United States District Court, D. New Jersey
December 22, 2005.
IN RE FLEETBOSTON FINANCIAL CORPORATION SECURITIES LITIGATION.
The opinion of the court was delivered by: WILLIAM BASSLER, District Judge
Plaintiffs filed a motion for class certification under
Fed.R.Civ.P. 23, for appointment of class counsel, and for appointment
of a class representative.
For the reasons set forth below, Plaintiffs' motion is
I. Analysis For Class Certification Under Federal Rule of
Civil Procedure 23
Before obtaining certification, a class must meet the four
requirements of Rule 23 (a): (1) numerosity, (2) commonality, (3)
typicality, and (4) adequacy of representation. Fed.R.Civ.P.
23(a); In re Life USA Holding, Inc., 242 F.3d 136, 143 (3d Cir.
2001). If Plaintiffs satisfy these Rule 23(a) requirements, they
must then show that the class is appropriate under Rule 23 (b)
(1), (2) or (3). Plaintiffs seek certification under 23 (b) (3).
FBF contends that Plaintiffs fail to meet the requirements
under Rule 23 (1) (a) of numerosity as well as under Rule 23 (a)
(4) of adequacy of representation. FBF does not dispute
commonality or typicality. A. Rule 23 (a) (1): numerosity
A class must be "so numerous that joinder of all members is
impracticable." Fed.R.Civ.P. 23 (a) (1). Plaintiffs seek to
represent a class that "consists of persons or entities that
exchanged Summit shares for FBF share [sic] in the Merger and
were damaged thereby." (Pl. Reply Br. at 15.) Plaintiffs, while
they do not provide an exact number, "believe the proposed class
consists of thousands of Summit shareholders who exchanged
millions of Summit shares of common stock." (Pl. Br. at 14.)
There were 26,953 shareholders of Summit stock and approximately
175,721,433 shares of Summit common stock outstanding and
entitled to vote on the Merger. (Id. at 14.) Although
Plaintiffs have not provided the exact number of the class, the
number of shareholders and outstanding shares support a finding
of the existence of at least 40 members of the proposed class
sufficient for a finding under Rule 23 (a) (1) for numerosity.
See Shamberg v. Ashlstrom, 111 F.R.D. 689, 698 (D.N.J. 1986)
("Certification is not barred because the precise number of class
members has not been determined.").
"No minimum number of plaintiffs is required to maintain a suit
as a class action, but generally if the named plaintiff
demonstrates that the potential number of plaintiffs exceeds 40,
the first prong of Rule 23 (a) has been met." Stewart v.
Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001). FBF argues that
Plaintiffs have not demonstrated the numerosity requirement because
Plaintiffs' argument wrongly assumes that all Summit shareholders
"were `damaged' if at any time they sold FBF shares below $41."
(FBF Letter Br. in Opp. at 2.)
"In determining the propriety of a class action, the question
is not whether the plaintiff or plaintiffs have stated a cause of
action or will prevail on the merits, but rather whether the
requirements of Rule 23 are met." Eisen v. Carlisle &
Jaccuelin, 417 U.S. 156, 177-78 (1973) (internal citations
omitted). FBF, however, urges the Court to engage in a "more
searching analysis" similar to that in Newton v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 259 F.3d 154 (3d Cir. 2001). (FBF
Letter Br. in Opp. at 2.)
In Newton, the Third Circuit considered the merits of an
interlocutory appeal from a denial of a class certification. The
Circuit Court noted that, at times, "it may be necessary for the
court to probe behind the pleadings before coming to rest on the
certification process." Newton, 259 F.3d at 166. Considering
the measure of damages from a Rule 10b-5 claim, the district
court found that the economic loss was unique to each investor
and therefore plaintiffs' claims did not warrant a class
certification. Id. at 179-81. Unlike Newton, where the court
could draw on a full record from its consideration of a motion
for summary judgment, this Court's evaluation of Plaintiffs' factual and legal allegations is more limited by the nature of
the procedural history. See Id. at 178-79.
FBF's averments are more appropriately considered on a motion
for summary judgment. The focus of Rule 23 (a) (1) is on the size
of the proposed class and whether "joinder of all members is
impracticable." Fed.R.Civ.P. 23 (a) (1). While "[V]arious
factors beyond the number of class members are relevant to
determining impracticability. . . ." the Court is unable to find
caselaw law that supports a denial of class certification based
on FBF's arguments and similar circumstances to those here.
Szczubelek v. Cendant Mortg. Corp., 215 F.R.D. 107, 116-17
(D.N.J. 2002) (citing cases considering other factors, such as:
judicial economy; geographic dispersion of the class members;
financial resources of the class members; ability of claimants to
institute individual suits; and, whether claims involve only a
small amount of damages). Based on the record, it is sufficient
at this time for the Court to make the more narrow finding that
the proposed class satisfies the numerosity element of Rule 23
(a) is met.
