In Re: IPO Securities Lit., et al v. , et al

Filing 6297

MEMORANDUM OPINION AND ORDER, #100698 the Second Circuit directed this Court to determine whether pro se objector Hayes is a class member. For all of the reasons that are set forth in this Order, I hold that Hayes is not a class member. (Signed by Judge Shira A. Scheindlin on 8/25/11) (pl) Modified on 8/26/2011 (ajc).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

----------------------------------------------------- )(
IN RE: INITIAL PUBLIC OFFERING
SECURITIES LITIGATION

MEMORANDUM OPINION

AND ORDER

MASTER FILE

NO. 21 MC 92 (SAS)

----------------------------------------------------- )(
SHIRA A. SCHEINDLIN, U.S.D.J.:
By orders dated May 17, 2011 and July 12, 2011,1 the Second Circuit
remanded to this Court three appeals of James J. Hayes - the sole remaining
objector to the $586 million global settlement reached in this case after nearly a
decade of litigation, and approved by this Court in October of 2009. 2 The Second
Circuit directed this Court "to determine whether pro se objector Hayes is a class
member.,,3
In order to be a class member, Hayes must have "purchased or
otherwise acquired any of the Subject Securities at issue in such case during the

See Docket Nos. 6282, 6287.
See In re IPO Sec. Litig., 671 F. Supp. 2d 467 (S.D.N.Y. 2009). In
granting plaintiffs' motion for final approval of the proposed settlement and for an
award of attorneys' fees, I rejected Hayes' objections to the settlement. I did not
address whether Hayes was a class member (and therefore had standing to object to
the settlement). See id. at 493-94.
2

3

Docket No. 6287.
-1­

Settlement Class Period applicable to such Action and [have been] damaged
thereby.”4 Hayes originally objected to the settlement based on his assertion of
membership in three IPO settlement classes: (1) In re JNI Corp. IPO Securities
Litigation (“JNI”),5 (2) In re Ticketmaster Online IPO Securities Litigation
(“Ticketmaster”),6 and (3) In re deCode Genetics, Inc. IPO Securities Litigation
(“deCode”).7 However, he now confesses – for the first time in over two years –
that he did not purchase the stock of JNI or Ticketmaster during the class period.8
As for deCode, his (untimely) submission of a “CSFBDIRECT brokerage

4

In re IPO Sec. Litig., 671 F. Supp. 2d at 472 (emphasis in original).

5

01 Civ. 101740.

6

01 Civ. 10822.

7

01 Civ. 11219. See 8/10/09 James J. Hayes Objection to Settlement
Class Certification, Settlement Adequacy and Attorney Fee Award, Ex. B. to the
Declaration of Christian Siebott in Support of Plaintiffs’ Response to this Court’s
July 20, 2011 Order Addressing Whether Pro Se Objector James J. Hayes Is a
Class Member (“Siebott Decl.”), at 1
8

Compare 6/14/11 Letter from James J. Hayes to the Court (“6/14/11
Hayes letter”), Ex. I to Siebott Decl., at 2 (emphasis added) (explaining that he
“receiv[ed] [Settlement] Notices for Ticketmaster and JNI Corp., which were
apparently not purchased during the respective class periods”) with 3/9/11 Letter
from James J. Hayes to the Court (“3/9/11 Hayes letter”), Ex. G to Siebott Decl., at
1 (“Hayes also asserts membership in several other classes, including Decode []
and Ticketmaster [], on the basis of his trades during the class period.”).
-2-

statement[]”9 shows that he suffered no loss in association with his alleged
purchase of 300 shares of that stock.10 Because he was not “damaged” by his
purchase of deCode stock, he falls outside the definition of a class member, and
therefore lacks standing to object to the settlement on that basis.11
However, Hayes now asserts that he is a class member based on his
alleged purchase of stock in Tut Systems, Inc. (“Tut Systems”), another of the 309
issuers whose securities are at issue in this litigation.12 As noted above, in his
original objections to the proposed settlement, Hayes did not assert membership in
the Tut Systems class. Only after this Court ordered Hayes to show cause “why an

9

8/8/11 Letter from James J. Hayes to the Court (“8/8/11 Hayes
letter”), Appendix A.
10

See James J. Hayes 2000 Tax Information Statement, Exhibit to
8/8/11 Hayes letter.
11

