Amicus Curiae Brief — Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (2015) (No. 14-857)

| Sturreme Court. US.

FILED

No. 14-857 AUG 3} 2015

are OFF'CE OF THE CLERK

IN THE

Supreme Court of the Hnited States

o>.

CAMPBELL-EWALD COMPANY,

Petitioner,

—VvV.—

JOSE GOMEZ,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

BRIEF FOR AMICUS CURIAE

NECA-IBEW WELFARE TRUST FUND,

IN SUPPORT OF RESPONDENT

DARREN J. ROBBINS

ERIC ALAN ISAACSON

Counsel of Record

ROBBINS GELLER RUDMAN

& Dowpb LLP

655 West Broadway

Suite 1900

San Diego, California 92101

(619) 231-1058

erici@rgrdlaw.com

Counsel for Amicus Curiae

NECA-IBEW Welfare

Trust Fund

HS

i

‘QUESTIONS PRESENTED

1. Whether a case becomes moot, and thus beyond

the judicial power of Article III, when the plaintiff

receives an offer of purportedly complete relief on his

claim.

2. Whether the answer to the first question is any

different when the plaintiff has asserted a class claim

under Federal Rule of Civil Procedure 23, but receives

an offer of purportedly complete relief before any

class is certified.

i

RULE 29.6 STATEMENT

NECA-IBEW Welfare Trust Fund is a Taft-Hartley

fund that issues no stock and is neither a subsidiary

of nor otherwise controlled by any publicly traded

parent corporation.

‘3

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .............ccccccccsccsscsesssssersees i

ee le IIE citiccsucnccenniccstsntecensntetesedesinten i

IDENTITY AND INTEREST OF AMICUS CURIAE 1

A. Private Securities Class Actions are

Critical to Enforcement of the Federal

LTO EA AMIE 4

B. Congress’ Carefully Designed Procedures

for Appointment of Lead Plaintiffs to

Ensure Effective Enforcement of the

Nation’s Securities Laws Would be

Frustrated if Defendants Could “Pick Off”

Representative Plaintiffs with Offers of

accor iacisisliieitihiaitsioninaniiilibadikianntibiniebiiiiad 7

EERE er ene sane 19

| REESE la

Securities Act of 1933 §27(a), 15 U.S.C. §77z-1(a), and

Securities Exchange Act of 1934 §21D(a), 15 U.S.C.

STII sscitsitsiiiieinndineiannienipmbbippeuntianindinaisidindiammbbsininesniaaaiie la

TABLE OF AUTHORITIES

Page

CASES

Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds,

Sy MI icin cnenincnsnentinendibatndibiiivabieia 5

Bateman Eichler, Hill Richards, Inc. v. Berner,

I eine 4

Blue Chip Stamps v. Manor Drug Stores,

gE SAE Ey Sa EN eee 4

Cal. Pub. Emps’ Ret. Sys. v. Chubb Corp.,

127 F. Supp. 2d 572 (D.N.J. 2001)..........0..0..000. 15

Chapman v. First Index, Inc.,

Nos. 14-2773, 14-2775, 2015 WL 4652878

I I, a cen calaeninl 18

Deposit Guaranty Nat’? Bank v. Roper,

i cesineianiniten 16

Dura Pharms., Inc. v. Broudo,

gE ne eee ee eae 4,5

Genesis Healthcare Corp. v. Symczyk,

I eI soi iinitcctenetateeiniataiednamanneiitiite 18

Gluck v. CellStar Corp.,

976 F. Supp. 542 (N.D. Tex. 1997)..............ccccceeee 15

Greebel v. FTP Software, Inc.,

939 F. Supp. 57 (D. Mass. 1996)...................0.0. 15

Halliburton Co. v. Erica P. John Fund Inc.,

I, i alec 5

iv

TABLE OF AUTHORITIES—Continued

Holley v. Kitty Hawk, Inc.,

200 F.R.D. 275 (N.D. Tex. 2001).................

In re Lucent Techs., Inc., Sec. Litig.,

194 F.R.D. 137 (D.N.J. 2000) ....... ee.

In re Merck & Co. Sec. Litig.,

432 F.3d 261 (3d Cir. 2005)........00.... eee.

In re Milestone Sci. Sec. Litig.,

183 F.R.D. 404 (D.N.J. 1998) .....000... ee.

In re Nice Sys. Sec. Litig.,

188 F.R.D. 206 (D.N.J. 1999) ..............eeeeeee

In re USEC Sec. Litig.,

168 F. Supp. 2d 560 (D. Md. 2099) .............

J.I. Case Co. v. Borak,

re eee ID ctiticnitinnineitiesinsintiiniitianinsioness

King v. Livent,

36 F. Supp. 2d 187 (S.D.N.Y. 1999)............

Merrill Lynch, Pierce, Fenner & Smith, Inc.

v. Curran,

I oo

Merrill Lynch, Pierce, Fenner & Smith Inc.

v. Dabit,

Be Ss FO GE ietticticnencncnenisncsnsenesnntenntnnes

Mills v. Electric Auto-Lite Co.,

ee SEs SI TED chsnsceccnsensennnicesiencnemssonsves

seen eter

Page

waive 15

ati 4.5

nincavenees 5)

Vv

TABLE OF AUTHORITIES—Continued

Page

Piper v. Chris-Craft Inds., Inc.,

a 4

Randall v. Loftsgaarden,

EERE Ei a re 4

Roper v. Consurve, Inc.,

578 F.2d 1106 (5th Cir. 1978) .........000000000.00.. 17,18

Surowitz v. Hilton Hotels Corp.,

EE ce ee en eee ean 17

Tellabs, Inc. v. Makor Issues & Rights, Lid.,

ESE IT ee Me 5,138

United States Parole Comm'n v. Geraghty,

8 ERR rea aa eT i 18

vi

TABLE OF AUTHORITIES—Continued

Page

STATUTES, RULES AND REGULATIONS

15 U.S.C.

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Federal Rules of Civil Procedure