B. Rule 23 (a) (2) Commonality
Rule 23 (a) (2) requires that "there [be] questions of law or
fact common to the class." Fed.R.Civ.P. 23 (a) (2). A
plaintiff can meet the commonality requirement by showing "the
presence of a single common issue." In re Prudential Ins. Co.
of America Sales Practices Litig., 962 F. Supp. 450, 510 (D.N.J.
1997) (citing 1 Newberg § 3.10, at 3-50 to 3-52).
Plaintiffs assert that FBF's alleged dissemination of
materially false and misleading information regarding FBF's
financial condition raises the following five common issues:
(a) Whether defendants violated the federal
securities laws . . ., including Sections 11 and 12
(a) (2) and/or 15 of the Securities Act;
(b) Whether the Merger Registration Statement
contained materially false and misleading statements;
(c) Whether the Merger Registration Statement and
documents incorporated by reference therein omitted
material facts that were necessary in order to make
the statements made, in light of the circumstances in
which they were made, not misleading; and
(d) Whether defendants, either in an individual
capacity or as a group, participated in the conduct
complained of . . .;
(e) Whether the members of the Class have sustained
damages, and, if so, the proper measure thereof.
(Pl. Br. at 15-16.)
FBF does not contest Plaintiffs' assertion that these five
issues are common to the claims of all putative class members.
The Court has no reason not to believe Plaintiffs' assertion.
"Class actions are a particularly appropriate and desirable means
to resolve claims based on the securities laws, since the
effectiveness of the securities laws may depend in large measure
on the application of the class action device." Eisenberg v.
Gagnon, 766 F.2d 770, 785 (3d Cir. 1985). Thus, Plaintiffs meet the commonality test.
C. Rule 23 (a) (3) Typicality
Rule 23 (a) (3) requires that "the claims or defenses of the
representative parties are typical of the claims or defenses of
the class." Fed.R.Civ.P. 23 (a) (3). The court must ask:
whether the action can be efficiently maintained as a
class and whether the named plaintiffs have
incentives that align with those of absent class
members so as to assure that the absentees' interests
will be fairly represented.
Baby Neal v. Casey, 43 F.3d 48
, 57 (3d Cir. 1994).
Here, Plaintiffs assort a cause of action premised on the
Securities Act of 1933. Plaintiffs, as prospective
representatives of the entire class, argue that all members of
the proposed class were injured as a result of the same
materially false and misloading Merger Registration Statement
that FBF provided to all members of the class. (Pl. Br. at 17.)
As a result, the claims of the representative, and the class are
linked by the "same core legal theories and arise from
defendant's common course. . . ." (Id.) Additionally, FBF has
not raised any objections to class certification based upon
typicality. Under these circumstances, Plaintiffs meet the
typicality requirement. See In re IGT Sec. Litigation,
122 F.R.D. 451, 456 (D.N.J. 1988).
D. Rule 23 (a) (4) Fair and Adequate Representation
Rule 23 (a) (4) requires a representative plaintiff to show that he "will fairly and adequately protect the interests of the
class." The rule is "designed to ensure that the absent class
members' interests are fully pursued." Samuel-Bassell v. Kia
Motors Am., Inc., 212 F.R.D. 271, 279 (E.D. Pa. 2002) (citing
In re Prudential Ins. Co. of Am. Sales Practices Litig.
148 F.3d 283, 312 (3d Cir. 1998)). The Court must find that the
representative plaintiff's counsel is qualified. See Barnes v.
Am. Tobacco, 161 F.3d 127, 141 (3d Cir. 1998). The named parties
must also be free from conflicts of interest with the class they
seek to represent. Amchem Prods. v. Windsor, 521 U.S. 591, 625
(1997). The Samuel-Bassett court summarized the inquiry as
In short, the plaintiffs' attorney must be qualified,
experienced and generally able to conduct the
proposed litigation, and the plaintiffs must not have
interests antagonistic to those of the class., It is
the defendants' burden to show the inadequacy of
plaintiff's class representation.
212 F.R.D. at 279 (internal citations omitted).
Making no arguments concerning the qualification of the
plaintiffs' attorney, FBF only objects to the proposed class
representative, The Estate of Harry Amsterdam, by Phillip
Amsterdam, on the grounds that Mr. Amsterdam:
(1) lacks familiarity with the basic allegations and
developments of this action;
(2) lacks familiarity with the duties and obligations
of a class representative;
(3) has unduly relied on counsel and has failed to
adequately supervise and direct the; and,
(4) disagrees with the class definition.
(FBF Br. at 13 19.)
FBF's contentions are without merit. First, FBF cites to
deposition statements taken out of context and overlooks Mr.
