15-3983(L)
In re Facebook, Inc., IPO Securities and Derivative Litigation
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
OR AN ELECTRONIC DATABASE (WITH THE NOTATION ‘SUMMARY ORDER’). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for
2 the Second Circuit, held at the Thurgood Marshall United States
3 Courthouse, 40 Foley Square, in the City of New York, on the
4 27th day of December, two thousand sixteen.
5
6 PRESENT: DENNIS JACOBS,
7 JOSÉ A. CABRANES,
8 BARRINGTON D. PARKER, JR.,
9 Circuit Judges.
10
11 - - - - - - - - - - - - - - - - - - - -X
12 In re Facebook, Inc., IPO Securities and
13 Derivative Litigation
14
15 Facebook, Inc., Mark Zuckerberg, Sheryl
16 K. Sandberg, David Ebersman, David M.
17 Spillane, Marc L. Andreessen, Erskine
18 B. Bowles, James W. Breyer, Donald E.
19 Graham, Reed Hastings, Peter A. Thiel,
20 Morgan Stanley & Co. LLC, J.P. Morgan
21 Securities LLC, Goldman, Sachs & Co.,
22 Merrill Lynch, Pierce, Fenner & Smith
23 Incorporated, Barclays Capital Inc.,
24 Allen & Company LLC, Citigroup Global
25 Markets Inc., Credit Suisse Securities
26 (USA) LLC, Deutsche Bank Securities
27 Incorporated, RBC Capital Markets LLC,
28 Wells Fargo Securities, LLC, Blaylock
29 Robert Van LLC, BMO Capital Markets
30 Corp., C.L. King & Associates, Inc.,
1
1 Cabrera Capital Markets, LLC, Castleoak
2 Securities, L.P., Cowen And Company,
3 LLC, E*Trade Securities LLC, Itau Bba
4 USA Securities, Inc., Lazard Capital
5 Markets LLC, Lebenthal & Co., LLC, Loop
6 Capital Markets LLC, M.R. Beal &
7 Company, Macquarie Capital (USA) Inc.,
8 Muriel Siebert & Co., Inc., Oppenheimer
9 & Co. Inc., Pacific Crest Securities
10 LLC, Piper Jaffray & Co., Raymond James
11 & Associates, Inc., Samuel A. Ramirez
12 & Company, Inc., Stifel, Nicolaus &
13 Company, Incorporated, The Williams
14 Capital Group, L.P., William Blair &
15 Company, LLC,
16 Intervenors-Appellants,
17
18 -v.- 15-3983(L)
19 15-3986(con)
20 15-3987(con)
21 15-3990(con)
22 North Carolina Department of State
23 Treasurer, Arkansas Teacher Retirement
24 System, Fresno County Employees’
25 Retirement Association, Sharon Morley,
26 Jose G. Galvan, Mary Jane Lule Galvan,
27 Eric Rand, Paul Melton, Lynn Melton,
28 Intervenors-Appellees,
29
30 NASDAQ OMX Group, Inc., The NASDAQ Stock
31 Market, LLC, Robert Greifeld, Anna M.
32 Ewing,
33 Defendants-Appellees,
34
35 T3 Trading Group, LLC, Avatar
36 Securities LLC, Philip Goldberg, Steve
37 Jarvis, Atish Gandhi, Colin Suzman,
38 Meredith Bailey, Faisal Sarni,
39 Plaintiffs-Appellees.*
40
41 - - - - - - - - - - - - - - - - - - - -X
* The Clerk of Court is respectfully directed to amend
the official caption to conform with the above.