REFERRER ve one eee eo aaa EE 11, 14.17

ATR Ree neo eR Ee Ra Ne Ne a. 17

STITT istic pcctisaoehdciaaeapiaiainedincabaieinbeniian teint 18

LEGISLATIVE HISTORY

H.R. Conf. Rep. 104-369 (1995),

reprinted in 1995 U.S.C.C.A.N. 679............. passim

vii

TABLE OF AUTHORITIES—Continued

Page

SECONDARY AUTHORITIES

5 Alba Conte & Herbert B. Newberg, Newberg on

Class Actions §15:29 (2002)..........ccccccceseeees peocenonee 17

7B Charles Alan Wright, Arthur R. Miller & Mary

Kay Kane, Federal Practice and Procedure: Civil

Ns ME icctcinnicnricinncabintesensssousetees 5, 7

IDENTITY AND INTEREST OF AMICUS

CURIAE!

NECA-IBEW Welfare Trust Fund is a Taft-Hartley

Fund that manages a large investment portfolio for

the benefit of workers, retirees, and their dependents,

and that in the course of executing its fiduciary duties

from time to time seeks to prosecute federal securities

class actions under the Securities Act of 1933

(“Securities Act” or “1933 Act”) and the Securities

Exchange Act of 1934 (“Exchange Act” or “1934 Act’).

In so doing, it has had occasion to refuse an offer of

judgment calculated to moot its individual claims and

to frustrate its efforts to act as lead plaintiff seeking

relief on behalf of a class of investors.

The NECA-IBEW Welfare Trust Fund thus has an

interest in the rule to be adopted by the Court in this

case. With this brief the Welfare Trust Fund urges

the Court not to adopt a rule such as that advanced

by the Petitioner, that permits defendants to moot

individual class representatives’ claims with offers of

judgment, thereby hobbling class actions and

seriously impairing enforcement of the federal

securities laws.

1 Pursuant to the Supreme Court Rule 37.6, counsel for

amicus curiae NECA-IBEW Welfare Trust Fund certifies that

they authored this brief in whole, and that no person or entity

other than the amicus or its counsel made a monetary

contribution to the briefs preparation or submission. Pursuant

to Rule 37.3(a), all parties have consented to the brief's filings,

through blanket letters of consent filed with the Clerk.

2

SUMMARY OF ARGUMENT

In construing Federal Rule of Civil Procedure 68

and Article III of the Constitution, this Court should

consider its ruling’s potential] effect on class actions in

general, and on private enforcement of our nation’s

federal securities laws in particular. For the rule

advanced by Petitioner would hobble the class-action

device and frustrate effective enforcement of the

federal securities laws.

Congress and this Court both have long recognized

the critical importance of private litigation to the

enforcement of our nation’s securities laws — as well

as the danger posed by strike suits purportedly filed

on behalf of a class, but that merely extract a payoff

to the individual plaintiff.

To strengthen private enforcement of the federal

securities laws, and to curtail abusive practices,

Congress enacted the Private Securities Litigation

Reform Act of 1995 (“PSLRA”) with detailed

procedures designed to ensure optimal enforcement of

the federal securities laws by putting the class

member “most capable of adequately representing the

interests of [the] class” or “most adequate plaintiff’ in

charge of any federal securities class action.? As set

forth herein, the PSLRA specifies that a class-action

complaint asserting federal securities claims must be

accompanied by a certification that the plaintiff will

not accept “any payment for serving as a

representative party on behalf of a class beyond the

plaintiffs pro-rata share of any recovery.” 15 U.S.C.

§§77z-1(a)(2)(A)(vi), 78u-4(a)(2)(A)(vi). The PSLRA

2 See 15 U.S.C. §§77z-1(a), 78u-4(a) (reproduced in this brief's

Appendix).

3

then requires public notice informing other class

members of the nature of the case, and that they have

60 days in which to seek appointment as lead plaintiff

in the matter. 15 U.S.C. §§77z-1(a)(3), 78u-4(a)(3).

The statute next directs the district court to consider

motions for appointment of lead plaintiff within 90

days after the notice’s publication, and to presume

that the applicant with the largest stake in the case is

the “most adequate plaintiff’ to represent the class.

15 U.S.C. §§77z-1(a)(3), 78u-4(a)(3). Congress sought

thereby to encourage the appointment of institutional

investors, such as NECA-IBEW Welfare Trust Fund,

to represent the class, thereby avoiding class

representatives who might put their individual

interest in recovery before that of the class.

As set forth below, adopting a construction of Rule

68 that permits defendants to “pick off’ lead plaintiffs

with offers of judgment would severely impair the

functioning of this scheme, undermining effective

enforcement of the federal securities laws and

reducing the public confidence in the integrity of our

nation’s capital markets.

There is no reason to adopt such a construction.

Federal Rule of Civil Procedure 68 says “fajn

unaccepted offer is considered withdrawn,”

permitting the plaintiff to litigate its claims. And one

who chooses to do so, and to litigate on behalf of a

class, surely presents a live “case or controversy”

within the meaning of Article ITI.

