CHICAGO, April 6, 2011 (GLOBE NEWSWIRE) -- Krislov & Associates, Ltd. announced today that it achieved a significant, wide-ranging securities fraud decision from the U.S. Court of Appeals, Third Circuit that is highly favorable to investors, especially institutional investors, upholding a district court's class certification decision against DVI's auditor, Deloitte & Touche LLP.
In In re DVI, Inc. Sec. Litig., -- F.3d --, 2011 WL 1125926 (3d Cir. Mar. 29, 2011), the court's 58-page opinion, addressing many of the major current issues in securities class action litigation, rejected numerous challenges to the district court's certification of a class of equity and debt investors, and the adequacy of institutional investors, lead plaintiffs Cedar Street Funds, to represent them. First, the Third Circuit rejected requiring investors to prove loss causation at the class certification stage and declared that plaintiffs need only show that loss causation is susceptible to class-wide proof, and noted that, in "typical" cases, as was the case here -- where plaintiffs allege that fraudulent misrepresentations artificially inflated the price of the security – it is presumed that damages and loss causation are susceptible of determination through evidence common to the class.
The court also rejected Deloitte's challenge to the fraud-on-the market presumption and its assertion that DVI's common stock and senior notes did not trade in efficient markets. The Third Circuit found no abuse of discretion by the District Court in crediting Plaintiff's expert, Dr. Michael Hartzmark of Navigant Economics, over defendants' experts, in finding market efficiency present for both DVI's common stock and two senior note tranches.
Additionally, in another issue important to institutional investors, the Third Circuit rejected Deloitte's challenges to institutional investor trading strategies and personally contacting company personnel to investigate the bona fides of the issuer's releases, finding Plaintiffs' access to DVI insiders a common practice of institutional investors and acceptable, and investor's subjective belief that a security is incorrectly priced not grounds to rebut the fraud-on-the-market presumption for investors' class-wide reliance on the market price.
In another aspect of the case, the court upheld the lower court's denial of class certification to pursue claims against the Clifford Chance lawfirm; in the court's view investors cannot assert class securities claims against "non-signing" attorneys who allegedly created, crafted and choreographed a "workaround" that caused the company to omit disclosures in their SEC filings.
Clint Krislov, lead attorney for Lead Plaintiffs and the Class, stated, "the Third Circuit's ruling against the accountants is a substantial victory for institutional investors, protecting them from baseless attacks on honest investigation by diligent investment funds which base their investment decisions on their independent evaluation of markets and pricing. With respect to the ruling on Clifford Chance, we will consider all our options, including whether to petition the U.S. Supreme Court."
Michael Karnuth, another primary attorney for Lead Plaintiffs and the Class, stated, "the Third Circuit's decision is a victory for investors on several fronts. The decision allows investors to bring class cases to redress fraud rather than be dismissed on buyer beware principles based on nebulous and hyper-technical market efficiency challenges, or premature and unduly burdensome loss causation objections." Mike Karnuth further stated, "we're also very pleased that the District Court and the Third Circuit agreed that our client's trading strategies and access to management were proper. This ruling not only vindicates our clients, but also allows institutional investors with similar common trading strategies to pursue appointment as lead plaintiffs without the threat of retribution."
Class Counsel involved in argument to the Third Circuit were Clint Krislov and Michael Karnuth, who were assisted on the briefs by Robert DeWitte and Eve-Lynn Rapp, all of Krislov & Associates, Ltd., with further assistance provided by Liaison Counsel Steve Schwartz and Kimberly Donaldson-Smith of Chimicles & Tikellis, LLP.