Shearman & Sterling LLP | Securities Litigation Blog | Facebook Argues That The Absence Of An Effective Plan To Manage Discovery From Unnamed Class Members May Warrant Reconsideration Of The Court’s Decision Granting Class Certification <br >  
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  • Facebook Argues That The Absence Of An Effective Plan To Manage Discovery From Unnamed Class Members May Warrant Reconsideration Of The Court’s Decision Granting Class Certification 
     
    05/16/2016
    On May 10, 2016, Facebook filed a letter in the United States District Court for the Southern District of New York action in connection with class action litigation concerning its $16 billion IPO. In re Facebook Inc., IPO Securities and Derivative Litigation, Case No. 1:12-md-02389 (S.D.N.Y.).  Facebook, defending against claims under Sections 11, 12, and 15 of the U.S. Securities Act of 1933 (the “Securities Act”), contends that the absence of an effective plan for obtaining individualized discovery from unnamed class members may render the case “unmanageable” as a class action and, as a result, “the Court may wish to reconsider class certification at some point.”  Facebook further requested that, “at the very least, if the case proceeds as a class action,” the Court confirm that Facebook “will have the right to take individualized discovery from absent class members in a later phase of the case.”  The Court’s ultimate decision on these issues may impact parties in similar cases.

    The letter was the latest salvo in a flurry of party submissions in the wake of Judge Robert Sweet’s December 2015 certification of retail and institutional investor classes in In re Facebook Inc., IPO Securities and Derivative Litigation, Case No. 1:12-md-02389 (S.D.N.Y.). In the action, plaintiffs bring claims under Sections 11, 12, and 15 of the Securities Act against Facebook, its Board of Directors, Chief Executive, Financial, and Operations Officers, Director of Accounting, and the underwriters of the IPO.  The class plaintiffs allege that Facebook made materially misleading public disclosures prior to its IPO that omitted information about revised revenue projections and the impact that increased mobile usage would have on its revenue. Facebook contends that many investors knew about the alleged revenue issues prior to the offering, and seeks individualized discovery in part to assess whether individual plaintiffs possessed such knowledge.

    Facebook’s most recent letter was filed after the various discovery-related submissions by the parties, which the Court has yet to address.  How the Court ultimately resolves these issues may have implications for parties in similar cases with respect to the timing and availability of certain types of discovery in class actions as well as the grounds for challenging a prior decision granting class certification in light of evolving evidence related to the manageability of the matter as a class action.
    CATEGORIES: Class Certification, Misstatement/Omission

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