Duane Morris Class Action Review - 2023 - Report - Page 295
A.
Procedural Rulings In Overlapping Class Actions
Fraud, stock drops, and corporate malfeasance typically spawn multiple class actions
that often involve claims under RICO. The manner and order of the litigation of multiple
lawsuits usually involves two or more courts.
A prime example of this in 2022 is Albright, et al. v. Terraform Labs, Ltd, 2022 U.S. Dist.
LEXIS 209074 (S.D.N.Y. Nov. 17, 2022). The plaintiff filed a class action alleging that
the defendants misled investors of TerraUS coins into believing that the coins were
stable and had the potential to generate high annual returns, while simultaneously
engaging in a scheme to artificially inflate their value in violation of the RICO. Another
plaintiff previously filed a class action lawsuit in the U.S. District Court for the Northern
District of California against all but one of the defendants in this matter; that action was
entitled Patterson, et al. v. Terraform Labs, Party Ltd., No. 22-CV-3600 (N.D. Cal. June
17, 2022). Patterson alleged that the defendants violated federal securities law and
California state law in addition to the RICO. As a result, the defendants in Albright filed a
motion to transfer venue to the Northern District of California pursuant to the first-filed
rule and for judicial convenience. The court denied the motion. It reasoned that although
Patterson was filed before the instant action and was brought against nearly all the
same defendants, there was a significant difference between the two cases because
Patterson asserted claims under the Securities Act of 1933 and the Securities
Exchange Act of 1934, and here the plaintiffs asserted strictly violations of the RICO.
The court ruled that the mutual exclusivity of the claims could impact the course of
litigation because treble damages are available under the RICO, but not under federal
securities statutes. The court further found that the “interest of justice” factors weighed
against transfer because the related securities class action would most certainly move
at a slower pace. Finally, the court ruled that since lead plaintiffs play crucial roles in
RICO litigation, the plaintiff’s choice of forum should be given consideration. The court
therefore denied the defendants’ motion to transfer venue.
B.
Rulings On Preemptive Motions To Strike Class Claims
As in other types of class actions, companies often utilize an aggressive posture by
attacking the class claims with preemptive motions to dismiss. The theory behind such a
motion is that no amount of discovery can shore up a defective class claim that, on its
face, could never be certified. In 2022, three different courts – two district courts as well
as the Eleventh Circuit - addressed this tactic in the context of RICO class actions.
In Haymount Urgent Care PC, et al. v. GoFund Advance, LLC, 2022 U.S. Dist. LEXIS
186768 (S.D.N.Y. Oct. 12, 2022), the plaintiffs filed a class action alleging that the
defendants’ various merchant cash advance (MCA) agreements were unlawfully
usurious loans in violation of the RICO. The defendants filed a motion to strike the
plaintiffs’ class allegations, and the court denied the motion. The court determined that
the plaintiffs plausibly alleged that the MCA agreements were entirely void under New
York law, which would mean that none of the provisions - including the class action
waivers - could be enforced. The court ruled that the MCA agreements at issue
contained broadly worded class action waiver provisions purporting to “waive any right
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Duane Morris Class Action Review – 2023