4

ARGUMENT

A. Private Securities Class

Actions are Critical to

Enforcement of the Federal

Securities Laws

This Court has many times affirmed that’ “private

actions provide ‘a most effective weapon in the

enforcement’ of the securities laws and are ‘a

necessary supplement to Commission action.”? “The

securities statutes seek to maintain public confidence

in the marketplace. by deterring fraud, in part,

through the availability of private securities fraud

actions.” Dura Pharms., Inc. v. Broudo, 544 U.S. 336,

3 Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299,

310 (1985) (quoting J.1. Case Co. v. Borak, 377 U.S. 426, 432

(1964)); see, e.g., Randall v. Loftagaarden, 478 U.S. 647, 664

(1986) (defining damages rule to enhance “the deterrent value of

private rights of action, which, we have emphasized, ‘provide “a

most effective weapon in the enforcement” of the securities laws

and are a “necessary supplement to Commission action”

(citations omitted); Merrill Lynch, Pierce, Fenner & Smith, Inc.

v. Curran, 456 U.S. 353, 380 (1982) (reiterating “the Court's

recognition in Borak, 377 U.S. at 432, that private enforcement

of Commission rules may ‘{[provide] a necessary supplement to

Commission action”) (this Court’s brackets); Piper v. Chris-Craft

Inds., Inc., 430 U.S. 1, 25 (1977) (Indeed, the Court in Borak

carefully noted that because of practical limitations upon the

SEC’s enforcement capabilities, “[p]rivate enforcement

provides a necessary supplement to Commission action.”)

(Court's emphasis, added in Piper); Blue Chip Stamps v. Manor

Drug Stores, 421 U.S. 723, 730 (1975) (quoting Borak, 377 U.S.

at 432); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 382 (1970)

(“private enforcement ‘provides a necessary supplement to

Commission action”) (same).

5

345 (2005). - “This Court has long recognized that

meritorious ‘private actions to enforce federal

antifraud securities laws are an essential supplement

to criminal prosecutions and civil enforcement actions

brought, respectively, by the Department of Justice

and the Securities and Exchange Commission (SEC).”

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.

308, 313 (2007) (citing Dura, 544 U.S. at 345, and J.J.

Case Co. v. Borak, 377 U.S. 426, 432 (1964)).

“Private securities fraud actions, however, if not

adequately contained, can be employed abusively,” as

this Court has itself recognized. Tellabs, 551 U.S. at

313. At worst, individual investors can assert class

claims not because they seek to benefit the class, but

instead to get extra leverage only to obtain payment

of their own individual claims. “As a check against

abusive litigation by private parties, Congress

enacted the Private Securities Litigation Reform Act

of 1995 (PSLRA), 109 Stat. 737.” Id. (citing Merrill

Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S.

71, 81 (2006)); see generally, 7B Charles Alan Wright,

Arthur R. Miller & Mary Kay Kane, Federal Practice

and Procedure: Civil 3d §1806, at 423-68 (3d ed.

2005); see also Halliburton Co. v. Erica P. John Fund

Inc., 134 S.Ct. 2398, 2413 (2014); Amgen Inc. v.

Connecticut Ret. Plans & Tr. Funds, 133 S.Ct. 1184,

1200-01 (2013).

Congress gave close attention to optimal

enforcement of the securities laws when it framed the

PSLRA’s detailed scheme for federal securities class

actions. Advancing the public interest was its

primary objective for, as the 1995 legislation’s

Conference Report reiterates, private securities class

actions truly are “an indispensable tool” for investors

and the nation:

6

The overriding purpose of our

Nation’s securities laws is to protect

investors and to maintain confidence in

the securities markets, so that our

national savings, capital formation and

investment may grow for the benefit of

all Americans.

The private securities litigation

system is too important to the integrity

of American capital markets to allow

this system to be undermined by those

who seek to line their own pockets by

bringing abusive and meritless suits.

Private securities litigation is an

indispensable tool with which defrauded

investors can recover their losses

without having to rely upon government

action. Such private lawsuits promote

public and global confidence in our

capital markets and help to deter

wrongdoing and to guarantee that

corporate officers, auditors, directors,

lawyers and others properly perform

their jobs. This legislation seeks to

return the securities litigation system to

that high standard.

H.R. Conf. Rep. No. 104-369, at 31 (1995), reprinted

in 1995 U.S.C.C.A.N. 679, 730; see Dabit, 547 U.S. 71

(2006) (quoting H.R. Conf. Rep. No. 104-369, at 31).

As set forth below, the rule urged by Petitioner in

this case would take us away from that high

standard, upending the Congressional scheme for

securities class actions, and frustrating optimal

enforcement of the nation’s securities laws.

7

B. Congress’ Carefully Designed

Procedures for Appointment

of Lead Plaintiffs to Ensure

Effective Enforcement of the

Nation’s Securities Laws

Would be _ “Frustrated if

Defendants Could “Pick Off’

Representative Plaintiffs with

Offers of Judgment

To control and correct perceived abuses of

securities class actions, the PSLRA sets out a

carefully crafted scheme for the appointment of lead

plaintiffs to prosecute those actions - as the

legislation’s Conference Report explains in some

detail. See H.R. Conf. Rep. No. 104-369, at 31-41; see

also Wright & Miller, Federal Practice & Procedure,

supra §1806, at 423-68. Petitioner's rule would upset

that scheme.

At the case’s outset, the PSLRA requires any

plaintiff filing a class-action complaint to provide a

sworn certification stating, among other things, “that

the plaintiff will not accept any payment for serving

as a representative party on behalf of a class beyond

the plaintiffs pro rata share of any recovery.” 15

U.S.C. §§77z-1(a)(2)(A)(vi), 78u-4(a)(2)(A)(vi), The

only exception is that the court may award the named

plaintiff “reasonable costs and expenses (including

lost wages) directly relating to the representation of

the class.” 15 U.S.C. §§77z-1(a)(4), 78u-4(a)(4).

Permitting defendants to moot a claim by offering

the named plaintiff its individual damages would

frustrate the statute’s rather obvious objective of

ensuring that class-action complaints should not be

filed with hopes of using the threat of class

proceedings to recover a larger award for the named

8

plaintiff than for other class members. Petitioner

asks the Court to bless such individual payoffs to

named plaintiffs — with nothing going to the class

that they seek (or purport) to represent.

