Facebook’s IPO Legal Battle Kicks Off in Federal Court
While Facebook, its board, its IPO underwriters (which include Morgan Stanley , Goldman Sachs , and JPMorgan ), and the Nasdaq may be eager to forget about the social network’s much-maligned May debut, the group was reminded today that disgruntled investors will not let the issue die anytime soon.
Thursday marked the unofficial "day 1" of an ensuing massive legal battle between investors and the social network’s IPO posse, as lawyers gathered in Manhattan federal court to wage their first real battle of the case: lawsuit consolidation.
With roughly fifty legal actions stemming from the IPO (from parties all across the nation), Facebook argued in a Manhattan federal court Thursday that all cases should be merged and consolidated into New York’s Southern District. It’s common practice in class action litigation to consolidate similar cases into a single district, but Facebook’s specific request was not without its objectors and controversy.
In a court Thursday, a lawyer for Nasdaq argued that a massive class action consolidation might be unfair if it extends through the life of a trial due to the circumstances of their cases -- which involve order execution and trading. The exchange has received support from certain plaintiffs arguing on similar grounds.
Judges presiding over the matter expressed confidence that cases could still be transferred to the Southern District in such a way as to alleviate Nasdaq's concerns.
Others investors argued that the cases should instead be moved to a California court, closer to where Facebook is headquartered. Lawyers for Nasdaq and Facebook objected to those requests.
The presiding judge did not issue a ruling following the conclusion of the hearing, instead saying the court would take the matter under submission. Lawyers close to the case expect a ruling sometime soon.
If consolidation is approved, as some experts anticipate, then a lead plaintiff will be named to represent investors. The consolidated group of plaintiffs would then be tasked with putting together a new complaint, which could, for the first time, disclose what kinds of monetary damages Facebook, its board, and its underwriters might be facing.
Lawyers for Nasdaq and Facebook declined to comment following the hearing.