" element of a claim under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5. Pursuant to Fed. R. Civ. P. 78, this motion is decided without oral argument and is denied.
Plaintiffs are the class of investors who purchased shares of American Bankers Insurance Group, Inc. ("ABI") stock between January 27, 1998 and October 13, 1998 after an announcement by Cendant that it would purchase ABI. Cendant made a tender offer for the purchase of ABI after a bidding war with American International Group, Inc. ("AIG"). Cendant filed a Schedule 14D-1 with the SEC on January 27, 1998, which included an offer by its subsidiary Season Acquisition Corp. to purchase ABI. Cendant later filed several amendments to the 14D-1 from March 1998 until October 1998. Plaintiffs allege that they purchased ABI stock in reliance on the materially false and misleading information contained in Cendant's offer to purchase, its 14D-1 schedules, and other documents and press releases related to the tender offer. They contend that Cendant's false and misleading statements caused the artificial inflation of the price of ABI's shares and that the true value of the securities they purchased was lower than they paid. This Court originally dismissed plaintiffs' claims under Section 10(b). See P. Schoenfeld Asset Management, LLC 47 F. Supp.2d 546 (D.N.J. 1999) ("Schoenfeld I"). This Court held, among other things, that plaintiffs had failed to satisfy the "in connection with" element of Section 10(b) and Rule 10b-5. Plaintiffs appealed, and the Third Circuit reversed. The Circuit held, among other things, that the Court should have applied the standards enunciated by Second and Ninth Circuits when the alleged fraud involves the public dissemination of allegedly misleading financial information. See Semerenko, 223 F.3d at 176, citing In re Ames Dep't Stores Inc. Stock Litig., 881 F.2d 953, 956, 965-66 (2d Cir. 1993); McGann v. Ernst & Young, 102 F.3d 390, 392-93 (9th Cir. 1996). The Semerenko Court observed that those cases held that
. . . where the fraud alleged involves the public dissemination of information in a medium upon which an investor would presumably rely, the "in connection with" element may be established by proof of the materiality of the misrepresentation and the means of its dissemination. . . . Under that standard, it is irrelevant that the misrepresentations were not made for the purpose or the object of influencing the investment decisions of market participants. . . . 223 F.3d at 176.
Accordingly, the Circuit directed this Court to determine whether "the misrepresentations in question were disseminated to the public in a medium upon which a reasonable investor would rely, and that they were material when disseminated." Id. In addition, in response to E&Y's petition for rehearing, the Circuit held that for E&Y's alleged misrepresentations in its financial statements and audit reports to be considered "in connection with" the purchase of ABI stock, plaintiffs would be required to establish that E&Y "knew, or that it had reason to know, that Cendant would use its financial statements and audit reports when making the tender offer for shares of ABI common stock." Id. at 177. This Court found that because the company's SEC filings-which were incorporated by reference into the tender offer documents-were the type of information upon which reasonable investors would tend to rely, and it was foreseeable that financial statements would be incorporated by reference into tender offer documents, plaintiffs had established the "in connection with" requirement. Schoenfeld II, 2001 WL 477096, * 8-9.
E&Y argues first that this Court misapplied the standard articulated in the Third Circuit's opinion with regard to foreseeability with regard to the 1995 and 1996 financial statements, and that this is a controlling question of law as to which there is a substantial ground for dispute which, if reversed, would materially advance the resolution of the litigation. According to E&Y, the foreseeability standard this Court used on remand was broader than what the Third Circuit articulated, because the Circuit stated that it would have to be foreseeable to E&Y at the time the statements were disseminated that the statements might be incorporated into tender offer documents for shares of ABI stock. Because the 1995 and 1996 financial statements were disseminated before the tender offer, claims based upon those financial statements cannot have been foreseeable to E&Y.
Second, E&Y contends the Court erroneously applied the "in connection with" test as to the claims based upon the 1997 financial statements, which were issued publicly on March 31, 1998 but were never included in any of the tender offer documents or used by Cendant to solicit the purchase of ABI stock.
Plaintiffs respond that both of E&Y's issues are not controlling issues of law and that there is no substantial ground for a difference of dispute as to the Court's holdings on those issues. Plaintiffs contend that E&Y's ground for dispute is only E&Y's own disagreement with this Court's interpretation of the standard enunciated by the Circuit. Moreover, plaintiffs argue that the 1997 financial statements stand on their own in the public domain. Because of this, plaintiffs maintain that an immediate appeal will not eliminate the need for a trial and thus would not materially advance the termination of the litigation.
Standard for Certification for Immediate Appeal Under 28 U.S.C. 1292(b)
Before an order is certified for appeal, the district court must determine that the ...