A plaintiff whose complaint asserts federal

securities claims on behalf of a class must, within 20

days of the class-action complaint’s filing, publish

notice, in a leading business journal or wire service,

advising putative class members of the action’s

pendency, and that they have 60 days in which any of

them may seek appointment as lead plaintiff for the

class. The PSLRA then requires the district court,

* Parallel 1933 Act and 1934 Act provisions both state:

(3) Appointment of lead plaintiff

(A) Early notice to class members

(i) In general. Not later than 20 days

after the date on which the complaint is

filed, the plaintiff or plaintiffs shall cause

to be published, in a widely circulated

national business-oriented publication or

wire service, a notice advising members

of the purported plaintiff class—

(I) of the pendency of the action, the

claims asserted therein, and the

purported class period; and

(II) that, not later than 60 days after

the date on which the notice is

published, any member of the

purported class may move the court

to serve as lead plaintiff of the

purported class.

(ii) Multiple actions. If more than one

action on behalf of a class asserting

substantially the same claim or claims

arising under this subchapter is filed,

9

within 90 days of the notice’s publication, to consider

whatever motions class members may file seeking

appointment as lead plaintiff, “including any motion

by a class member who is not individually named as a

plaintiff in the complaint.”> The statute directs that

the court “shall appoint as lead plaintiff the member

or members of the purported plaintiff class that the

court determines to be most capable of adequately

representing the interests of class members,” whom

the statute’s framers designate the “most adequate

plaintiff." The statute further directs the district

only the plaintiff or plaintiffs in the first

filed action shal] be required to cause

notice to be published in accordance with

clause (i).

(iii) Additional notices may be required

under Federal rules. Notice required

under clause (i) shall be in addition to

any notice required pursuant to the

Federal Rules of Civil Procedure.

15 U.S.C. §77z-1(a)(3), §78u-4(a)(3); see H.R. Conf. Rep. No. 104-

369, at 33 (“A plaintiff filing a securities class action must.

within 20 days of filing a complaint, provide notice to members

of the purported class in a widely circulated business

publication. This notice must identify the claims alleged in the

lawsuit and the purported class period and inform potential

class members that, within 60 days, they may move to serve as

lead plaintiff.”).

6 15 U.S.C. §§77z-1(a)(3)(B), 78u-4(a)(3)(B); see H.R. Conf.

Rep. No. 104-369, at 34 (“Within 90 days of the published notice,

the court must consider motions made under this section and

appoint the lead plaintiff.”).

6 Parallel 1933 Act and 1934 Act provisions both state:

{continued on next page]

10

court to adopt a rebuttable “presumption that the

(B) Appointment of lead plaintiff

(i) In general

Not later than 90 days after the date on

which a notice is published under

subparagraph (A)i), the court shall consider

any motion made by a purported class

member in response to the notice, including

any motion by a class member who is not

individually named as a plaintiff in the

complaint or complaints, and shall appoint as

lead plaintiff the member or members of the

purported plaintiff class that the court

determines to be most capable of adequately

representing the interests of class members

(hereafter in this paragraph referred to as

the “most adequate plaintiff’) in accordance

with this subparagraph.

(ii) Consolidated actions

If more than one action on behalf of a class

asserting substantially the same claim or

claims arising under this subchapter has

been filed, and any party has sought to

consolidate those actions for pretrial

purposes or for trial, the court shall not make

the determination required by clause (i) until

after the decision on the motion to

consolidate is rendered. As soon as

practicable after such decision is rendered,

the court shall appoint the most adequate

plaintiff as lead plaintiff for the consolidated

actions in accordance with this

subparagraph.

15 U.S.C. §77z-1(a)(3)(B)(i)-(ii), §78u-4(a)(3)(B)G)-(2).

11

most adequate plaintiff” is that person (or group) that

“either filed’ the complaint or made a motion in

response to a notice,” which “in the determination of

the court has the largest financial interest in the

relief sought by the class,” and “otherwise satisfies

the requirements of Rule 23 of the Federal Rules of

Civil Procedure.”’ Institutional investors will, of

7 Parallel 1933 Act and 1934 Act provisions both state:

(iii) Rebuttable presumption

(I) In general

Subject to subclause (II), for purposes of

clause (i), the court shall adopt a

presumption that the most adequate plaintiff

in any private action arising under this

subchapter is the person or group of persons

that—

(aa) has either filed the complaint or

made a motion in response to a notice

under subparagraph (A)(i);

(bb) in the determination of the court,

has the largest financial interest in the

relief sought by the class; and

(cc) otherwise satisfies the requirements

of Rule 23 of the Federal Rules of Civil

Procedure.

(II) Rebuttal evidence

The presumption described in subclause (1)

may be rebutted only upon proof by a

member of the purported plaintiff class that

the presumptively most adequate plaintiff—

(aa) will not fairly and adequately protect

the interests of the class; or

(bb) is subject to unique defenses that

render such plaintiff incapable of

adequately representing the class.

12

course, typically have the largest financial interest in

the relief sought.

Congress’ central concern, here, was to ensure that

securities class actions would be led not by

individuals seeking primarily to maximize their own

personal recoveries, but by institutional investors

best positioned to represent the interests of the entire

class of investors and long-term interests of the

companies in which many retain a stake. See H.R.