See Fed. R. Civ. P. 23(e)(5) (emphasis added) (“Any class member
may object to the [settlement] proposal . . .”); In re Drexel Burnham Lambert Grp.,
Inc., 130 B.R. 910, 923 (S.D.N.Y. 1991), aff’d, 960 F.2d 285 (2d Cir. 1992) (“Only
Class members have standing to object to the Settlement of a class action” because
“[o]bjectors who are non-Class members lack standing to object to the fairness,
reasonableness and adequacy of the Settlement.”); see also In re AOL Time
Warner, Inc., No. MDL 1500, 02 Civ. 5575, 2006 WL 903236, at *15 n.17
(S.D.N.Y. Apr. 6, 2006) (citing New York v. Reebok Int’l Ltd., 96 F .3d 44, 47 (2d
Cir. 1996)) (summarily dismissing objector whose account statements
demonstrated a profit on the subject securities, holding “[w]ithout an injury,
Heyburn does not have standing to object”).
12

See 6/14/11 Hayes letter; 3/9/11 Hayes letter at 1.
-3-

Order should not be issued dismissing his motion to reduce the Appeal Bond for
lack of standing” and to “furnish proof to the Court that he is in fact a class
member”13 did he submit “proof of membership for the Tut Systems class.”14 That
“proof” consisted of a “portion[] of his 1999 personal income tax form reporting a
$2,317 trading loss in Tut Systems, Inc. during the class period.”15
Hayes’ proof fails to establish his class membership for two reasons.
First, it is untimely. Although Hayes timely objected to the JNI, Ticketmaster, and
deCode settlements – all of which he lacked standing to object to – he failed to
“identify” Tut Systems among the “securities [he] purchased,” as required by the
Notice of Pendency and Proposed Global Settlement.16 Nor did he submit a proof
of claim form for Tut Systems.17 Although this Court considered Hayes’
13

Docket No. 6260.

14

3/9/11 Hayes letter.

15

Id. (footnote omitted). See James J. Hayes 1999 Schedule D (Form
1040), Exhibit to 3/9/11 Hayes letter.
16

Notice of Pendency and Proposed Global Settlement, Ex. A to Siebott

Decl., at 12.
17

See Proof of Claim and Release, In re IPO Sec. Litig., available at
http://iposecuritieslitigation.com/poc.pdf, § D (requiring putative class members to
represent that they “have enclosed photocopies of the stockbroker’s confirmation
slips, stockbroker’s statements, or other documents evidencing each purchase, sale
or retention of the Subject Securities transactions listed above in support of my
claim. (IFANY SUCH DOCUMENTS ARE NOT IN YOUR POSSESSION,
PLEASE OBTAIN A COPY OR EQUIVALENT DOCUMENTS FROM YOUR
-4-

objections on the merits, he lacked standing to assert those objections on the basis
of membership in the JMI, Ticketmaster, and deCode classes at the time he
objected. His after-the-fact assertion of membership in a wholly different class
cannot cure this deficiency in standing.18 The time to object to the Tut Systems
settlement has long passed. Because Hayes submitted no evidence whatsoever of
the sole basis for his alleged class membership until roughly two years after the
deadline to do so – nor referenced that alleged class membership in his objections –
he has given up his “legal rights and options in this settlement.”19 He is not a

BROKER BECAUSE THESE DOCUMENTS ARE NECESSARY TO PROVE
AND PROCESS YOUR CLAIM.)”).
18

Accord Feder v. Electronic Data Sys. Corp., 248 Fed. Appx. 579, 581,
2007 WL 2800135, at *2 (5th Cir. 2007) (“[W]here the proof of claims period has
closed and the settlement has been finally approved by the district court, the burden
of proving class membership cannot be satisfied by the appellant’s unsupported
assertions of class membership. [Appellant] did not submit a proof of claim form.
Nor did he provide the documentary evidence required by the claim form to
support his contention that he bought or sold EDS stocks during the class period.
His objection did not include the required information as to the number or type of
EDS securities that [appellant] alleges to have dealt in during the period.”).
19

Notice of Pendency and Proposed Global Settlement at 1 (explaining
that “[t]he only way to get payment” is to “submit a claim form by December 10,
2009”; that the deadline to object is August 10, 2009; and that if putative class
members “do nothing” they “get no payment” and “give up rights”). See In re Air
Cargo Shipping Servs. Antitrust Litig., 09-4813-cv (2d Cir. Apr. 6, 2010), Ex. M to
Siebott Decl. (dismissing an appeal for lack of standing because an objector to a
class action settlement “did not file a claim to a portion of the settlement fund”);
Braud v. Transport Serv. Co. of Ill., Nos. 05-1898, 05-1977, 05-5557, 06-0891,
2010 WL 3283398, at *5 (E.D. La. Aug. 17, 2010) (rejecting plaintiffs’ objections
-5-

member of any class.
Second, even if Hayes’ proof of class membership were timely, it is
insufficient. Not only does Hayes’ unsigned, unsworn, unauthenticated 1999 tax
form fall short of the documentation required to support a proof of claim;20 it also
falls short of establishing Hayes’ class membership by a preponderance of the
evidence.21 “Allowing someone to object to settlement in a class action based on
this sort of weak, unsubstantiated evidence would inject a great deal of unjustified
uncertainty into the settlement process.”22 For all of these reasons, I hold that
Hayes is not a class member.

