The 10b-5 Daily

Whether the plaintiffs in a securities class action should be required to disclose the identities of their confidential witnesses as part of the discovery process is an issue that continues to be the subject of litigation. The 10b-5 Daily had a post last year about an E.D. of Pa. decision in which the court held that the defendants were entitled to the names of all individuals known by the plaintiff to have relevant knowledge, but the plaintiff was not required to specifically identify the confidential witnesses relied upon in the complaint. The court did note, however, that it would consider revisiting its decision if the defendants were presented with an overwhelming list of names.

How many names would be “overwhelming”? A court in the N.D. of Cal. has an answer: 77. In In re Harmonic, Inc. Sec. Litig., 245 F.R.D. 424 (N.D. Cal. 2007), the court found the only effect of allowing the plaintiffs to withhold the names of the five confidential witnesses relied upon in the complaint would be “to force the Defendants to expend resources on taking the depositions of 77 people [i.e., the witnesses identified in the plaintiffs’ initial disclosures] in order to obtain the information.” The court also rejected the plaintiffs’ argument that the names of their confidential witnesses were protected work product, noting that the information would “inevitably come to light.”

Holding: Motion to compel answers to interrogatories concerning confidential witnesses granted.

Texas billionaire Sam Wyly has been in litigation over the settlement in the Computer Associates securities class action for years, alleging that plaintiffs’ counsel improperly settled the case for a low amount just prior to the company’s public disclosures of accounting fraud. The 10b-5 Daily has previously posted about Wyly’s efforts to obtain documents related to the case (see here, here, and here). Having finally obtained the documents earlier this year, Wyly has brought a fraud action in New York state court against the relevant plaintiff law firms. Newsday has an article on the suit.

Quote of note: “The heart of Wyly’s claim is the distinct difference between two sets of shareholder lawsuits filed against CA — one in 1998 following a sharp drop in CA’s share price, and another in 2002 following revelations of federal probes of CA’s accounting. . . . The suit takes exception with the law firms’ claims that allegations in the two suits were largely similar and therefore could be combined for the purposes of a settlement. The suit claims that if allegations in the latter suit had been properly researched and argued, the settlement would have been much larger. Instead, Wyly’s suit argues, the 2002 suit never even reached the discovery phase.”

Addition: An alert reader notes that Wyly has not actually been given the documents he was seeking from plaintiffs’ counsel. According to the relevant court docket, production has been stayed pending an appeal of the court’s decision.

The trial of the year – if you are a securities litigator – has come to an end. Reuters and the Associated Press report that the jury in the JDS Uniphase trial has returned a unanimous verdict in favor of the defendants. (Thanks to Securities Litigation Watch for the links.)

Quote of note (Associated Press): “Christopher Dewees, JDS Uniphase’s chief legal officer, said the company participated in multiple settlement talks since the lawsuit was filed in 2002, but the parties remained ‘very far apart.’ ‘The company is obviously extremely pleased that the jury recognized that this case is without merit,’ he said in an interview. ‘But it is obviously chagrined to have spent the time, effort and money over the past 6 years to achieve this verdict.'”

The New Jersey Law Journal has an article discussing the status of the various Vioxx-related securities litigations pending against Merck & Co. The company entered into a $4.8 billion product liability settlement last week, which may make the plaintiffs’ cases easier to win. The securities class action, however, was dismissed earlier this year on statute of limitations grounds. The dismissal is being appealed to the Third Circuit. (The 10b-5 Daily has previously posted about the lead plaintiff dispute in the case.)

Plenty of cases get snatched from the hands of juries by settlements on the courthouse steps. The JDS Uniphase trial, however, is still going strong. More updates can be found on Crash.net (click here) and a San Jose Mercury News blog.

Quote of Note (San Jose Mercury News): “As of now, it looks like closing arguments will start sometime on Monday (maybe) and continue through at least Tuesday.”

Addition: Meanwhile, Securities Litigation Watch reports that another securities class action trial has gotten underway in the D. of Arizona. The corporate defendant in the case, which started in 2004, is Apollo Group.

A few interrelated items of note:

(1) The New York Law Journal has a column (Nov. 15 edition – subscrip. req’d) on possible securities litigation reform. Professor John Coffee argues that “we have too little securities litigation in the contexts where it would be useful and too much securities litigation in the contexts where it is useless.” He suggests a compromise reform that would “restore ‘aiding and abetting’ liability by overturning Central Bank, while also placing a percentage ceiling on the non-trading corporation’s liability in a secondary market case.”

(2) Professor Coffee states in his column that the number of securities class actions has dropped and “no real upturn is in sight.” Others are not so sure. The D&O Diary had a post two weeks ago noting that a significant upturn in filings appeared to be underway. That trend is continuing, fueled largely by filings from a single plaintiffs’ law firm. Coughlin Stoia has filed ten new securities class actions so far this month (click here for a press release search).

(3) Lots of suits leads to lots of settlements. RiskMetrics has released the Securities Class Action Services (SCAS) 50 Power Rankings report, which ranks the top 50 plaintiffs’ law firms based on various settlement statistics. Coughlin Stoia heads the list for cumulative dollar value of securities class action settlements from 2003 to 2006.

While media reports on the JDS Uniphase securities class action trial have tapered off since the opening statements, there is one place to get updated reports – Crash.net, a motorsport website. It turns out that Kevin Kalkhoven, the former CEO of JDS Uniphase and a defendant in the case, is one of the owners of the Champ Car World Series. Accordingly, Crash.net is following the trial closely, with a focus on Kalkhoven (click here, here, here, here, and here for the last two weeks of coverage).

Quote of note: “The trial is scheduled for nineteen days, which means if all goes according to plan, the evidentiary portion of the trial will end on Friday 16 November. Then, the thanksgiving week will be a ‘break’ for all lawyers and jurors, before reconvening the following week for closing arguments and jury deliberations.”