Conf. Rep. No. 104-369, at 32-35. The legislation’s

Conference Report explains that the PSLRA

amends the Securities Act of 1933 (the

“1933 Act”) by adding a new section 27

and the Securities Exchange Act of 1934

(the “1934 Act”) by adding a new section

21D. These provisions are intended to

encourage the most capable

representatives of the plaintiff class to

participate in class action litigation and

to exercise supervision and control of the

lawyers for the class. These provisions

are intended to increase the likelihood

that parties with significant holdings in

issuers, whose interests are more

(iv) Discovery. For purposes of __ this

subparagraph, discovery relating to whether a

member or members of the purported plaintiff

class is the most adequate plaintiff may be

conducted by a plaintiff only if the plaintiff first

demonstrates a reasonable basis for a finding

that the presumptively most adequate plaintiff is

incapable of adequately representing the class.

15 U.S.C. §77z-1(a)(3(B)(iii), 78u-4(a)(3)(B)(iii).

13

strongly aligned with the class of

shareholders, will participate in the

litigation and exercise control over the

selection and actions of plaintiffs

counsel.

H.R. Conf. Rep. No. 104-369, at 32. Thus, the Report

explains, “[t}he Conference Committee seeks to

increase the likelihood that institutional investors

will serve as lead plaintiffs by requiring courts to

presume that the member of the purported class with

the largest financial stake in the relief sought is the

‘most adequate plaintiff.” H.R. Conf. Rep. No. 104-

369, at 34.

As this Court recognized in Tellabs, Congress

sought thereby “to increase the likelihood that

institutional investors — parties more likely to balance

the interests of the class with the long-term interests

of the company — would serve as lead plaintiffs.”

Tellabs, 551 U.S. at 321. The legislation’s

Conference Report explains that the statute's

provisions are grounded in a conviction “that

increasing the role of institutional investors will

ultimately benefit shareholders and assist courts by

improving the quality of representation in securities

class actions.” H.R. Conf. Rep. No. 104-369, at 34.

Allowing defendants instead to “pick off’ the most

capable class representatives with offers of judgment

in the midst of the lead-plaintiff appointment process

would throw a monkey wrench into the legislative

scheme. To permit defendants to pick off lead

plaintiffs after appointment, but before a class is

certified would effectively destroy it.

The opportunity for mischief should be apparent.

No motion for class certification can be entertained

14

until after appointment of the lead plaintiff. Without

doubt, the PSLRA _ permits a_ preliminary

consideration of whether the lead plaintiff “otherwise

satisfies the requirements of Rule 23 of the Federal

Rules of Civil Procedure.” 15 U.S.C. §77z-

1(a)(3)(B)Gii)(D(cc), §78u-4(a)(3)(B)(ii)(D(cc). += But

consideration of Rule 23’s factors is strictly

constrained at this stage by a provision limiting

rebuttal to “proof by a member of the purported

plaintiff class that the presumptively most adequate

plaintiff’ either “will not fairly and adequately protect

the interests of the class,” or “is subject to unique

defenses that render such plaintiff incapable of

adequately representing the class.”® Defendants, who

8 Parallel 1933 Act and 1934 Act provisions both state:

(iii) Rebuttable presumption

(1) In general

Subject to subclause (II), for purposes of clause

(i), the court shall adopt a presumption that the

most adequate plaintiff in any private action

arising under this subchapter is the person or

group of persons that—

(aa) has either filed the complaint or made a

motion in response to a notice under

subparagraph (A)(i);

(bb) in the determination of the court, has

the largest financial interest in the relief

sought by the class; and

(cc) otherwise satisfies the requirements of

Rule 23 of the Federal Rules of Civil

Procedure.

(II) Rebuttal evidence.

The presumption described in subclause (I) may

be rebutted only upon proof by a member of the

purported plaintiff class that the presumptively

most adequate plaintiff—

15

may later challenge class certification, lack standing

to do so at this early stage. °

(aa) will not fairly and adequately protect the

interests of the class; or

(bb) is subject to unique defenses that render

such plaintiff incapable of adequately

representing the class.

(iv) Discovery

For purposes of this subparagraph, discovery

relating to whether a member or members of the

purported plaintiff class is the most adequate

plaintiff may be conducted by a plaintiff only if

the plaintiff first demonstrates a reasonable

basis for a finding that the presumptively most

adequate plaintiff is incapable of adequately

representing the class.

15 U.S.C. §77z-1(a)(3)(B)(iii), (iv), §78u-4(a)(3)(B)(iii), (iv).

9 See 15 U.S.C. §§77z-1(a)(3)(B)Gil) UD, 78u-4(a)(3)(B)iii) AD

(permitting only “a member of the purported plaintiff class” to

rebut the lead-plaintiff presumption); In re Merck & Co. Sec.

Litig., 432 F.3d 261, 266-67 (3d Cir. 2005) (noting in dictum that

“the weight of authority” denies defendants standing to oppose

the choice of lead counsel); see, e.g., In re USEC Sec. Litig., 168

F. Supp. 2d 560, 565 (D. Md. 2009); Cal. Pub. Emps’ Ret. Sys. v.

Chubb Corp., 127 F. Supp. 2d 572, 575 n.2 (D.N.J. 2001) (most

courts have denied defendants the right to challenge “the

adequacy of lead plaintiffs and their chosen counsel” and citing

cases); Holley v. Kitty Hawk, Inc., 200 F.R.D. 275, 277 (N.D. Tex.

2001) (statute “does not provide for defendants to weigh in”);

Gluck v. CellStar Corp., 976 F. Supp. 542, 550 (N.D. Tex. 1997)

(holding that defendants cannot challenge the appointment of a

lead plaintiff); Greebel v. FTP Software, Inc., 939 F. Supp. 57, 60

(D. Mass. 1996); In re Lucent Techs., Inc., Sec. Litig., 194 F.R.D.