2
1
2 FOR INTERVENORS-APPELLANTS: RICHARD D. BERNSTEIN, Willkie Farr
3 & Gallagher LLP, Washington, DC,
4
5 Andrew Brian Clubock, Susan E.
6 Engel, Kirkland & Ellis LLP, New
7 York, NY and Washington, DC,
8
9 James P. Rouhandeh, Charles
10 Duggan, Andrew Ditchfield, Davis
11 Polk & Wardwell LLP, New York, NY.
12
13
14 FOR INTERVENORS-APPELLEES: JOHN J. RIZIO-HAMILTON, Salvatore
15 J. Graziano, Bernstein Litowitz
16 Berger & Grossmann LLP, New York,
17 NY,
18
19 Thomas A. Dubbs, James W. Johnson,
20 Thomas G. Hoffman Jr., Labaton
21 Sucharow LLP, New York, NY,
22
23 Steven E. Fineman, Lieff Cabraser
24 Heimann & Bernstein LLP, New York,
25 NY,
26
27 Frank R. Schirripa, Hach Rose
28 Schirripa & Cheverie LLP, New York,
29 NY.
30
31 FOR DEFENDANTS-APPELLEES: PAUL LANTIERI III, William A.
32 Slaughter, Stephen J. Kastenberg,
33 Ballard Spahr LLP, Philadelphia,
34 PA.
35
36 FOR PLAINTIFFS-APPELLEES: Vincent R. Cappucci, Jordan
37 Abraham Cortez, Entwistle &
38 Cappucci LLP, New York, NY,
39
40 Douglas G. Thompson, Michael G.
41 Mclellan, Finkelstein Thompson
42 LLP, Washington, DC,
43
3
1 Christopher Lovell, Victor E.
2 Stewart, Lovell Stewart Halebian
3 Jacobson LLP, New York, NY.
4
5
6 Appeal from a judgment of the United States District Court
7 for the Southern District of New York (Sweet, J.).
8 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND
9 DECREED that the judgment of the district court be AFFIRMED.
10
11 Facebook, Inc., et al. appeal as intervenors from the final
12 judgment of the United States District Court (Sweet, J.)
13 approving a class action settlement in this securities case
14 stemming from the initial public offering (“IPO”) of Facebook
15 stock. We assume the parties’ familiarity with the underlying
16 facts, the procedural history, and the issues presented for
17 review.
18 The appellants intervene to vindicate their interests as
19 defendants in separate but related litigation. The Judicial
20 Panel on Multidistrict Litigation transferred two groups of
21 actions relating to the Facebook IPO to the same judge in the
22 Southern District of New York, who consolidated them into two
23 class actions: a “Nasdaq action” (pleading claims against
24 various Nasdaq defendants arising from investor losses allegedly
25 caused by technical malfunctions on the exchange on the day of
26 the IPO) and a “Facebook action” (pleading claims against various
27 Facebook and underwriter defendants arising from investor losses
28 allegedly caused by misrepresentations and omissions in the IPO
29 prospectus). This appeal arises from the settlement of the
30 Nasdaq action. The parties in this action are satisfied with
31 the settlement. The appellants are the defendants in the
32 Facebook action, which is ongoing.
33 The appellants do not challenge the terms of the settlement
34 vis-à-vis the parties in the settled case. Though they objected
35 to it in the district court and now at least formally challenge
36 its approval, they do not object to its substance--that is, no
37 one disputes the settlement’s fairness, nor is there a genuine
38 dispute about its form. The dispute on appeal concerns the
39 judgment credit provision, which, consistent with the Private
40 Securities Litigation Reform Act (“PSLRA”) and the law of this
41 Circuit, provides that any judgment against the Facebook
42 defendants arising from the same matters alleged in the Nasdaq
43 complaint will be reduced by the greater of (a) the amount that
44 corresponds to the percentage of responsibility of the Nasdaq
4
1 defendants for the damages awarded in the Facebook action [the
2 “proportional responsibility” deduction], or (b) the amount
3 paid by the Nasdaq defendants to the common plaintiffs for common
4 damages [the “pro-tanto” deduction] (or (c) a third quantity
5 not relevant here). See generally 15 U.S.C. § 78u-4(f)(7)(B).
6 Appellants object to the inclusion of the phrase “for common
7 damages,” but they do not argue that they are entitled to a
8 judgment credit for damages that are not common; nor does there
9 appear to be any serious contention that the wording of the
10 settlement fails to conform to the law. Rather, appellants
11 object to any implication that the damages alleged in the two
12 actions may not be common, and that the issue is left to be
13 litigated and decided in the Facebook action. They argue that
14 all of the damages to the common plaintiffs are common, that
15 appellants should therefore receive judgment credit in the
16 Facebook action for the full amount of the Nasdaq settlement
17 paid to common plaintiffs, and that the district court was
18 obligated to decide that issue in connection with the Nasdaq
19 settlement.
