NEW YORK, Jan. 21, 2005 (PRIMEZONE) -- In a major opinion in one of the hottest areas of securities litigation, on January 19, 2005, U.S. District Judge Gerard E. Lynch certified a class of plaintiffs in a securities fraud lawsuit against investment bank Robertson Stephens, Inc. (currently a Bank of America unit) and Robertson Stephens managing director and senior equity research analyst Paul Johnson.
Pomerantz Haudek Block Grossman & Gross LLP is co-lead counsel to the newly certified plaintiff class. Patrick V. Dahlstrom of Pomerantz's Chicago office briefed and argued the class certification motion.
In his class certification decision, Judge Lynch declared that class counsel had "ably and zealously represented the interests of the class."
Plaintiffs charge that from August 22, 2000 through April 27, 2001, Robertson Stephens and Johnson repeatedly issued false and misleading research reports that fraudulently recommended that investors buy Corvis Corporation stock. As Judge Lynch's opinion explains, Plaintiffs allege that defendants' motive for issuing the fraudulent research reports was "to inflate the market price of Corvis stock, which Johnson and certain (Robertson Stephens) officers owned through partnerships and other means."
As the opinion indicates, Plaintiffs charge that while Robertson Stephens and Johnson were publishing fraudulent research reports recommending that investors buy Corvis stock, Johnson was "privately advising the partnerships to sell their Corvis shares."
In short, as Judge Lynch notes, "Plaintiffs claim that (Robertson Stephens) and Johnson committed securities fraud through a kind of 'pump-and-dump' scheme to keep the price of Corvis artificially inflated until they could dispose of their shares."
The scheme with which Robertson Stephens and Johnson have been charged first came to light on Sunday, May 27, 2001, when the New York Times published an article by Gretchen Morgenson entitled "Buy, They Say. But What Do They Do?; I.P.O. Conflicts Bedevil Analysts." As Judge Lynch indicates, the article "revealed that Johnson and other (Robertson Stephens) executives had been selling Corvis while advising the public to buy."
A critical ruling in Judge Lynch's opinion was his determination that plaintiffs bringing class action securities fraud cases against research analysts like Johnson do not have to meet a higher standard of proof in order to obtain class certification than plaintiffs in other securities fraud cases.
The question of what showing plaintiffs bringing securities fraud claims against research analysts must make in order to achieve class certification is one of the most hotly-contested issues in securities litigation today.
In ruling that plaintiffs bringing cases against research analysts do not have to meet a higher standard of proof to obtain class certification, Judge Lynch considered and rejected an earlier decision by Manhattan U.S. District Judge Jed S. Rakoff. In contrast to Judge Lynch, Judge Rakoff held that plaintiffs bringing claims against research analysts do, indeed, have to make a special, higher, showing to certify a class than other securities fraud plaintiffs. Pomerantz Haudek Block Grossman & Gross LLP is representing plaintiffs in an appeal from Judge Rakoff's decision.
Judge Lynch's decision yesterday includes a thoughtful review of the prior opinions that address the relevant legal issues. Judge Lynch's thorough and insightful analysis marks his decision as a potential landmark in this important area of securities litigation. The official title of the case is DeMarco v. Robertson Stephens Inc. and Paul Johnson, 03 Civ. 590 (GEL) (S.D.N.Y.).
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.