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Huge Class Action Defense Victory As Second Circuit Court Of Appeals Reverses Federal District Court Order Certifying Class Action Against Wall Street Banks In Largest Securities Class Action Ever

Julie Creswell of the New York Times reports today on the decision of the United States Court of Appeals for the Second Circuit reversing a district court order certifying a class action against hundreds of Wall Street banks. The 51-page decision concerned a district court order in In re Initial Public Offering Securities Litig., ___ F.3d ___ (2nd Cir. December 6, 2006), granting a motion to certify a class action in “six focus cases out of 310 consolidated class actions, which themselves were consolidations of thousands of separate class actions alleging securities law violations in connection with public offerings.” Slip Opn., at 2. Ms. Creswell reports that the class action had been described as “the largest consolidated securities class-action ever” and that “[n]early all firms on Wall Street were touched by the lawsuit.” The lawsuit alleged that during the late 1990s, Wall Street banks artificially inflated the share prices of IPOs, realizing huge profits. Ms. Creswell notes that J.P. Morgan Chase recently agreed to pay $425 million to settle the claims against it, and that a proposed settlement awaiting court approval “guaranteed the plaintiffs at least $1 billion in recovery from all of the defendants in the case.” Such settlements are generally conditioned on class certification, at least for purposes of settlement, so yesterday’s decision could affect that billion-dollar proposal, as well as the J.P. Morgan Chase settlement.

Julie Creswell’s article, entitled “Court Rejects Class Action Against Banks,” may be found in Section C. of the December 6, 2006 edition of the New York Times. The Second Circuit opinion will be summarized in a separate article.