By Nate Raymond
NEW YORK, Dec 6 (Reuters) - Bernstein Litowitz Berger &
Grossmann and Labaton Sucharow will be the lead law firms in
securities lawsuits arising out of Facebook Inc's $16 billion
initial public offering, according to a federal judge's ruling
The two firms represent a group of state pension funds in
North Carolina and Arkansas and other investors that were chosen
as lead plaintiffs in proposed class action litigation over the
IPO. The investors have accused Facebook of misrepresenting its
financial condition in the run-up to the May stock offering.
The ruling helps set a structure for the Facebook IPO
litigation, a headache for the social media company and a
nagging reminder of the technical glitches in what had been one
of the most hotly anticipated stock market debuts in recent
U.S. District Judge Robert Sweet in Manhattan also named
lead plaintiffs and counsel for lawsuits against NASDAQ OMX
Group Inc stemming from the IPO. NASDAQ was sued for securities
law violations and negligence over allegations that orders to
buy and sell Facebook weren't properly executed on the first day
The plaintiffs also say the company concealed information
about a slide in its revenue tied to changes in how people
accessed its popular social networking Web site.
Facebook, which has defended its pre-IPO disclosures,
declined to comment Thursday through a spokeswoman. A spokesman
for NASDAQ declined to comment on the litigation.
Since debuting at $38 per share, Facebook shares later fell
by as much as 50 percent. They closed at $26.90 on Thursday,
down 2.6 percent.
Sweet, in his written order, consolidated the cases and
picked lead plaintiffs to head up most of the 42 lawsuits before
him arising out of the IPO. The order was intended to streamline
evidence gathering and briefing, as well as provide leadership
for the lawsuits.
Under the Private Securities Litigation Reform Act, courts
routinely select a lead plaintiff, who is typically the
shareholder with the biggest losses, though judges have
discretion to pick a different investor.
The plaintiff group picked to lead 31 cases alleging
securities violations against Facebook includes the North
Carolina Retirement Systems, Arkansas Teacher Retirement System,
the Fresno County Employees' Retirement Association and Banyan
Capital Master Fund Ltd. The group has collectively claimed a
combined $7.1 million in losses.
"Its members are large, institutional investors with
experience representing shareholder classes in similar
litigation with the resources to pursue the action," Sweet said.
The pension fund group edged out a challenge by another
group including Eiffel Tower Ventures LLC that is represented by
Robbins Geller Rudman & Dowd.
The Eiffel Tower group had a smaller combined loss of $1.5
million. But its lawyers challenged picking the pension fund
group because of alleged conflicts of interest, among other
The group had argued that North Carolina Treasurer Janet
Cowell had close personal ties with Erskine Bowles, a board
member at Facebook and Morgan Stanley, the lead underwriter on
the IPO and also a defendant in some of the lawsuits. Bowles is
also a president emeritus at the University of North Carolina
and a former White House chief of staff.
Sweet, though, said even if Bowles and Cowell have
"significant personal and financial ties," there was no
indication that would have an impact on the institutional
investor group's ability to lead the class.
Max Berger, the lead attorney at Bernstein Litowitz on the
case, said North Carolina's fund would be a "tremendous lead
plaintiff" in what has become a "very important case." He said
that the Eiffel Tower group's conflict allegations were not
Samuel Rudman, a lawyer at Robbins Geller on the case,
The judge also picked investors and lawyers to lead the 10
proposed class actions against NASDAQ.
The judge said First New York Securities LLC, T3 Trading
Group, LLC, and Avatar Securities, LLC, would act as co-lead
plaintiffs in the lawsuits alleging securities law violations.
The group traded a combined $316 million in Facebook shares the
day of the IPO, the decision said.
The law firm Entwistle & Cappucci was named lead counsel for
lawsuits accusing NASDAQ of federal securities law violations.
Two other law firms, Finkelstein Thompson and Lovell Stewart
Halebian Jacobson, were named to lead cases accusing NASDAQ of
The case is In re Facebook, Inc, IPO Securities and
Derivative Litigation, U.S. District Court, Southern District of
New York, MDL No. 12-2389.
For the Institutional Investor Group: Max Berger, Bernstein
Litowitz Berger & Grossman, and Thomas Dubbs, Labaton Sucharow.
For Eiffel Tower Ventures, LLC, et al.: Samuel Rudman,
Robbins Geller Rudman & Dowd.
For the NASDAQ Claimant Group: Andrew Entwistle, Entwistle &
For the NASDAQ Negligence Parties: Michael McLellan,
Finkelstein Thompson, and Christopher Lovell, Lovell Stewart
For Facebook, Inc: Andrew Clubok, Kirkland & Ellis; and
Richard Bernstein, Willkie Farr & Gallagher.
For underwriter banks: James Rouhandeh of Davis Polk &
For NASDAQ: William Slaughter of Ballard Spahr.
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