The World in U.S. Courts: Fall 2013 - Securities
Five class actions were filed against Crocs. Inc., its auditor, and several of its directors, officers, and managers, alleging the violation of the Exchange Act of 1934 and rules promulgated by the Securities and Exchange Commission. The cases were consolidated, and the district court appointed a Lead Plaintiff whose consolidated complaint was dismissed with prejudice. During the appeal of the case’s dismissal, the Lead Plaintiff and the defendants reached a settlement agreement and sought the court’s preliminary certification of a settlement class and preliminary approval of the agreement. Another plaintiff objected to class certification, arguing that the Lead Plaintiff lacked standing because its members purchased the subject securities on a foreign exchange. The challenging plaintiff argued that this created a unique defense against the Lead Plaintiff, which defeated the “typicality requirement” for class certification. The court disagreed, concluding that it did not have to determine whether the Lead Plaintiff lacked standing because such questions “implicate the merits of the dispute.” It also found that the fact that the Lead Plaintiff could be subject to a unique defense did not call into question whether it could adequately represent the interests of the class. Accordingly, the court concluded that allegation that the Lead Plaintiff purchased the subject securities on a foreign exchange were insufficient to defeat class certification for purposes of settlement approval.