August 01, 2018

The Judicial Panel on Multidistrict Litigation on Wednesday denied a bid from Credit Suisse to centralize four putative class actions the bank is facing from investors in its short-term notes inversely related to the stock market’s volatility index, saying there aren’t enough involved parties or lawsuits to warrant centralization.

Credit Suisse had asked that three investor lawsuits in the Southern District of New York and one in the Northern District of Alabama, each of which alleges the bank misrepresented the value of the short-term notes during a critical time of steep price drops and substantial investor losses, be centralized in the New York venue. The panel opted not to, noting the three New York actions were already consolidated and that counsel in each action said it was willing to work together on overlapping discovery efforts.

“Given the minimal number of involved counsel and actions, informal coordination of discovery and pretrial motions is practicable and preferable to centralization,” the JPML said.

Investors in each of the four actions allege Credit Suisse and its executives falsely claimed in prospectuses and pricing supplements, one of which was released on Jan. 29, that the bank would calculate the intraday indicative value of the VIX notes and update it every 15 seconds.

Those misrepresentations became evident when updates stopped coming after 4:10 p.m. on Feb. 5, the same time that volatility futures prices began changing drastically, according to two of the investor complaints. Investors allege they were buying the inverse VIX notes the bank was representing to be valued at around $24.70 when the bank knew that, based on skyrocketing volatility futures prices, the notes actually had a value of between $4.22 and $4.40. Falling to such a low triggered an “acceleration event” whereby the notes, due to mature in 2030, were prematurely redeemed by Credit Suisse on Feb. 21, they say.

Two actions were filed in New York in March, a third was filed in Alabama a month later and the fourth was filed in May, also in New York’s Southern District.

Last month, a New York federal judge consolidated the three New York actions, finding each asserted roughly the same claims about the 90 percent price drop for Inverse VIX Short exchange-traded notes, and appointed Cohen Milstein Sellers & Toll PLLC and Levi & Korsinsky LLP as lead counsel for the putative class.

With that in mind, the JPML found there were effectively only two actions in the broader litigation — the consolidated New York case and the Alabama action — and that Credit Suisse thus bears a heavier burden in demonstrating that centralization is appropriate.

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Investors in the consolidated New York action are represented by Michael B. Eisenkraft, Steven J. Toll, Eric Berelovich, Carol V. Gilden and Laura Posner of Cohen Milstein Sellers & Toll PLLC and Nicholas I. Porritt, Adam M. Apton and Alexander Krot of Levi & Korsinsky LLP.

The entire article can be accessed here.