The solicitation dispute in the WorldCom case pending in the S.D.N.Y. has a new development. As previously reported in The 10b-5 Daily, the WorldCom court has found that Milberg Weiss engaged in an “active campaign” to encourage pension funds to file individual actions related to the main securities class action against WorldCom and is running the individual actions as “a de facto class action.” Moreover, the firm’s communications resulted in “some confusion and misunderstanding of the options available to putative class members.”
As a result of this determination, on November 17 the court ordered that a curative notice be sent to all investors who have filed individual WorldCom actions. Since that ruling, the court also has dismissed a Securities Act claim (based on a 1998 bond offering) brought by an individual investor because it was time-barred under the applicable statute of limitations. (The 10b-5 Daily has posted a summary of the decision in the State of Alaska Dept. of Revenue v. Ebbers case.)
The curative notice has been signed by the court and can be found here. The notice discusses: (1) the court’s findings concerning Milberg Weiss’s solicitation of individual investors; (2) the potential negative impact on individual actions of the State of Alaska decision (in addition to the statute of limitations decision concerning the 1998 bond offering, the court made other rulings that might discourage the bringing of individual actions); and (3) some of the additional burdens and costs that could result from bringing an individual action.
Addition: The controversy is evidently causing some of the individual investors to rethink their strategy. According to a Dow Jones Newswires article (subscrip. required) from late last week, the Asbestos Workers Local 12 Annuity fund has instructed Milberg Weiss to voluntarily dismiss its individual suit and is requesting that the court not prevent the fund from joining the main class action.
Quote of note (Dow Jones): “[District Judge] Cote has not yet been called on to formally decide whether funds that want to opt back into the class would be permitted to recover through the class action, lawyers involved in the case said. In the notice being sent to individual action plaintiffs, Cote said that defendants in the case have contended that even if claims are dismissed without prejudice, such investors shouldn’t be allowed to recover funds under established legal doctrine.”