US Judge Raises Standard For Class Certification In Securities Fraud Lawsuits

by Glen Shapiro, LawAndTax-News.com, New York

14 July 2004

Ruling recently in the Southern District of New York District Court, Judge Jed Rakoff effectively raised the bar for those demanding class action status in cases of alleged securities fraud involving stock analysts.

Rejecting a request to grant class status to three consolidated suits against Lehman Brothers, Judge Rakoff announced that plaintiffs in such cases must make a "prima facie showing" that advice given by analysts moved the stock market "in a reasonable quantifiable respect".

The three suits, which failed to secure class action status as a result of their failure to make such a showing, had alleged that Lehman Brothers analyst Michael Stanek issued public reports recommending stock in software firm RealNetworks to investors, whilst simultaneously urging preferred clients to sell the stocks.

According to the plaintiffs, Mr Stanek told favoured clients that he had recommended the stock because the firm was employing the investment banking services of Lehman Brothers.

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