McIntire v. China MediaExpress Holdings, Inc.
38 F. Supp. 3d 415
S.D.N.Y.2014Background
- Lead plaintiffs seek class certification for CCME securities claims under the Exchange Act; class period Apr 1, 2010–Mar 11, 2011.
- DTT HK served as CCME’s auditor from Dec 4, 2009–Mar 11, 2011; CCME filed 2009 Form 10-K with an audit report by DTT HK.
- Citron Research (Jan 31, 2011) and Muddy Waters (Feb 3, 2011) published reports questioning CCME’s fraud and accounting; CCME’s stock fell thereafter.
- DTT HK sent a March 3, 2011 letter outlining fraud signs and resigned as CCME’s auditor on Mar 11, 2011, withdrawing its audit report.
- Trading was suspended after the resignation and resumed two months later with an 81.8% price drop; plaintiffs allege DTT HK’s misstatements inflated CCME’s price during the class period.
- Court granted class certification against DTT HK, appointing lead plaintiffs and class counsel; granted plaintiffs’ motion and denied DTT HK’s strike of Jones’s testimony.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Proposed Class meets Rule 23 requirements. | Plaintiffs satisfy numerosity, commonality, typicality, adequacy, and Rule 23(b)(3) predominance. | DTT HK contends deficiencies in reliance and predominance. | Yes; class certification granted under Rule 23(a) and 23(b)(3). |
| Whether fraud-on-the-market applies to establish class-wide reliance. | Market efficiency plus misstatements create a rebuttable presumption of reliance. | Market efficiency disputable; need for individualized inquiries. | Fraud-on-the-market presumed; market efficiency sufficiently shown. |
| Daubert challenge to market-efficiency expert Jones. | Jones qualified; event-study methodology reliable for market efficiency. | Jones’s methods flawed; not reliable. | Daubert motion denied; Jones’s testimony admissible (weight issues unresolved). |
| Whether price impact and damages theory support classwide relief. | Jones’s model supports classwide damages; Comcast framework satisfied. | Need for apportionment and evidence of price impact. | Price impact evidence insufficient to defeat class certification; Comcast-based damages theory adequate for classwide relief. |
Key Cases Cited
- Livent, Inc. Noteholders Sec. Litig., 210 F.R.D. 512 (S.D.N.Y.2002) (liberal Rule 23 interpretation to maximize private/public benefits)
- Basic Inc. v. Levinson, 485 U.S. 224 (U.S. 1988) (fraud-on-the-market presumption foundational for reliance)
- In re Vivendi Universal, S.A. Sec. Litig., 242 F.R.D. 76 (S.D.N.Y.2007) (market-wide theories of damages and predominance)
- In re Salomon Analyst Metromedia Litig., 236 F.R.D. 208 (S.D.N.Y.2006) (fraud-on-the-market presumption and reliance principles)
- In re Alstom SA Sec. Litig., 253 F.R.D. 266 (S.D.N.Y.2008) (methodology for assessing market efficiency and price movements)
- In re Pfizer Inc. Sec. Litig., 936 F. Supp. 2d 252 (S.D.N.Y.2013) (loss causation and price impact considerations in liability)