In one of the most closely watched securities cases, FirstEnergy won an appeal with significant implications for securities fraud class actions. On August 13, the U.S. Court of Appeals for the Sixth Circuit vacated the certification of a multiyear class of FirstEnergy Corp. investors seeking extensive damages after FirstEnergy’s stock price fell in the aftermath of reports of alleged public corruption in Ohio state government. S&C was named a Law360 “Legal Lion” for the win.
When S&C was brought in to represent FirstEnergy in early 2023, the district court had already denied a motion to dismiss the securities litigation and class certification was fully briefed. Within months, S&C successfully petitioned the Sixth Circuit to grant a rare mid-case review of the district court’s class certification decision.
A unanimous Sixth Circuit held that the class certification was defective on both grounds that S&C raised on appeal and remanded the case. The appeal was supported by three groups of amicus, including industry groups, law professors and former SEC officials.
In a decision of first-impression for the Sixth Circuit, the court agreed with S&C that it should follow a Ninth Circuit ruling where the Firm prevailed for Volkswagen in a case raising similar issues. The Sixth Circuit agreed that the looser standard applicable to omissions-based claims does not apply to this case, which is instead subject to the stricter applicable to claims based on misrepresentations. The Sixth Circuit also concluded that the district court erred by failing to properly determine whether plaintiffs had provided a methodology for calculating damages on a class-wide basis. The appeals court agreed with FirstEnergy that while this standard required a “rigorous analysis,” the “district court failed to conduct any analysis at all.”
The S&C team included Robert Giuffra Jr. (who argued the appeal), Sharon Nelles, David Rein, Morgan Ratner and Max Gottschall.
This ruling is the latest in a series of achievements by S&C for FirstEnergy. Last week, in this case, the Firm obtained a Sixth Circuit stay on a mandamus petition that halted the district court’s order granting plaintiffs access to FirstEnergy’s internal investigations conducted by two other law firms. The ruling threatened to undermine the attorney-client privilege and work product doctrine. The American Lawyer’s Litigation Daily named Robert Giuffra, David Rein and Nicholas Menillo “Litigators of the Week” for this result. The Firm also helped the company resolve state and federal investigations into this corruption scandal.