Puddu v. NYGG, LTD.
- Denise Cote
- 1:15-cv-08061
- U.S. District Court · Southern District of New York
- 8
In Puddu v. NYGG, Judge Cote denied Benjamin Wey’s motion to reconsider class certification, ruling that price-impact evidence alone did not defeat the reliance presumption.
Benjamin Wey’s motion was denied, and the plaintiffs’ previously certified class remained unaffected by this order.
What happened
In Puddu v. NYGG (ASIA), LTD., Benjamin Wey asked the court to reconsider its earlier decision certifying a class of 6D shareholders. The plaintiffs relied on a rule that can presume investors relied on important omissions when deciding whether common issues predominated for class treatment.
Wey argued that he should be allowed to show that revealing his beneficial ownership of 6D shares did not affect the stock price. He relied on Supreme Court decisions concerning a different reliance presumption and submitted an expert report about the lack of price impact after the government announcements.
Judge Denise Cote denied Wey’s motion for reconsideration. She held that the plaintiffs’ reliance presumption did not depend on an efficient market and was not defeated solely by evidence that the disclosure did not immediately affect 6D’s share price.
The detailed version
- Puddu v. NYGG, LTD. · No. 1:15-cv-08061
- Denise Cote
- July 15, 2022
Background
The plaintiffs brought claims on behalf of themselves and a proposed class of 6D Global Technologies, Inc. shareholders. The opinion states that Benjamin Wey was a beneficial owner, through NYGG (Asia) Ltd., of a significant portion of 6D shares and had not publicly disclosed his relationship to NYGG (Asia) or 6D. After the Department of Justice and Securities and Exchange Commission announced an indictment and complaint against Wey on September 10, 2015, NASDAQ delisted 6D. Trading later resumed over the counter, and the stock price fell from $2.90 per share when trading was halted to $0.21 per share within four days.
The plaintiffs moved to certify a class in February 2022. The court granted that motion on June 27, 2022, finding that they satisfied the requirements of Federal Rule of Civil Procedure 23. In particular, common questions about investor reliance predominated over individual questions. The plaintiffs relied on the Affiliated Ute presumption, which allows reliance to be presumed in certain securities-fraud cases involving material failures to disclose information.
Motion for Reconsideration
Wey moved for reconsideration on July 11, 2022. A motion for reconsideration is limited to circumstances such as an intervening change in controlling law, new evidence, clear error, or manifest injustice; it is not an opportunity to reargue issues already decided. Wey had already made his price-impact argument in opposing class certification.
Wey argued that Supreme Court decisions involving the Basic presumption of reliance required an opportunity to show that the disclosure of his beneficial ownership had no effect on 6D’s share price. Those decisions allow a defendant, at the class-certification stage, to rebut the Basic presumption by showing that an alleged misstatement did not affect the stock price. Wey also submitted an expert report concluding that 6D’s share price was unaffected during the day of trading after the government announcements.
Ruling
Judge Denise Cote denied Wey’s motion for reconsideration. The court distinguished the Basic presumption from the Affiliated Ute presumption used by the plaintiffs. According to the court, Affiliated Ute focuses on whether an omission was material and does not assume that the stock market was efficient. An investor may therefore rely on a material omission even if a later disclosure does not quickly change the stock price.
The court also held that the fact that 6D shares traded on a national exchange did not make the lack of price impact during a single day sufficient to rebut the presumption. The July 11, 2022 motion for reconsideration was denied.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.