“Although Mossberg was not alone when he was appointed lead plaintiff in this action, finding him an adequate class representative in the face of the information the Court now has before it would render the PSLRA’s protections and Rule 23’s requirements toothless…”, Judge George H. Wu, United States District Court Judge, November 14, 2011 (in granting (!!!!) Lead Plaintiff’s Motion for Class Certification, Sven Mossberg vs. IndyMac Financial, Inc. and Michael Perry)
“Judge Wu’s own ruling combined with Mr. Mossberg’s sworn deposition makes clear that this complaint against me is entirely “lawyer-driven litigation by a manufactured plaintiff”. Again, Judge Wu is ignoring the PSRLA law. Why?”, Mike Perry’s Comment to His Defense Attorneys at the Time
“Attached below is an email I sent my attorneys with a draft blog posting I wanted to make at the time discussing the Tripp/Mossberg private securities class-action litigation against me. Because the litigation (which settled, see private litigation tab on my blog for a further discussion) was ongoing at the time, my attorneys objected to my posting it. However, as promised, I am now making this available in the hope that others may read this and work to substantially improve the private securities laws. I think this email speaks for itself; it alone makes a strong case as to the frivolous nature of many private class-action securities lawsuits and how plaintiff’s attorneys exploit our dysfunctional American legal system.”, Mike Perry, former Chairman and CEO, IndyMac Bank
From: Michael Perry
Sent: Thursday, November 17, 2011 2:08 PM
Here it is……I did it pretty quickly, but this is what I want to say. mike
11/17/2011 – Judge Wu Certifies Tripp Securities Class Action Suit Against M. Perry
I have added three documents as attachments at the bottom of this summary: “Plaintiff Mossberg’s Deposition”, “Perry’s Opposition to Tripp Class Certification”, and “Judge Wu’s Ruling Approving Tripp Class Certification”.
“The Private Securities Reform Litigation Act (PSRLA), passed by Congress in 1995 as part of its “Contract with America”, was designed to limit frivolous securities lawsuits. Prior to the PLSRA, there was a very low barrier to initiate litigation, which encouraged the filing of suits which were weak or entirely frivolous. Defending against these suits could prove extremely costly, even where the charges were unfounded, and as a result, defendants often found it cheaper to settle than to fight and win. To reduce the number of purportedly frivolous lawsuits that survive motions to dismiss, the PSLRA raised the pleading standards (the specifity and strength of the factual allegations that must be alleged in the plaintiff’s complaint) in three specific ways: 1) A requirement that false statements be plead “with particularity”, 2) A requirement that the pleading create a “strong inference” of Scienter, and 3) a requirement that the plaintiff prove loss causation.”
I believe, that this ruling and other decisions that Judge Wu has made in this case essentially ignores the law and eviscerates my protections as a defendant under the Private Securities Litigation Reform Act of 1995. Let me address just a few facts:
- I am the sole person named in this securities class action lawsuit and yet I did not prepare any of our securities filing documents and was only one of many experts who reviewed them. Scores of Indymac managers, directors, outside lawyers, and independent auditors prepared and/or reviewed all of these public disclosures.
- NOT ONE of these individuals, many of who provided me with formal written SOX certifications each quarter, ever expressed any concerns about the alleged securities disclosure violations in the Tripp complaint.
- The SEC’s allegations against me, do not include ANY common allegations with Tripp. Tripp is all about loan underwriting disclosures and the SEC had not made a single allegation in their complaint against me about loan underwriting or any lending activities. Also, several senior managers, who reported to me were responsible for loan underwriting and their written SOX certifications do not include any concerns or issues about our loan underwriting disclosures.
- Indymac was largely owned by institutional shareholders. Not one of them has joined this lawsuit against me. In fact judge Wu, in his ruling, noted the following:
- I had no motive to make false or misleading statements about our underwriting. I bought stock in both 2007 and 2008 and had not sold a single share since 2005.
- The witnesses cited in the complaint are entirely “anonymous” and the plaintiff’s have refused (to-date) our request to seek out their identities, so we can take their testimony.
