On Thursday, Judge Colleen McMahon denied an objector’s motion for a declaration that the plaintiffs and their counsel should have brought certain fraud claims in their securities fraud litigation, filed ten years ago in connection with Facebook’s IPO and settled in 2018. The court rebuked the motion, a version of the same filing submitted multiple times to both the district court and the Second Circuit, as “a paradigmatic example of [] frivolous and vexatious litigation.”
The case centers on alleged misrepresentations and omissions made in the registration statement for Facebook’s May 2012 initial public offering (IPO). After six years of litigation, the parties settled for $35 million. In September 2020, the Second Circuit affirmed the trial court’s order approving the settlement.
Last June, Judge McMahon disposed of the remaining objections and approved the lead plaintiff’s distribution plan of the settlement fund.
This week’s opinion recounted that the objector, James J. Hayes, first objected to the settlement at the district court level, arguing that “[p]laintiffs and their counsel had purportedly abused their authority under the Private Securities Litigation Reform Act of 1995, as well as Federal Rule of Civil Procedure 23, by failing to pursue Exchange Act claims against Morgan Stanley & Co., one of the underwriters of Facebook’s IPO.”
The district court and later the Second Circuit rejected the objection, finding that counsel’s decision to pursue certain claims and not others was within its discretion. Having been “soundly rejected on the merits,” Judge McMahon said there was nothing left to do except deny the movant’s request with prejudice. “This means the argument WILL NOT BE ENTERTAINED AGAIN,” the court emphasized.
Further, the court ordered Hayes to show cause as to why a leave-to-file sanction should not be imposed.
Co-lead counsel is Kessler Topaz Meltzer & Check LLP and Lieff Cabraser Heimann & Bernstein. Facebook is represented by Kirkland & Ellis LLP and Willkie Farr & Gallagher LLP.
