Duane Morris Class Action Review - 2023 - Report - Page 338
class certification because it failed to apply the required rebuttable presumption that if
an employer's records show no meal period, a rebuttable presumption arises that the
employee was not relieved of duty and no meal period was provided. The California
court of appeal agreed. It determined that when an employer has failed to document
that its employees took meal breaks, the trial court must apply a rebuttable presumption
that no meal breaks were provided. Because the trial court failed to apply the required
presumption, this undermined the whole of its analysis. Id. at *15. The court of appeal
reversed and remanded for further proceedings to allow the trial court to reevaluate is
certification analysis. Id. at *16.
Colorado
When analyzing a request for class certification based on federal securities laws, state
courts will closely examine whether plaintiffs adequately stated an underlying federal
securities violation.
For example, in Jagged Peak Energy, Inc., et al. v. Oklahoma Police Pension And
Retirement Fund, 2022 Colo. LEXIS 1034 (Colo. Nov. 21, 2022), the plaintiff, the
Oklahoma police pension system, filed a securities class action lawsuit under the
Securities Act of 1933 against executives and directors of the drilling company and the
investment banks underwriting the IPO, which involved the sale of over 31 million
shares at $15 per share to the public. Id. at *4-5. The pension system provides pension
and disability benefits for municipal police officers and purchased shares traceable to
the IPO. The plaintiff alleged that within a short time after its investments, facts emerged
that the defendants negligently overstated the company’s ability to increase its oil and
gas production. One of the statements at issue was that the defendant asserted that it
was going to increase shareholder value through the following strategy: “maximize
returns by optimizing drilling and completion techniques through the experience and
expertise of our management and technical teams.” Id. at *7. The plaintiff argued that
the statements were false because the company knew that it hired inexperienced
employees and wasteful contractors who had deals that incentivized overbilling. The
defendants argued that the statements at issue were mere puffery. The trial court was
unpersuaded by the defendant’s argument and the defendant appealed. The Colorado
Supreme Court upheld the trial court’s decision and allowed the securities class action
to move forward because the plaintiff’s allegations included additional context that the
company’s in-house geologists were inexperienced and incompetent, that company had
previously entered into bad deals leading to significantly increased costs, and that the
company’s CEO was aware of drilling site problems. Id. at *32. Although a close call for
the Supreme Court, because the analysis includes looking at facts in hindsight, it was
satisfied that the plaintiff sufficiently alleged misrepresentations that were misleading at
the time of the IPO, and not just in hindsight.
Delaware
Delaware is a forum where securities fraud and commercial class action litigation is
paramount. Over the past year, it decided a significant class action involving a securities
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Duane Morris Class Action Review – 2023
