Securites Class Actions and Standing

After six years of litigation in the securities class action case of In re Smith Barney Transfer Agent Litigation, Judge William H. Pauley III of the Southern District of New York in the an Order dismissed the Lead Plaintiff based on the fact that it had never purchased any of the Smith Barney funds at issue. Stating that one of the foundational grounds for a motion testing the pleadings is lack of standing, the judge cited “epic failures” by the lawyers on both sides of the case, and called the effect of the error “seismic” causing the litigation to take on “Sisyphean dimensions.”

“After six years of litigation, including extensive motion practice, an appeal to the Second Circuit, remand, more motion practice, and discovery, lead counsel learned that the lead plaintiff never purchased any of the securities at issue in this action,” Pauley wrote in today’s decision. “Lead counsel’s failure to confirm the most basic fact — that its client purchased the securities at issue in this action — has resulted in a considerable waste of time and resources,” Pauley said. Criticizing the lawyers for all of the parties in the case for failing to exercise due diligence, Pauley wrote “In retrospect, it was something so obvious that every lawyer in the case should have recognized the problem and reacted immediately. But no one did.”

The Brooklyn Law School Library has in its collection A Practitioner’s Guide to Class Actions by Marcy Hogan Greer (Call #KF8896 .P735 2010), an ABA publication that is a comprehensive guide providing practitioners with an understanding of the intricacies of a class action lawsuit. It also has a state-by-state analysis of the ways in which the class action rules differ from the Federal Rule of Civil Procedure 23.