Ally Financial Wins Securities Dismissal in State Court After Pivotal Supreme Court Ruling; S&C Partner Marc De Leeuw Recognized in The American LawyerJanuary 11, 2019
Ally Financial Inc. obtained the dismissal of a securities class action in Michigan state court this week, relying on S&C as counsel. This decision is one of the first defense victories in a state court to follow the Supreme Court's ruling in Cyan Inc. v. Beaver County Employees Retirement Fund that state courts have jurisdiction over class actions brought under the Securities Act of 1933. Marc De Leeuw headed the S&C team, and the impressive win led to The American Lawyer recognizing him as a “Litigator of the Week” runner up. This win also serves as a posthumous tribute to S&C litigation partner Daryl Libow, who passed away last November at age 59 and played a key role in the victory.
In the case, two lead plaintiff pension funds maintained that Ally had deceived investors about its subprime car loan practices when the U.S. Treasury sold its shares of the company to the public in a 2014 IPO. Plaintiffs sought damages under Sections 11, 12 and 15 of the Securities Act of 1933 based on an alleged “explosion of losses” at Ally in 2016 and 2017 that, they claimed, totaled $750 million.
Before the Supreme Court's Cyan ruling, defendants often succeeded in removing '33 Act class actions like these to federal court. But in Cyan, the Court unanimously held that state courts have jurisdiction over these cases. As a result, plaintiffs can now use state courts to try to circumvent some of the procedural restrictions of the Private Securities Litigation Reform Act and take advantage of what may be perceived as more plaintiff-friendly state courts and procedural standards. After the Cyan decision, Ally had to proceed in Michigan state court.
Marc convinced Judge Brian R. Sullivan of the Circuit Court for the County of Wayne to dismiss the shareholders' claims against Ally. He persuaded the Judge that Ally had adequately disclosed its subprime operations in its IPO documents. In addition, the Judge held, the plaintiffs hadn't shown that any alleged faulty underwriting practices negated Ally's statements in its IPO filings. “The actions of a few errant loans in practice doesn't render the statement in the documents false,” the Judge wrote.