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Click here for the full text of this decision FACTS:Appellants-defendants, Electronic Data Systems Inc. (EDS), James E. Daley and Richard H. Brown, appealed the certification of a Federal Rule of Civil Procedure 23(b)(3) plaintiff class in a securities class action. The U.S. Navy awarded a $6.9 billion contract to EDS to create a global intranet, known as the Navy Marine Corps Intranet (NMCI). To account for the NMCI contract, as well as other long-term contracts, EDS used the “percentage of completion” (POC) method of accounting, under which income is recognized as work on a contract progresses. On Sept. 19, 2002, following a revised-earnings announcement by EDS made after the close of trading on Sept. 18, EDS’s stock price dropped from a Sept. 18 close of $36.46 to a Sept. 19 close of $17.20. This drop in price resulted in a one-day market loss of $9.7 billion. Securities holders thereafter brought several class actions alleging, among other things, that EDS knew of serious problems with the NMCI contract and improperly used POC accounting to hide these problems and inflate the price of EDS stock. In addition, the securities class action plaintiffs allege that EDS made material misrepresentations of its progress on the NMCI contract in filings with the Securities and Exchange Commission and in its press releases and that appellants Brown and Daley, EDS’s former CEO and CFO, respectively, were responsible for the scheme to artificially inflate EDS stock price. In addition to the suits filed by the securities holders, participants in EDS’s retirement savings plans brought related suits alleging on a similar basis violations of the Employee Retirement Income Security Act. The district court consolidated all of the securities actions brought against EDS and separately consolidated all of the related ERISA actions. The Department of the Treasury of the state of New Jersey, including its Division of Investment on behalf of Common Pension Fund A (New Jersey), was appointed Lead Plaintiff under the Private Securities Litigation Reform Act of 1995. New Jersey engaged retired New Jersey Superior Court Judge C. Judson Hamlin to oversee securities class actions in which New Jersey was involved, including this one. The district court certified the class pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure and named New Jersey as class representative. Defendants brought an interlocutory appeal, focusing primarily on New Jersey’s arrangement with Hamlin and claiming error by the district court in its decisions regarding adequacy, typicality, and superiority under Rule 23. A panel of the court granted defendants’ petition for permission to appeal. HOLDING:Affirmed. Appellants’ principal argument is that New Jersey is not a proper class representative because it does not meet the adequacy prerequisite of Rule 23(a)(4). The court rejects appellants’ argument that the district court found New Jersey adequate only because of Hamlin’s involvement. The court points out that the district court’s choice of the words that Hamlin “helps” and “enhances” New Jersey’s adequacy demonstrates that it did not, as appellants claim, find that New Jersey is adequate “solely” due to Hamlin’s involvement. Additionally, the court finds that there is evidence in the record to support a determination that New Jersey meets the adequacy requirements even without Hamlin. Appellants next claim that New Jersey’s failure to name KPMG as a defendant in this case, coupled with the fact that KPMG is New Jersey’s auditor, demonstrates a conflict of interest with the class that should disqualify New Jersey from serving as class representative. KPMG was EDS’ outside auditor during the class period. The court, however, agrees with the district court’s determination that “New Jersey has no self-interest in protecting KPMG,” and “New Jersey has shown its zeal in pursuing class interests, even when those interests conflict with KPMG’s interests.” Thus, the court does not agree with appellants that there are unique circumstances that threaten adequacy. Appellants also claim that New Jersey has a disqualifying conflict of interest with the interests of certain members of the proposed class who are also participants in EDS’s 401(k) plan and, as such, have an ERISA class action pending against the same defendants. The disqualifying conflict with the 401(k) participants, according to appellants, is that “the ERISA case is based on a broader theory of loss causation than the securities case and the two cases involve different measures of damages.” Because the theory of loss causation in the ERISA action is broader than the theory of loss causation in this securities case, appellants claim that the 401(k) participants will be judicially estopped from asserting their theory in the ERISA action. The court disagrees and points out that the district court explained how the position of the plaintiffs in the ERISA class is complementary with the position taken by the plaintiffs in the securities class. The court concludes that although the theories in each action are different, they are not mutually exclusive. Appellants then claim error by the district court in finding that New Jersey met the typicality requirement of Rule 23(a)(3). According to appellants, New Jersey’s claims are not typical of the claims of the class because there are three unique defenses applicable to New Jersey’s claims. The court rejects appellants’ arguments and concludes that the district court did not abuse its discretion in finding that New Jersey’s claim is typical of the claims of the class. Finally, appellants claim that the superiority requirement of Rule 23(b)(3) is not met because New Jersey has not provided a trial plan, and that the district court’s certification order in the absence of trial plan violates the court’s holding in Robinson v. Texas Automobile Dealers Association, 387 F.3d 416 (5th Cir. 2004). But the court states that it did not hold in Robinson, however, that the submission of a trial plan was a prerequisite for a finding of superiority. Instead, the court explains that it held that “[a] court must consider”how a trial on the alleged causes of action would be tried.’” Consequently, the court holds that the district court premised its legal analysis of this question on a correct understanding of the governing law, and it did not abuse its discretion in finding that New Jersey was not required to submit a trial plan as a prerequisite for finding that this class action meets the superiority requirement of Rule 23(b)(3). OPINION:Garwood, J.; Garwood, Smith and DeMoss, JJ.

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