In re Micro Focus International plc. Securities Litigation

Background

On September 29, 2020, the court granted defendants’ motion to dismiss the Second Amended Class Action Complaint. Judgment was entered, and the case was closed the next day. The lead plaintiff appealed the dismissal, but the parties withdrew the appeal by stipulation, which the Second Circuit approved on April 30, 2021.

On June 17, 2021, the lead plaintiff moved for preliminary approval of a proposed class settlement. The parties had agreed to settle the action for $15 million in cash, subject to court approval. State plaintiffs in a consolidated proposed securities class action in California state court, along with members of the proposed class in this case, objected. They argued that the federal court lacked subject-matter jurisdiction, that approval could improperly block the state-court action, and that the proposed settlement, allocation plan, and notice were flawed.

Jurisdictional briefing and appeal

The court ordered briefing on whether it still had jurisdiction after dismissing the case in its entirety. At the lead plaintiff’s and defendants’ request, the Second Circuit reinstated the previously withdrawn appeal. The parties then sought a conference related to the Second Circuit’s deferral of a joint request to send the case back to the district court for settlement purposes.

Federal Rule of Civil Procedure 62.1 allows a district court, when a pending motion may involve issues under review on appeal, to defer the motion, deny it, or state that the motion raises a substantial issue—or that the court would grant it if the appeals court sent the matter back. The district court may decide the motion if the appeals court remands the case for that purpose.

Ruling

Judge Andrew L. Carter, Jr. stated that he had not yet decided whether, after dismissing the case, he could consider the motion for preliminary settlement approval. He ruled that the motion and the supplemental jurisdictional briefing raised a substantial issue about whether the district court continued to have jurisdiction to oversee the settlement. He noted both the strong public policy favoring settlements in the Second Circuit and the requirement that federal courts hear only live cases or controversies.

The court stated that, if the Second Circuit remanded the action, it would consider the motion, including the jurisdictional questions. The order did not approve or deny the proposed settlement and did not resolve the jurisdiction issue. Because the motion raised a substantial issue, the lead plaintiff and defendants were directed to promptly notify the Second Circuit’s clerk, and the district court clerk was directed to send the order to the circuit clerk.