to class settlement where “[t]here is no evidence in the record that putative
plaintiffs filed timely proof of claim forms” because “[i]t is axiomatic that one
must file a proof of claim form to become a member of a class”).
20

See Proof of Claim and Release § D.

21

See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (holding
that standing “must be supported in the same way as any other matter on which the
plaintiff bears the burden of proof, i.e., with the manner and degree of evidence
required at the successive stages of the litigation”); see also In re WorldCom, Inc.
Sec. Litig., 388 F. Supp. 2d 319, 340 (S.D.N.Y. 2005) (holding that objector lacked
standing to object to settlement where she “submitted a ‘Notice Regarding the
Court’s Inquiry Regarding Standing’ reaffirming that [she] had an out-of-pocket
loss arising from her purchase of WorldCom securities during the Class Period”
but failed to submit a proof of claim).
22

Feder, 248 Fed. Appx. at 581.
-6-

Dated:

August 25,2011
New York, New York

-7­

- Appearances For Plaintiffs’ Executive Committee:
Stanley D. Bernstein, Esq.
Rebecca M. Katz, Esq.
Christian Siebott, Esq.
Bernstein Liebhard LLP
10 East 40th Street
New York, New York 10016
[phone]

Robert A. Wallner, Esq.
Ariana J. Tadler, Esq.
Peter G.A. Safirstein, Esq.
Neil Fraser, Esq.
Milberg LLP
One Pennsylvania Plaza
New York, New York 10119
[phone]

David Kessler, Esq.
Barroway Topaz Kessler Meltzer &
Check LLP
280 King of Prussia Road
Radnor, Pennsylvania 19087
[phone]

Jules Brody, Esq.
Stull, Stull & Brody LLP
6 East 45th Street
New York, New York 10017
[phone]

Howard B. Sirota, Esq.
Sirota & Sirota LLP
260 Madison Avenue
New York, New York 10016
[phone]

Fred Taylor Isquith, Esq.
Thomas H. Burt, Esq.
Wolf Haldenstein Adler Freeman & Herz
LLP
270 Madison Avenue
New York, New York 10016
[phone]

Liaison Counsel for Underwriter Defendants:
Gandolfo V. DiBlasi, Esq.
Penny Shane, Esq.
David M.J. Rein, Esq.
Richard J.L. Lamuscio, Esq.
Sullivan and Cromwell LLP
125 Broad Street
New York, New York 10004
[phone]
-8-

Liaison Counsel for Issuer Defendants:
Jack C. Auspitz, Esq.
Joel C. Haims, Esq.
Hilary M. Williams, Esq.
Angela T. Rella, Esq.
Reema S. Abdelhamid, Esq.
Morrison and Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
[phone]
Copy to:
James J. Hayes (pro se)
4024 Estabrook Drive
Annadale, Virginia 22003
James J. Hayes (pro se)
200 Homewood Ave.
Greensboro, NC 27403

-9-

Appendix A

-10-

James J. Hayes

4024 Estabrook Dr.

Annandale, VA 22003

August 8, 2011

I
Hon. Shira A. Scheindlin
Uni ted States District Court
Southern District of New York
500 Pearl Street, Rm 1620
New York, NY 10007

Re: Initial Public' Offering Litigation, 21 MC 92 (SAS)
Dear Judge Scheindlin:
I first learned of the Court's July 20, 20 II Order today when it was included as an exhibit in the
plaintiffs' August 5, 2011 response. Had I received that order, I would have submitted proof of my
transactions in Decode Genetics Inc. The attached copies of my CSFBDIRECT brokerage statements,
show that I purchased 300 shares on 8118/2000 and sold those shares on 9/20/2000. These transactions
are within the class period, which begins on 711612000 and ends on 12/6/2000.
Respectfully submitted,

c. Stanley D. Bernstein
Attachment: CSFB Statements

--~~,-.:.

.....

~

2000
,-\rl'Olillt

!\ umbef"

Recipient's Name and Address:

YOUR TAX INFORl\1ATION

JA:VIES J HAYES
..W2..+ ESTABROOK DR

l':u q)lc'iH', ltil:ntilll':tli
'\,dllil11.:1

STATEMENT

.." . .