Judge Wu knows all of this and yet he somehow ruled that the plaintiff’s had met their burden of a “strong inference” of Scienter. Scienter is a legal term (similar to intent or recklessness), but under the PSLRA, “this requirement is supposed to allow a defendant to obtain a dismissal of a cases where the plaintiff merely points to a false statement and declares that the defendant “must have known” that the statement was falls, based upon his position in the company” (Wikipedia). The bottom line is the plaintiff’s haven’t even proved that a statement I or Indymac made was false, let alone Scienter. The plaintiff’s have generally alleged the following: “Indymac had unexpected loan and credit losses, Indymac’s stock declined, Indymac failed, and by the way the Treasury’s Office of Inspector General issued a critical report on Indymac’s loan underwriting and we have some anonymous witnesses who the plaintiff’s won’t identify, but they had some underwriting concerns too”. That was enough for Judge Wu, but he is wrong, that is not enough to meet “strong inference of Scienter” standard under the PSLRA law.
On the subject of “loss causation”, Judge Wu gave the plaintiff’s five tries (granting my motion to dismiss five times, but each time, over several years, allowing the plaintiff’s to amend their complaint and change the dates of the class period three times and their allegations significantly), before he finally denied my sixth motion to dismiss saying that the plaintiff’s had finally, in his opinion, properly alleged “loss causation”.
So the only thing we were left with before spending millions to go to trial (and win, which we will do if we go to trial), was to fight class certification.
I can tell you that in reading Mr. Mossberg’s deposition, the following was clear to me:
- He is a “straw man” plaintiff, in violation of the PSLRA law. In fact, Judge Wu said the following in his ruling: “Although Mossberg was not alone when he was appointed lead plaintiff in this action, finding him an adequate class representative in the face of the information the Court now has before it would render the PSLRA’s protections and Rule 23’s requirements somewhat toothless…”
- Mr. Mossberg testified that he did not recall EVER reading any of Indymac’s public disclosures or hearing me or anyone else discuss the company.
- Mr. Mossberg testified that he made his decisions to purchase Indymac stock solely at the recommendation of an independent financial advisors newsletter, to which he had subscribed for many years.
- Mr. Mossberg testified that he bought 1,000 shares in December, 2007; increasing his total ownership of Indymac by 1/3rd many months after he alleges “the truth of my securities fraud was revealed” on March 1, 2007.
- Mr. Mossberg made clear that he and his attorneys do not expect this matter to go to trial; they expect a settlement. Based on Mr. Mossberg’s age and health and statements, it is clear that if we were to go to trial, you could see Mr. Mossberg “drop out”. Judge Wu basically in his ruling says the plaintiff doesn’t matter, in clear violation of the PSLRA law.
Read Mr. Mossberg’s deposition and the other class certification documents attached and tell me with a straight face that Mr. Mossberg meets the following legal citing, from Judge Wu’s ruling: “Any lingering uncertainty, with respect to the adequacy standard in securities fraud class actions, has been conclusively resolved by the PSLRA’s requirement that securities class actions be managed by active, able class representatives who are informed and can demonstrate they are directing the litigation. In this way, the PSLRA raises the standard (plaintiff) adequacy threshold.”
Judge Wu, himself then goes on to say, “In any event this discussion effectively is beside the point here, as the general or standard Rule 23 analysis is enough to raise an eyebrow at the proposition that Mossberg should be named class representative in this action.”
So, how did Judge Wu certify this class action lawsuit against me, with Mr. Mossberg as the lead plaintiff? He certainly did not follow the law under the PSLRA. His own words and citings in his ruling clearly show that he erred and ignored the law.
Judge Wu has made it clear in his ruling that he really doesn’t care who the plaintiff is: ”On the other hand, even if Mossberg’s counsel affirmatively elected not to take advantage of the opportunity the Court now presents it with to procure another representative or co-representative, it would not be an extraordinary surprise to learn that the Ninth Circuit gave them yet another opportunity, if it saw fit to disagree with this Court’s adequacy analysis.”…..in direct violation of the law under the PSLRA. If the plaintiff does not matter or can be replaced years into a case, they are clearly a “straw man” plaintiff who would not be able to meet the PSLRA requirement to be “directing the case”. How can you “direct a case” that you have not been involved in for more than four years????
It is clear to me that Judge Wu doesn’t agree with or believe in or is choosing not to enforce the PSLRA’s heightened pleading requirements for plaintiffs. Why? I don’t know, but this statement in his ruling is particularly galling and to me shows bias: “Finally, where, as here, “recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis, this factor, weighs in favor of class certification”. What about me? I am an individual too. I didn’t sue anyone, they sued me. What about the millions it is going to cost me to defend myself, as a result of Judge Wu’s incorrect rulings on Scienter and on Class Certification?