20 Appellants’ objection, therefore, is not truly an objection
21 to the terms of settlement at all, but is to the district court’s
22 decision to defer the question of common damages to be decided
23 in the Facebook action. They argue that the district court
24 lacked the authority to enter final judgment without first
25 deciding whether the damages in the two actions are indeed common
26 damages, because the PSLRA requires the district court to resolve
27 such issues and because the failure to resolve them violates
28 principles of finality. We disagree.
29 The PSLRA provides that nonsettling defendants are entitled
30 to a judgment credit for a settlement by another defendant. See
31 15 U.S.C. § 78u-4(f)(7)(B). This in effect codifies the
32 common-law “one satisfaction rule, which provides that a
33 plaintiff is entitled to only one satisfaction for each
34 injury.” Singer v. Olympia Brewing Co., 878 F.2d 596, 600 (2d
35 Cir. 1989). Under this rule, “a nonsettling defendant is
36 entitled to a credit of the settlement amount against any
37 judgment obtained by the plaintiff against the nonsettling
38 defendant as long as both the settlement and judgment represent
39 common damages.” Id.
40 Class settlements of federal securities claims have
41 frequently been approved when they have provided a judgment
42 reduction formula that gives nonsettling defendants credit for
43 the greater of (1) “the settlement amount for common damages,”
44 or (2) “the ‘proportionate share’ of the settling defendants’
5
1 fault as proven at trial.” Gerber v. MTC Elec. Techs. Co.,
2 Ltd., 329 F.3d 297, 302-3 (2d Cir. 2003). This “capped
3 proportionate share” formula complies with the one satisfaction
4 rule because it “ensures that a judgment credit is at least the
5 amount of the settlement for common damages.” Id. at 303. The
6 settlement under review calls for application of that formula.
7 Appellants cite Denney v. Deutsche Bank AG, 443 F.3d 253
8 (2d Cir. 2006), for a more expansive view of what the PSLRA
9 requires, but they misconstrue the case. Denney observed that,
10 “[o]rdinarily, the potential harshness of a bar order [depriving
11 non-settling defendants of contribution claims against settling
12 defendants] is mitigated by a judgment credit provision that
13 protects a nonsettling party from paying damages exceeding its
14 own liability”; but that the judgment credit provision under
15 review in that case
16 simply provide[d] that nonsettling parties shall
17 be “sufficiently” compensated, without
18 specifying how such compensation shall be
19 calculated. The use of the word
20 “sufficiently”--if read to mean “fully,” as the
21 district court urges--might provide nonsettling
22 parties with some peace of mind. But they are
23 unfairly prejudiced by the failure to specify how
24 that full and sufficient compensation will be
25 calculated.
26
27 Id. at 274. Denney emphasized the utility of knowing in advance
28 of trial whether a proportionate, pro rata, or pro tanto
29 methodology will apply to any judgment credit and accordingly
30 remanded “for modification of the judgment credit and/or bar
31 order provisions.” Id. at 276. Denney did not, however,
32 require deciding whether or to what extent damages are common
33 between two actions before approving settlement in one of them.
34 It required only that a settlement with a bar order specify the
35 methodology of any eventual judgment credit. The settlement
36 under review does so specify the methodology.
37 Appellants’ argument that the settlement approval violates
38 principles of finality is no more persuasive. Indeed, the
39 Nasdaq action is done, and the judgment is final. All parties
40 in that action are satisfied, and the judgment can be executed.
41 “[F]inality implies that, after the entry of judgment, the court
42 will concern itself with nothing other than the mechanics of
43 execution.” Int’l Controls Corp. v. Vesco, 535 F.2d 742, 747
44 (2d Cir. 1976). With respect to the Nasdaq action, that finality
6
1 is achieved. The open question of whether and to what extent
2 damages are common with the Facebook action will have no effect
3 whatsoever on the Nasdaq action, and can be litigated just as
4 well in the Facebook action.
5 Accordingly, and finding no merit in Appellants’ other
6 arguments, we hereby AFFIRM the judgment of the district court.
7 FOR THE COURT:
8 CATHERINE O’HAGAN WOLFE, CLERK
7