16

Congress thought the PSLRA’s provisions

important to the national interest, ensuring effective

enforcement of our securities laws by securing the

best representation in securities class actions. See

H.R. Conf. Rep. 104-369, at 31-32. To permit a

defendant to pick off the “most adequate plaintiff” by

mooting its claims, thereby manipulating the

appointment of a different lead plaintiff to prosecute

the class action, would defeat Congress’ plan and

frustrate its aims.

This Court recognized in Deposit Guaranty Nat

Bank v. Roper, 445 U.S. 326 (1980), that allowing

defendants to “pick off” class representatives would be

destructive to the class-action device. This Court

explained that holding the case moot

simply because the defendant has sought

to “buy off” the individual private claims

of the named plaintiffs would be

contrary to sound judicial

administration. Requiring multiple

plaintiffs to bring separate actions,

which effectively could be “picked off” by

a defendant’s tender of judgment before

an affirmative ruling on class

certification could be obtained, obviously

would frustrate the objectives of class

actions; moreover it would invite waste

of judicial resources by stimulating

successive suits brought by others

claiming aggrievement.

137, n. 17 (D.N.J. 2000); In re Nice Sys. Sec. Litig., 188 F.R.D.

206, n. 11 (D.N.J. 1999); In re Milestone Sci. Sec. Litig., 183

F.R.D. 404, 414-16, n. 14 (D.N.J. 1998). But see King v. Livent,

36 F. Supp. 2d 187, 190-91 (S.D.N.Y. 1999).

”

17

445 U.S. at-339, affg Roper v. Consurve, Inc., 578

F.2d 1106, 1108 (5th Cir. 1978) (“defendants cannot

moot the class claim by attempting to pay off the class

representatives”). Roper considered “whether a

tender to named plaintiffs in a class action of the

amounts claimed in their individual capacities,

followed by the entry of judgment in their favor on the

basis of that tender; over their objection, moots the

case,” and held emphatically that it does not. Jd. at

327; see also 5 Alba Conte & Herbert B. Newberg,

Newberg on Class Actions §15:29, at 97 (2002) (“a

court cannot render class claims moot by first denying

class certification and then entering judgment for the

plaintiffs based on the defendants’ tendering an offer

of judgment in the amount of the plaintiffs claims”).

Allowing defendants to “pick off claimants would,

as we have shown, be utterly destructive of the

PSLRA’s scheme for enforcement of the federal

securities laws by means of private class action.

Adopting the Petitioner's position also would run

counter to the policy of discouraging “strike suits,”

where a plaintiff seeks to coerce a settlement of its

own claim by also asserting claims on behalf of a class

but with no intention of prosecuting the case for the

benefit of the class. “Permitting the defendants to

pay off the plaintiffs” with offers of complete relief on

their individual claims clearly “raises the danger of

strike suits” contrary to Rule 23’s underlying policies.

Conte & Newberg, supra, §15:29, at 97. In Surowitz

v. Hilton Hotels Corp., 383 U.S. 363, 371 (1966), a

shareholder derivative suit asserting 1933 Act and

1934 Act claims, this Court acknowledged that the

federal rules governing class actions and shareholder

suits are designed “to discourage ‘strike suits.” But

Petitioner's rule would encourage them, inviting

18

actions filed for quick payoffs to the putative class

representative.

Petitioner's rule entails extremely undesirable

consequences. But nothing at all in either Rule 68 or

this Court’s Article III jurisprudence requires or

justifies Petitioner's position that would-be class

representatives may be “picked off” against their will.

Rule 68 unequivocally states that an unaccepted offer

of judgment “is considered withdrawn,” Fed. R. Civ.

P. 68(b), and a withdrawn offer cannot sensibly be

deemed to moot anyone’s claims. Nothing in this

Court’s jurisprudence suggests it should “adopti] a

rule that an individual seeking to proceed as a class

representative is required to accept a tender of only

his individual claims.” Roper, 445 U.S. at 341

(Rehnquist, J., concurring). And Article III merely

requires a live case or controversy, which clearly is

present when an eager litigant refuses an offer of

judgment in order to litigate on behalf of itself and a

larger class. See Roper, 445 U.S. at 327; United

States Parole Comm'n v. Geraghty, 445 U.S. 388, 400

(1970) (noting the “flexible character of Art. III

mootness doctrine”); see also Genesis Healthcare Corp.

v. Symcezyk, 133 S.Ct. 1523, 1532-37 (2013) (Kagan,

J., dissenting); Chapman v. First Index, Inc., Nos. 14-

2773, 14-2775, 2015 WL 4652878 (7th Cir. Aug. 6,

2015).

19

CONCLUSION

For all the foregoing reasons, the judgment of the

Ninth Circuit should be affirmed.

DATED: August 31, 2015 Respectfully submitted,

DARREN J. ROBBINS

ERIC ALAN ISAACSON

(Counsel of Record)

ROBBINS GELLER RUDMAN

& DowD LLP

655 West Broadway

Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058

erici@rgrdlaw.com

Attorneys for Amicus Curiae

NECA-IBEW Welfare Trust

Fund

APPENDIX

la

APPENDIX

Securities Act of 1933 §27, 15 U.S.C. §77z-1(a),

and Securities Exchange Act of 1934 §21D, 15

U.S.C. §78u-4(a) both provide:

(a) Private class actions

(1) In general

The provisions of this subsection shall apply to

each private action arising under this

subchapter that is brought as a plaintiff class

action pursuant to the Federal Rules of Civil)

Procedure.

