Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The four federal judges who were named earlier this year to oversee more than 90 lawsuits against the mutual fund industry have already given signs that they want to hang on to the cases from start to finish. That’s a goal made more complicated by 1998′s Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26. A unanimous Supreme Court said that the federal judiciary has statutory authority to consolidate similar lawsuits filed in multiple districts-but only for the purpose of deciding pretrial matters like discovery and summary judgment. When it comes time for trial, the suits must be sent back to the “transferor” districts in which they were originally filed. There are 12 transferor districts in the mutual fund litigation, In re Mutual Funds Investment Litigation, No. MDL-1586. But the four “transferee” judges�J. Frederick Motz, Catherine C. Blake and Andre M. Davis of the District of Maryland and Frederick P. Stamp Jr. of the Northern District of West Virginia�still have considerable resources to work around Lexecon, according to Stanford Law School Professor Deborah R. Hensler, the author of a 2001 statistical study of multidistrict litigation. Also, what statutory authority the four judges lack may soon be supplied by Congress. Bill H.R. 1768, passed unanimously by the U.S. House of Representatives on March 24, would effectively nullify Lexecon by allowing multidistrict litigation to be transferred “for trial purposes.” The new law would apply to cases pending on the date of its enactment. The bill has the support of the White House and the Judicial Conference of the United States, according to the House Judiciary Committee. The Senate Judiciary Committee has not yet looked at the bill, according to a spokesman. In a Feb. 20 letter to the parties, the four judges urged the plaintiffs to file new complaints in the District of Maryland that would supersede their old complaints filed elsewhere “as a means to avoid potential Lexecon issues.” The lawsuits accuse dozens of mutual funds and investment firms that deal in them of engaging in unfair trading practices, such as timing trades to favor large-scale investors at the expense of small ones. The claims include class actions on behalf of investors who put money in the funds and derivative actions by shareholders of the companies that manage the funds or of their parent companies. David J. Bershad of New York’s Milberg Weiss Bershad Hynes & Lerach said that the class action investors, many of whom he represents, would probably have no objection to filing superseding complaints, which would give the four judges start-to-finish control over the cases. He said he is discussing the issue with other counsel for class action plaintiffs. Nicholas E. Chimicles of Haverford, Pa.’s Chimicles & Tikellis, who represents many of the derivative plaintiffs, said that the judges renewed their call for superseding complaints at their first hearing on April 2. His clients may balk, however, because some of the damages they seek are tied to the date of filing. The Investment Company Act of 1940, for instance, allows investors to recover investment advisory fees, but only for the year preceding filing. By resetting the clock, superseding filings would have an effect on what his clients can recover, he said. Mutual fund companies Strong Capital Management, One Group and Janus Capital Group, declined to comment. Hensler said that judges have other ways of extending their control over multidistrict cases in the Lexecon era. The Judicial Panel on Multidistrict Litigation, the rotating group of federal judges that decides what cases to consolidate and where to transfer them, tends to favor transferee judges known for putting pressure on parties to settle, she said. Hensler added that pretrial rulings may so strengthen or weaken a party’s position that they “are in effect dispositive.” For those reasons, while she thinks overruling Lexecon is “a good thing,” she doubts H.R. 1768 would have a huge impact. Young’s e-mail address is [email protected].

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.