In re Nyse Specialists Securities Litigation
| Decision Date | 13 December 2005 |
| Docket Number | No. 03 Civ. 8264(RWS).,03 Civ. 8264(RWS). |
| Citation | 405 F.Supp.2d 281 |
| Parties | In re NYSE SPECIALISTS SECURITIES LITIGATION. |
| Court | U.S. District Court — Southern District of New York |
Lerach Coughlin Stoia Geller Rudman & Robbins, San Diego, CA (William S. Lerach, Mark Solomon, Byron S. Georgiou, William J. Doyle, II, Brian O. O'Mara, Lucas F. Olts), of counsel, Lovell Stewart Halaebian, New York, NY (Christopher Lovell, Victor E. Stewart, Writer C. Clayton, James M. Bekier, of counsel), for Plaintiffs.
Fried, Frank, Harris, Shriver & Jacobson, New York, NY (Debra M. Torres, of counsel), for New York Stock Exchange.
Morgan, Lewis & Bockius, New York, NY (Robert M. Romano, John M. Vassos, of counsel), for Bear Wagner Specialists and Bear Stearns & Co.
Davis Polk & Wardwell, New York, NY (Lawrence Portnoy, of counsel), for Fleet-Boston Financial Corp.; Fleet Specialist, Inc.; Bank of America Corp. and Quick & Reilly, Inc.
Weil, Gotshal & Manges, New York, NY (Irwin H. Warren, Stephen A. Radin, of counsel) for LaBranche & Co., Inc. and LaBranche & Co. LLC.
Katten Muchin Zavis Rosenman, New York, NY (E. Michael Bradley, of counsel), for George M.L. LaBranche, IV.
Dickstein Shapiro Morin & Oshinsky, Washington, DC, and New York, NY (Howard Schiffman, Alexander D. Widell, of counsel), for Performance Specialist Group LLC.
Wilmer Cutler Pickering Hale and Dorr, New York, NY (Robert B. McCaw, Robert W. Trenchard, of counsel) for Spear, Leeds & Kellogg Specialists LLC; Spear, Leeds & Kellogg, LP., Goldman, Sachs & Co., and the Goldman Sachs Group, Inc.
King & Spalding, New York, NY (Richard A. Cirillo, Paul A. Straus, of counsel), Wolf, Block, Schorr & Solis-Cohen, Philadelphia, PA, (M. Norman Goldberger, Nathan E. Kase, Andrew C. Curley, of counsel), for SIG Specialists, Inc. and Susquehanna International Group, LLP.
Sullivan & Cromwell, New York, NY (Robert J. Giuffra, Jr., Stacey R. Friedman, of counsel), for Van der Moolen Holding, NV.
Friedman Kaplan Seiler & Adelman, New York, NY (Katherine L. Pringle, Robert S. Loigman, Melissa E. London, of counsel), for Van der Moolen Specialists USA, LLC.
LaBranche & Co., LLC ("LaBranche LLC"), LaBranche & Co., Inc. ("LaBranche & Co."), George M.L. LeBranche, IV ("M.LaBranche"), Spear, Leeds & Kellogg Specialists LLC ("Spear Leeds LLC"), Spear, Leeds & Kellogg, LP ("Spear Leeds LP"), Goldman Sachs & Co., Inc. ("Goldman Sachs & Co."), The Goldman Sachs Group, Inc. (the "Goldman Sachs Group"), Van der Moolen Specialists USA, LLC ("VDM Specialists"), Van der Moolen Holding, NV ("VDM Holding"), Fleet Specialist, Inc. ("Fleet Specialist"), FleetBoston Financial Corp. ("FleetBoston Corp."), Bank of America Corp. ("Bank of America"), Quick & Reilly, Inc. ("Quick & Reilly"), Bear Wagner Specialists LLC ("Bear Wagner LLC"), Bear Stearns & Co., Inc. ("Bear Stearns & Co."), SIG Specialists, Inc. ("SIG Specialists"), Susquehanna International Group, LLP ("SIG LLP"), Susquehanna Financial Group, LLP (Susquehanna), and Performance Specialist Group, LLC ("Performance Specialist") (collectively, the "Specialist Defendants")1 have moved pursuant to Rules 12(b)(6) and 9(b), Fed.R.Civ.P., to dismiss Plaintiff's Consolidated Complaint ("the Complaint"). Defendant New York Stock Exchange ("NYSE")2 has moved to dismiss the Complaint pursuant to Rule 12(b)(6). Lead Plaintiffs California Public Employees' Retirement System ("CalPERS") and Empire Programs, Inc. ("Empire") (collectively, the "Plaintiffs") have moved to modify the discovery stay set forth in Section 21D(b)(3)(B) of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), 15 U.S.C. § 78u-4(b)(3)(b).
For the reasons set forth below, the motions to dismiss of the Specialist Defendants are granted in part and denied in part. The motion of NYSE to dismiss is granted. To the extent that claims have not been dismissed with prejudice, leave is granted to replead within thirty (30) days of the entry of this opinion.
