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, ...