Here is what a knowledgeable friend who reviewed his matter wrote to me.
“What a crock! Dredge up an 88 year old guy in New Jersey as your front man??!! These lawyers have no down side other than the investment of their own time. We need stronger rules re: bringing frivolous suits and wasting taxpayer money. If your case gets thrown out and is shown to be without merit, you (should have to) pay a hefty fee to more than cover court costs and reimburse all costs incurred by the defendant. This ability to consume others’ resources without any notable risks is a big flaw in our system.”
I could not agree more.
The 9th Circuit and Congress, help…..Federal Judges like Wu are ignoring the law under the Private Securities Litigation Reform Act of 1995. This has major repercussions for businesses and our economy, because these frivolous securities lawsuits cost a lot of time and money and frankly discourage leadership and capital formation which are key to economic growth. Think about it. If you follow closely what is happening to me and others like me, as a result of losing our firms in this unprecedented financial crisis, you would be crazy to aspire to take your company public or lead a public company. Businesses fail….that is part of capitalism…..a healthy part, it should not be seen as a financial bonanza for frivolous litigation.
Finally, Judge Wu said the following is his ruling: “The lion’s share of any trial in this matter will no doubt center on questions….the common questions….of the truth or falsity of Perry’s and Indymac’s statements, scienter, and loss causation.”
In failing to do his job properly, Judge Wu has put me in the difficult position of deciding to spend millions to defend myself against these completely meritless allegations or settle, because I have other important meritless litigation to fight and limited time and resources to do so. That being said, I am leaning towards seeing this matter through to a win in court, no matter what the cost to me personally. People think the mortgage markets were screwed up; if they only knew how our legal system truly works.
Here are a few other comments from Judge Wu’s ruling and my response:
“The trial court must conduct a “rigorous analysis” to determine whether the party seeking certification has met the prerequisites of Rule 23 of the Federal Rules of Civil Procedure”.
Judge Wu’s own comments from his ruling clearly show he did not meet the prerequisites of Rule 23.
“Mossberg has informed the Court that co-named plaintiff, Wayman Tripp, will be unable to continue to serve as a representative of the class due to illness.”
This goes to my view expressed above that Judge Wu has not followed the PSRLA law requiring the plaintiffs to “direct the case”, as opposed to their attorneys. Mr. Tripp was the co-defendant and has Alzheimers, how could he have been co-directing the case? Also, Mr. Mossberg testified under oath that he and Mr. Tripp had never met or discussed the case. So clearly, this is evidence of a case “directed by plaintiffs’ attorneys, with “straw man” plaintiffs.
“Under the PSLRA a plaintiff must proffer a sworn certification indicating, among other things, that he , she or it is not acting at the behest of counsel and has reviewed the complaint and authorized its filing.”
Mr. Mossberg testified under oath that he did no such thing. He testified that he did not review any of his attorney’s legal documents in advance of their filing (and therefore could not have authorized their filing) . He testified that he received them after they were filed. Doesn’t this show Judge Wu that Mr. Mossberg lied under oath….either in his sworn certification or his deposition?
“This entails some measure of involvement or vigor on the class representative’s part, perhaps especially in the securities litigation arena.”
From Mr. Mossberg’s testimony the only thing he seems to vigorously pursue is where is the closest bathroom!
Judge Wu citing from “Cooper”:
“The class representatives are familiar with the facts and theories of this case. Each of the class representatives has declared to the Court that they have supervised and monitored the progress of the litigation, including the reviewing of quarterly updates from the class counsel and supervising subordinates who collected discovery materials. The class representatives have given their depositions in this case demonstrating their knowledge of the issues involved in the case….given the extensive holdings of the class representatives, and the importance of the funds under their management, the class representatives are extremely likely to pursue this suit with vigor.”