Amsterdam's considerable knowledge of the circumstances that give
rise to this action. Second, the fact that the named Plaintiffs
do not have personal knowledge of every technical aspect of the
lawsuit is no barrier to certification. See Surowitz v. Hilton
Hotels Corp., 383 U.S. 363, 372-73 (1966) (upholding appointment
of plaintiff as class representative even though he was
"uneducated generally and illiterate in economic matters"); 1
Newberg on Class Actions § 3:34 at 461 (4th ed. 2002) ("most
courts have followed the Surowitz rationale in rejecting any
challenge to adequacy for class actions under amended Rule 23
based on ignorance of the facts or theories of liability"); see
also Nathan Gordon Trust v. Northgate Exploration, Ltd.,
148 F.R.D. 105, 107 (S.D.N.Y. 1993) ("it is familiar law that a class
representative need not have personal knowledge of the evidence
and the law involved in pursuing a litigation"). The Court sees
no reason to deny certification solely because Mr. Amsterdam is
not familiar with every fact of the case. Third, the Court does
not believe that Mr. Amsterdam has unduly relied on counsel.
Although Mr. Amsterdam may have limited knowledge as to the legal
intricacies of the case, his deposition testimony indicates that he spent a substantial amount of time reviewing the issues and
becoming aware of the claims against FBF. Finally, under the
facts presented, there are no foreseeable conflicts in the
interests of The Estate of Harry Amsterdam, by Phillip Amsterdam,
and the class members.
E. Certification Under Rule 23(b) (3)
Under Rule 23(b) (3), provided a plaintiff has satisfied all
four requirements of Rule 23(a):
[a]n action may be maintained as a class action if . . .
the court finds that the questions of law or fact
common to the members of the class predominate over
any questions affecting only individual members, and
that a class action is superior to other available
methods for the fair and efficient adjudication of
Fed.R.Civ.P. 23(b) (3).
In making this determination, the Court looks to the following
(A) the interest of members of the class in
individually controlling the prosecution or defense
of separate actions; (B) the extent and nature of any
litigation concerning the controversy already
commenced by or against members of the class; (C) the
desirability or undesirability of concentrating the
litigation of the claims in the particular forum; (D)
the difficulties likely to be encountered in the
management of a class action.
Fed.R.Civ.P. 23(b) (3).
In this litigation, Plaintiffs' allegations arise from the same
operative facts: FBF created and/or issued a materially false and
misleading Merger Registration Statement. Plaintiffs' theory of liability is based on violations of the Securities Act.
Plaintiffs are the only members of the putative class to commence
litigation of this matter. It is unlikely that members of the
class would prefer to individually control the prosecution of
their own claims because of the expense of the action. It is
desirable to concentrate this litigation in one forum to avoid
inconsistent adjudications and promote judicial economy. The size
of the class is common and presents no significant management
In addition, the Court notes that FBF objects to certification
because Plaintiff's definition of the proposed class is
unmanageable and because some members may not have suffered any
losses due to the alleged claims. (FBF's Br. at 79.)
The Third Circuit recently held, in In re Merck & Co. Sec.
Litig., that "[s]ection 11 plaintiffs do not have to plead loss
causation. Instead it is an affirmative defense in section 11
cases; defendants can limit damages by showing that the
plaintiffs' losses were caused by something other than their
misrepresentations." In re Merck & Co. Sec. Litig., 2005
U.S.App.LEXIS 27412, *36 (3d Cir. Dec. 15, 2005) (internal
citations omitted). Thus, it is not necessary at this stage for
Plaintiffs to prove loss causation. See also In re
DaimlerChryler AG Sec. Litig., 197 F.Supp.2d 42, 66 (D.Del.
2002) (noting that "[w]ith regard to claims under Sections 11 and 12 of
the Securities Act, loss causation need not be shown as part of
the plaintiff's prima facie case.").
Nevertheless, it is critically important that the class be
defined so that
it identifies the persons (1) entitled to relief, (2)
bound by a final judgment, and (3) entitled to notice
in a Rule 23(b) (3) action. . . . Definitions,
particularly under (b) (3), should avoid criteria
that are subjective (e.g., a plaintiff's state of
mind) or that depend on the merits (e.g., persons who
were discriminated against). Such definitions
frustrate efforts to identify class members,
contravene the policy against considering the merits
of a claim in deciding whether to certify a class,
and create potential problems of manageability.
MOORE'S FEDERAL PRACTICE, MANUAL FOR COMPLEX LITIGATION § 30.14,
at 217-18 (3d Matthew Bender 1995).
The Court therefore rejects Plaintiffs' proposed class
definition and defines the class as:
All persons or entities who exchanged shares of
Summit Bancorp ("Summit") common stock for shares of
FBF common stock in connection with the merger
between FBF and Summit (the "Merger"), and pursuant
to the registration statement and prospectus filed by
FBF on or about January 25, 2001 (the "Merger
Registration Statement" or "Registration Statement")
for the shares it would be issuing in connection with
the Merger (the "Class") and who sold such shares of
FBF common stock between December 21, 2001 and
November 7, 2003 and who sustained damages as a
result of such transactions. Excluded from the Class
are defendants; members of the Individual Defendants'
immediate families; any director, officer,
subsidiary, or affiliate of FBF; any entity in which
any excluded person has a controlling interest; and their
legal representatives, heirs, successors and assigns.
For the foregoing reasons, the Court grants Plaintiffs' motion
for class certification.
An appropriate Order follows.
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