Summary

.

.

. .

or Transactions We Do Not :Report To The~S(SeeenclQS...re for additional information)
Amount

E411it) Oplion.. Transactions
Optllll1~ Proceeds and Expiratiom .... ,
:-'l·curitit·s l'urch:Jsed
'\t:t Cost of Securities Purchased ................................................................................................................................................... .

'\laq!.in lntt'l'est E.xpense Charged to Your Account ........................................................................................................................... ..

:woo individuals, report details on Form 1040; Schedule 0; LineAND BARTER EXCHANGE TRANSACTIONS
Form 1099~B PROCEEDS FROM BROKER
(For
1 or 8.) ,
','",'" "','",
"
,

OMB No. 1545--0715

Thi, i, importalll lax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may
he imp,),ed 011 ~tlU if Ihi; income is taxable and the IRS determines that it has not been reported.
7ludciPrULe5~

!

it'

)/1

CUSlP

(Box i bl

Dare
(Box ia)

t>rt~'Leeds

QuantilY

(Less Commissions & Fees)
(Box 2 I

G3682L105

12/28/2000

1,000

007525108

12/15/2000

1,000

096761101

02/1112000

1,000

15,166.99

236277109

12/27/2000

1.000

292.48

243586104

0912012000
09/20/2000

100
200

(Box 4)

19,979.33

iiUB 1.\.\'\S I ,\1.:.\1S 1,\("

Tax Withheld

144.99

,\I)\\\;C!D DICII.\L 1:,\10 CORP

redei'ilt Income

2,780.75
5,561.47

RU 101 11111 {)()\1lTD SIlS i\
lSi '\,ffh 't (;,()'-21 i 11~(1

[)\ \'i-,.,\

lil ">1 '\, ISS S1'S PLe '-\DR

I)j ( UI Jt (;1 \,1 lies I'\C CO\l

--_ ... _----­

8,342.22
Jji)\' I \

(OKI'

254546104

07/10/2000
07/10/2000

50U
500

14,239,53
14.239.52
28,479.05

iJO'\\U):")O'\ LLlI-..I:,\ LX J/':,\Kl TIT J:'\C
DUDIKI CT CO;\1

257661504

(7Cf 00(1 (,':V1)

U9il4/2000

500

pp-sp

3,823.62

Page 2 of 7

----~

;%/~
-~., :*'.

2000
An:OUllt :\umber:

Recipient's Name and Address:

R,t q1IClil', UL'l1tlllt'atlnll

JA'"vIES J HAYES

\,

·W2~

Inj1ci

YOUR TAX INFORl\1ATION
STATEMENT

ESTABROOK DR

TRAl\SACTI0NS WE DO NOT REPORT TO THE IRS .
[Ul
1)" 'l

OI\S TRANSACTIONS
Expinlli( II/ Dale'
Strike Price

f {PUt

('.\1 I
il!!) ILKLLEC
ClSB': S79HH9CJ

EXP 03-18-0U @ 50

(COlllillued)
Trade! Process
Date

Transaction Type

02/28/2000
03/20/2000

Sell Open
Expiration

Qual1lity

Purchase AmowlI

10
10

Proceeds

3,572.37
.00

----------

3,572.37
TUI.d

.00

12,544.77

"HI RITiF""; PI R('f-I:\SfD
CUSIP

)/1

,;\Ili i l)]1 (IL'\,ULOl;l LTDSJIS

M~7298100

ISI'\,-If]j ili)i(J·"~'i1l2tl

TradeiProcess
Date
01/19/2000
01119/2000

Quantity

500
500

Net Cost

Accrued ImereS{ Purchased
Security Type

Amo/tlll

10.916.25
10,947.50
21.863.75

K\ll\il \\ '>U11\\.\RI LTDSIIS
\ j ) \ \ \ ( I j) DI(ill:\1 )'\,10 CORP

M81867109

08/09/2000

100

1.000.00

007525108

08118/2000
08/18/2000

200
800

2,204.00
8,816.00
11,020.00

BOSI U'\, III I

j{

1'\,(' CLASS i\

Jl (O[l! (;1 \llltS I\,C CO\1
I)IO'\,I ..\. CORI'

100557107

11/02/2000
11102/2000

300
700

2,443.50
5,701.50
..... --- .. _--­
8,145.00

243586104

0811812000

300

8,307.50

254546104

07107/2000
07/07/2000

500
500

11.260.00
11.260.00
--------~-

22,520.00
j7CF 11111113951

pP-sP

Pa:?e 6 of 7