A federal appeals court Tuesday vacated class certification in six key cases in the massive litigation over dot-com era initial public offerings -- a potentially devastating setback for plaintiffs in the biggest consolidated securities class action in U.S. history.
The decision by a three-judge panel of the 2nd U.S. Circuit Court of Appeals leaves in doubt whether plaintiffs will ever be able to certify a class against IPO underwriters in the more than 300 cases that make up In Re IPO Securities Litigation. It may also help to unravel a pending $1 billion settlement agreement reached between IPO issuers and the plaintiffs, lawyers involved in the case say.
The case, filed in 2001, alleges that 55 underwriters, 310 issuers and hundreds of individual corporate officers conspired to manipulate the market for IPOs of Internet and high-tech stocks during the 1990s. New York U.S. District Judge Shira Scheindlen consolidated thousands of suits into 310 class actions and certified six of them to test arguments about whether the entire docket should move forward.
But the 2nd Circuit said Scheindlen used a lower standard of proof than she should have when certifying the classes. In an opinion by Judge Jon Newman, the circuit said that the case was "bristling with individual questions," and that plaintiffs hadn't sufficiently proven that enough common issues existed among potential class members. The circuit remanded the cases back to Scheindlen.