(2) Certification filed with complaint

(A) In general

Each plaintiff seeking to serve as a

representative party on behalf of a class shall

provide a sworn certification, which shall be

personally signed by such plaintiff and filed

with the complaint, that—

(i) states that the plaintiff has reviewed

the complaint and authorized its filing;

(ii) states that the plaintiff did not

purchaee the security that is the subject of

the com, laint at the direction of plaintiff's

counsel or in order to participate in any

private action arising under this

subchapter;

(iii) states that the plaintiff is willing to

serve as a representative party on behalf of

a class, including providing testimony at

deposition and trial, if necessary;

(iv) sets forth all of the transactions of the

plaintiff in the security that is the subject

of the complaint during the class period

specified in the complaint;

2a

(v) identifies any other action under this

subchapter, filed during the 3-year period

preceding the date on which the

certification is signed by the plaintiff, in

which the plaintiff has sought to serve, or

served, as a representative party on behalf

of a class; and

(vi) states that the plaintiff will not accept

any payment for serving as a

representative party on behalf of a class

beyond the plaintiffs pro rata share of any

recovery, except as ordered or approved by

the court in accordance with paragraph (4).

(B) Nonwaiver of attorney-client privilege

The certification filed pursuant’ to

subparagraph (A) shall not be construed to be a

waiver of the attorney-client privilege.

(3) Appointment of lead plaintiff

(A) Early notice to class members

(i) In general

Not later than 20 days after the date on

which the complaint is filed, the plaintiff or

plaintiffs shall cause to be published, in a

widely circulated national business-

oriented publication or wire service, a

notice advising members of the purported

plaintiff class—

(I) of the pendency of the action, the

claims asserted therein, and _ the

purported class period; and

(II) that, not later than 60 days after

the date on which the notice is

published, any member of the purported

class may move the court to serve as

lead plaintiff of the purported class.

(ii) Multiple actions

3a

If more than one action on behalf of a

class asserting substantially the same

claim or claims arising under this

subchapter is filed, only the plaintiff or

plaintiffs in the first filed action shall be

required to cause notice to be published in

accordance with clause (i).

(iii) Additional notices may be

required under Federal! rules

Notice required under clause (i) shall be

in addition to any notice required pursuant

to the Federal Rules of Civil Procedure.

(B) Appointment of lead plaintiff

(i) In general

Not later than 90 days after the date on

which a notice is published under

subparagraph (A)(i), the court. shall

consider any motion made by a purported

class member in response to the notice.

including any motion by a class member

who is not individually named as a plaintiff

in the complaint or complaints, and shall

appoint as lead plaintiff the member or

members of the purported plaintiff class

that the court determines to be most

capable of adequately representing the

interests of class members (hereafter in

this paragraph referred to as the “most

adequate plaintiff’) in accordance with this

subparagraph.

(ii) Consolidated actions

If more than one action on behalf of a

class asserting substantially the same

claim or claims arising under this

subchapter has been filed, and any party

has sought to consolidate those actions for

pretrial purposes or for trial, the court

4a

shall not make the determination required

by clause (i) until after the decision on the

motion to consolidate is rendered. As soon

as practicable after such decision is

rendered, the court shall appoint the most

adequate plaintiff as lead plaintiff for the

consolidated actions in accordance with

this subparagraph.

(iii) Rebuttable presumption

(I) In general Subject to subclause

(ID), for purposes of clause (i), the

court shall adopt a presumption that

the most adequate plaintiff in any

private action arising under this

subchapter is the person or group of

persons that—

(aa) has either filed the complaint

or made a motion in response to a

notice under subparagraph (A)(i);

(bb) in the determination of the

court, has the largest financial

interest in the relief sought by the

class; and

(cc) otherwise satisfies the

requirements of Rule 23 of the

Federal Rules of Civil Procedure.

(II) Rebuttal evidence

The presumption described in

subclause (J) may be rebutted only

upon proof by a member of the

purported plaintiff class that the

presumptively most adequate

plaintiff—

(aa) will not fairly and adequately

protect the interests of the class;

or

5a

(bb) is subject to unique defenses

that render such plaintiff

incapable of adequately

representing the class.

(iv) Discovery

For purposes of this subparagraph,

discovery relating to whether a member or

members of the purported plaintiff class is

the most adequate plaintiff may be

conducted by a plaintiff only if the plaintiff

first demonstrates a reasonable basis for a

finding that the presumptively most

adequate plaintiff is incapable of

adequately representing the class.

(v) Selection of lead counsel

The most adequate plaintiff shall, subject

to the approval of the court, select and

retain counsel to represent the class.

(vi) Restrictions on professional

plaintiffs

Except as the court may otherwise

permit, consistent with the purposes of this

section, a person may be a lead plaintiff, or

an officer, director, or fiduciary of a lead

plaintiff, in no more than 5 securities class

actions brought as plaintiff class actions

pursuant to the Federal Rules of Civil

Procedure during any 3-year period.

(4) Recovery by plaintiffs

The share of any final judgment or of any

settlement that is awarded to a representative

party serving on behalf of a class shall be equal, on

a per share basis, to the portion of the final

judgment or settlement awarded to all other

members of the class. Nothing in this paragraph

shall be construed to limit the award of reasonable

costs and expenses (including lost wages) directly

6a

relating to the representation of the class to any

representative party serving on behalf of the class.

(5) Restrictions on settlements under seal

The terms and provisions of any settlement

agreement of a class action shall not be filed under

seal, except that on motion of any party to the

settlement, the court may order filing under seal

for those portions of a settlement agreement as to

which good cause is shown for such filing under

seal. For purposes of this paragraph, good cause

shall exist only if publication of a term or provision

of a settlement agreement would cause direct and

substantial harm to any party.

(6) Restrictions on payment of attorneys’ fees

and expenses

Total attorneys’ fees and expenses awarded by

the court to counsel for the plaintiff class shall not

exceed a reasonable percentage of the amount of

any damages and prejudgment interest actually

paid to the class.