That is the type of Plaintiff that is supposed to pursue securities litigation cases and Judge Wu knows it. Under the PSLRA, the largest shareholders; generally institutions are supposed to take the lead. It is should be suspicious to Wu that they did not….not one of them. Here is what Wu has allowed with Mr. Mossberg (and I sure even this involved a lot of coaching on the plaintiff attorney’s part):
“He relatively accurately summarized the allegations in the lawsuit. He knows the name of the judge handling this case. He knows the Ninth Circuit has been asked to review one of the Court’s decisions thus far, knows there have been mediation/settlement efforts, has met with his attorneys in person twice, spoken with them on the phone numerous times, and has received materials from and sent materials to his attorneys, by way of mail, on at least several occasions, has an at-least-somewhat-reasonable explanation of “what it means to be a class representative”, he believes he can fulfill those duties and that he has done so to this point, is familiar with the course of the pleading versions filed in the case, is familiar with at least some of the key documents filed in this case, and has on occasion, when necessary , asked his attorneys questions about some of those documents.”
Just contrast Judge Wu’s list above (which is embarrassingly like my youngest daughter’s report card….when she was in 1st grade!!!) with “Cooper”. It seems biased against me and for the plaintiffs that he goes to such lengths to defend Mossberg’s qualifications.
Judge Wu (additional citing from “Cooper”):
“(t)he class representatives in this case do not have troubling traits that suggest this is a lawyer-driven litigation by a manufactured plaintiff out to make a quick buck.”
Judge Wu’s own ruling combined with Mr. Mossberg’s sworn deposition makes clear that this complaint against me is entirely “lawyer-driven litigation by a manufactured plaintiff”. Again, Judge Wu is ignoring the PSRLA law. Why?
“There is no question that an ideal class representative would be much more engaged than Mossberg has been here. In fact, one might call this borderline.”
If Mossberg is not well below the borderline (and clearly many of Judge Wu’s highly inconsistent statements in this order show he is), I don’t know who is.
“The Court cannot expect Mossberg (or, frankly, any class representative) to sit at home typing up pleadings, briefs, and other relevant documents, asking only that his lawyers sign them as officers of the Court.”
To me, this statement is so far from the truth and irrelevant that to me again it shows bias on the part of Judge Wu. Just follow the law here Judge Wu and plaintiffs. Mr. Mossberg has not directed this case in any way. He is a “straw man”. He testified under oath that he never reviewed any of his attorneys filings before they were made, never made a suggestion for even an edit, and he could not recall making a single suggestion about the case to his attorneys….other again, that he could not travel long distances without being near a restroom.
“..the Court may not find Mossberg to be an adequate representative on his own. In the end, however, a rejection of Mossberg as a class representative would not necessarily mean an end to this case. The Court would allow Mossberg’s counsel to look for other suitable representatives or co-representatives (perhaps even Claude Reese, the only applicant to become lead plaintiff at the beginning of this action other than Tripp and Mossberg).”
Clearly, Judge Wu knows that Mossberg is not qualified. He keeps bringing it up in his own ruling. I don’t understand how if he properly ruled under the PSRLA that Mossberg was out that the case would not be dismissed. How can a new plaintiff meet the “qualification” requirements to have directed the case? By allowing a new plaintiff to come it four years into this case, isn’t he saying the plaintiff does not matter, in violation of the PSLRA? And step back for a moment, Indymac was mostly owned by large institutional shareholders. Not one institution was willing to be a plaintiff. Not one. And four years into this case, one co-plaintiff stepped down due to Alzheimers leaving Mossberg who is clearly unqualified and Judge Wu says, “Why don’t you go back and get that one other guy from several years ago who wanted to be the lead plaintiff”? That sure seems biased to me, doesn’t it?
Sent: Thursday, November 17, 2011 2:26 PM
To: Michael Perry
Subject: judge wu
I pulled this off a judge rating site regarding Wu. Well written so not just some pissed off slacker. It’s somewhat consistent with other comments:
Civil Litigation – Private
Comment #: 10032
He maintains a friendly courtroom demeanor with an excellent clerk, but he is otherwise a disaster. He micromanages to a degree that his calendar is always overfull with return hearings. As a result, he is never prepared for argument, and has rarely read any of the papers. He wings everything, including criminal sentencing, which is a disgrace. He makes up for this by invariably sentencing for less than the proposed term, for the most peculiar reasons. In civil cases, he is the most plaintiff-favorable judge in the District Court, perhaps because he is naturally indecisive, and so reasons that he’ll not be overturned by keeping the case alive. He is very intelligent, and has the ability to be very, very much better than he presently is. He is a great disappointment