On October 17, 2003, this action was initiated by Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust, which filed a complaint (03 Civ. 8521) on behalf of itself and all others similarly situated. On November 11, 2003, Empire filed its complaint (03 Civ. 8935). On December 16, 2003, CalPERS filed its complaint (03 Civ. 9968). On March 16, 2004, Rosenbaum Partners, LP filed a complaint (04 Civ.2038) in its individual capacity. By Opinion dated May 27, 2004, the above-referenced actions were consolidated for all purposes under docket number 03 Civ. 8264, CalPERS and Empire were appointed as lead plaintiffs, and lead counsel was selected. See Pirelli Armstrong Tire Corp. v. LaBranche & Co., Inc., 229 F.R.D. 395 (S.D.N.Y.2004). A Consolidated Complaint (the "Complaint") was filed on September 17, 2004. On November 16, 2004, the Specialist Defendants moved to dismiss the Complaint pursuant to Rules 9(b) and 12(b)(6), Fed.R.Civ.P. On November 17, 2004, the NYSE moved to dismiss the Complaint pursuant to Rule 12(b)(6). Pursuant to a briefing schedule agreed to by the parties, these motions were heard and marked fully submitted on April 13, 2005.
A motion to modify the PSLRA discovery stay was filed by the Plaintiffs on October 1, 2004. This motion was heard and marked as fully submitted on November 17, 2004.
CalPERS is the largest public employee retirement system in the United States, with assets of over $166 billion and nearly 1.4 million beneficiaries, including active and retired public employees. CalPERS is alleged to have purchased and/or sold almost three billion shares of NYSE-listed stock between October 17, 1998 and October 15, 2003 (the "Class Period").
Empire is a New Jersey corporation that has its principal place of business in Saddle River, New Jersey. Empire is alleged to have purchased and/or sold over four billion shares of NYSE-listed stock during the Class Period.
The NYSE is a not-for-profit corporation organized under the laws of New York State.3 Pursuant to the Exchange Act, it is registered with the SEC as a national stock exchange. Each of the specialist firms and their individual employee specialists are members of the NYSE.
LaBranche LLC, is a registered brokerdealer with the SEC and an NYSE member organization. LaBranche LLC is the largest NYSE specialist firm, serving as a specialist for more than 600 companies listed on the NYSE. During the Class Period, LaBranche LLC accounted for about 29% of the annual trading volume on the NYSE. The parent company of LaBranche LLC is LaBranche & Co. M. LaBranche is the Chairman, President, and CEO of LaBranche & Co., and he has served as a LaBranche LLC specialist since 1977. During the Class Period, he served as a Special Governor of the NYSE, in which capacity he was charged with overseeing the trading activities of the specialist firms, and he was a member of the NYSE Market Performance Committee.
Spear Leeds LLC is an NYSE specialist firm and a registered broker-dealer. Spear Leads LLC is a subsidiary of parent company Spear Leads LP, which is a wholly owned subsidiary of the Goldman Sachs Group. Spear Leeds LLC is the second largest specialist firm on the NYSE, serving as a specialist for the stocks of more than 550 NYSE-listed companies and accounting for about 20% of the annual trading on the NYSE during the Class Period. Spear Leeds LLC is affiliated with Goldman Sachs & Co., which is a member firm of the NYSE.
VDM Specialists is an NYSE specialist firm responsible for trading in the stocks of more than 370 public companies listed on the NYSE. During the Class Period, VDM Specialists accounted for about 12.5% of the annual trading volume on the NYSE. Van der Moolen Holding is the parent company of VDM Specialists.
Fleet Specialist is an NYSE specialist firm that is responsible for trading in more than 430 NYSE-listed companies. It accounted for some 18% percent of the NYSE's annual trading volume during the Class Period. Since April 1, 2004, the parent company of Fleet Specialist has been Bank of America. Prior to that time, Fleet Specialist' parent company was FleetBoston Corp., which merged with Bank of America. Quick & Reilly is a member of the NYSE and an affiliate of Fleet Specialist and Bank of America. Prior to its merger with Bank of America, FleetBoston Corp. was the parent of Quick & Reilly.
Bear Wagner LLC is a member of the NYSE and a registered broker-dealer that operates as an NYSE specialist. Bear Wagner LLC acts as specialist for more than 340 NYSE-listed stocks and accounted for some 16% of the NYSE's annual trading volume during the Class Period. Bear Stearns & Co. is a member of the NYSE and is the broker-dealer affiliate of Bear Wagner LLC.
SIG Specialists is a member of the NYSE and a wholly owned subsidiary of SIG LLP. SIG Specialists is a registered broker-dealer that operates as an NYSE specialist firm. SIG Specialists is responsible for trading in more than 150 NYSE listed stocks and accounted for some 3% of the NYSE trading volume during the Class Period. Susquehanna, a member organization of the NYSE, is affiliated with SIG Specialists and SIG LLP.
Performance Specialist, a member of the NYSE, is a registered broker-dealer that operates as a NYSE specialist. Performance Specialist is responsible for the trading of more than 165 NYSE-listed stocks. During the Class Period, it accounted for some 1.5% of the NYSE's annual trading volume.
This is a securities class action brought on behalf of public investors who purchased and/or sold shares listed on the New York Stock Exchange ("NYSE") during the Class period, for which specialist firms were responsible for maintaining the trading market. The Consolidated Complaint (the "Complaint") alleges that Defendants violated the Securities...
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