(7) Disclosure of settlement terms to class

members

Any proposed or final settlement agreement that

is published or otherwise disseminated to the class

shall include each of the following statements,

along with a cover page summarizing the

information contained in such statements:

(A) Statement of plaintiff recovery

The amount of the settlement proposed to be

distributed to the parties to the action,

determined in the aggregate and on an average

per share basis.

(B) Statement of potential outcome of case

(i) Agreement on amount of damages

If the settling parties agree on the

average amount of damages per share that

would be recoverable if the plaintiff

7a

prevailed on each claim alleged under this

subchapter, a statement concerning the

average amount of such potential damages

per share.

(ii) Disagreement on amount of

damages

If the parties do not agree on the average

amount of damages per share that would

be recoverable if the plaintiff prevailed on

each claim alleged under this subchapter, a

statement from each settling party

concerning the issue or issues on which the

parties disagree.

(iii) Inadmissibility for certain

purposes

A statement made in accordance with

clause (i) or (ii) concerning the amount of

damages shall not be admissible in any

Federal or State judicial action or

administrative proceeding, other than an

action or proceeding arising out of such

statement.

(C) Statement of attorneys’ fees or costs

sought

If any of the settling parties or their counsel

intend to apply to the court for an award of

attorneys’ fees or costs from any fund

established as part of the settlement, a

statement indicating which parties or counsel

intend to make such an application, the

amount of fees and costs that will be sought

(including the amount of such fees and costs

determined on an average per share basis), and

a brief explanation supporting the fees and

costs sought.

8a

(D) Identification of lawyers’

representatives

The name, telephone number, and address of

one or more representatives of counsel for the

plaintiff class who will be reasonably available

to answer questions from class members

concerning any matter contained in any notice

of settlement published or otherwise

disseminated to the class.

(E) Reasons for settlement

A brief statement explaining the reasons why

the parties are proposing the settlement.

(F) Other information

Such other information as may be required

by the court.

(8) Attorney conflict of interest

If a plaintiff class is represented by an attorney

who directly owns or otherwise has a beneficial

interest in the securities that are the subject of the

litigation, the court shall make a determination of

whether such ownership or other interest

constitutes a conflict of interest sufficient to

disqualify the attorney from representing the

plaintiff class.

(b) Stay of discovery; preservation of evidence

(1) In general

In any private action arising under this

subchapter, all discovery and other proceedings

shall be stayed during the pendency of any motion

to dismiss, unless the court finds, upon the motion

of any party, that particularized discovery is

necessary to preserve evidence or to prevent

undue prejudice to that party.

(2) Preservation of evidence

During the pendency of any stay of discovery

pursuant to this subsection, unless otherwise

ordered by the court, any party to the action with

9a

actual notice of the allegations contained in fhe

complaint shall treat all documents, data

compilations (including electronically recorded or

stored data), and tangible objects that are in the

custody or control of such person and that are

relevant to the allegations, as if they were the

subject of a continuing request for production of

documents from an opposing party under the

Federal Rules of Civil Procedure.

(3) Sanction for willful violation

A party aggrieved by the willful failure of an

opposing party to comply with paragraph (2) may

apply to the court for an order awarding

appropriate sanctions.

(4) Circumvention of stay of discovery

Upon a proper showing, a court may stay

discovery proceedings in any private action in a

State court as necessary in aid of its jurisdiction,

or to protect or effectuate its judgments, in an

action subject to a stay of discovery pursuant to

this subsection.

(c) Sanctions for abusive litigation

(1) Mandatory review by court

In any private action arising under this

subchapter, upon final adjudication of the action,

the court shall include in the record specific

findings regarding compliance by each party and

each attorney representing any party with each

requirement of Rule 11(b) of the Federal Rules of

Civil Procedure as to any complaint, responsive

pleading, or dispositive motion.

(2) Mandatory sanctions

If the court makes a finding under paragraph (1)

that « party or attorney violated any requirement

of Rule 11(b) of the Federal Rules of Civil

Procedure as to any complaint, responsive

pleading, or dispositive motion, the court shall

making a finding that

any party or attorney has violated Rule 11 of the

Federal Rules of Civil Procedure, the court shall

give such party or attorney notice and an

opportunity to respond.

(3) Presumption in favor of attorneys’ fees

and costs

(A) In general

Subject to subparagraphs (B) and (C), for

purposes of paragraph (2), the court shall adopt

a presumption that the appropriate sanction—

(i) for failure of any responsive pleading or

dispositive motion to comply with any

requirement of Rule 11(b) of the Federal

Rules of Civil Procedure is an award to the

opposing party of the reasonable attorneys’

fees and other expenses incurred as a

direct result of the violation; and

(ii) for substantial failure of any complaint

to comply with any requirement of Rule

11%) of the Federal Rules of Civil

Procedure is an award to the opposing

party of the reasonable attorneys’ fees and

other expenses incurred in the action.

(B) Rebuttal evidence

The presumption described in subparagraph

(A) may be rebutted only upon proof by the

party or attorney against whom sanctions are

to be imposed that—

(i) the award of attorneys’ fees and other

expenses will impose an unreasonable

burden on that party or attorney and would

be unjust, and the failure to make such an

award would not impose a greater burden

lla

on the party in whose favor sanctions are

fo be imposed; or

(ii) the violation «* Rule 11(b) of the

Federal Rules of Civil Procedure was de

minimis.

(C) Sanctions

If the party or attorney against whom

sanctions are to be imposed meets its burden

under subparagraph (B), the court shal] award

the sanctions that the court deems appropriate

pursuant to Rule 11 of the Federal Rules of

(d) Defendant’s right to written interrogatories

In any private action arising under this subchapter in

which the plaintiff may recover money damages only

on proof that a defendant acted with a particular

state of mind, the court shall, when requested by a

defendant, submit to the jury a written interrogatory

on the issue of each such defendant’s state of mind at

the time the alleged violation occurred.