NYX » Topics » In re NYSE Specialists Securities Litigation

This excerpt taken from the NYX 10-Q filed May 11, 2009.

In re NYSE Specialists Securities Litigation

In an order dated March 14, 2009, the district court granted the plaintiffs’ motion for class certification with respect to the claims alleging violations of federal securities laws by the specialist firm defendants; those defendants filed a petition for interlocutory appeal of that order. The order does not apply to a separate claim asserted against New York Stock Exchange, Inc. alleging that it made false and misleading statements concerning the regulation and operation of its market; the dismissal of that claim was remanded to the district court in 2007, but further proceedings have not been scheduled.

In addition to the matter described above and in the 10-K, NYSE Euronext is from time to time involved in various legal proceedings that arise in the ordinary course of its business. NYSE Euronext does not believe, based on currently available information, that the results of any of these various proceedings will have a material adverse effect on its operating results or financial condition.

These excerpts taken from the NYX 10-K filed Feb 27, 2009.

In re NYSE Specialists Securities Litigation

In 2003 the California Public Employees’ Retirement System (“CalPERS”) filed a class action complaint, later consolidated with related actions, in the U.S. District Court for the Southern District of New York (“Southern District”) against the NYSE, NYSE specialist firms, and others, alleging various violations of federal securities laws and breach of fiduciary duty, on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003, and seeking unspecified money damages. In 2005 the district court granted the NYSE’s motion to dismiss, holding that the NYSE, as a self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function, and thus dismissed all the claims asserting that the NYSE had failed to effectively regulate specialists during the relevant period. The district court also held that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Second Circuit (“Second Circuit”).

In 2007 the Second Circuit issued an opinion affirming in part, and vacating and remanding in part, the district court’s decision. The Second Circuit upheld the district court’s ruling as to the NYSE’s self-regulatory immunity, but vacated the district court’s holding that the plaintiffs lacked standing to assert their claims that the NYSE made false and misleading statements. The appeals court remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had asserted in its motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation. Further proceedings in the district court have not been scheduled.

In re NYSE Specialists Securities Litigation

In 2003 the California Public Employees’ Retirement System (“CalPERS”) filed a class action complaint, later consolidated with related actions, in the U.S. District Court for the Southern District of New York (“Southern District”) against the NYSE, NYSE specialist firms, and others, alleging various violations of federal securities laws and breach of fiduciary duty, on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003, and seeking unspecified money damages. In 2005 the district court granted the NYSE’s motion to dismiss, holding that the NYSE, as a self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function, and thus dismissed all the claims asserting that the NYSE had failed to effectively regulate specialists during the relevant period. The district court also held that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Second Circuit (“Second Circuit”).

In 2007 the Second Circuit issued an opinion affirming in part, and vacating and remanding in part, the district court’s decision. The Second Circuit upheld the district court’s ruling as to the NYSE’s self-regulatory immunity, but vacated the district court’s holding that the plaintiffs lacked standing to assert their claims that the NYSE made false and misleading statements. The appeals court remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had asserted in its motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation. Further proceedings in the district court have not been scheduled.

In re NYSE Specialists Securities Litigation

In 2003 the California Public Employees’ Retirement System (“CalPERS”) filed a class action complaint, later
consolidated with related actions, in the U.S. District Court for the Southern District of New York (“Southern District”) against the NYSE, NYSE specialist firms, and others, alleging various violations of federal securities laws and
breach of fiduciary duty, on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003, and seeking unspecified money damages. In 2005 the district court granted the NYSE’s motion to dismiss,
holding that the NYSE, as a self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function, and thus dismissed all the claims asserting that the NYSE had failed to effectively
regulate specialists during the relevant period. The district court also held that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market. The plaintiffs
appealed that decision to the U.S. Court of Appeals for the Second Circuit (“Second Circuit”).

In 2007 the Second Circuit issued
an opinion affirming in part, and vacating and remanding in part, the district court’s decision. The Second Circuit upheld the district court’s ruling as to the NYSE’s self-regulatory immunity, but vacated the district court’s
holding that the plaintiffs lacked standing to assert their claims that the NYSE made false and misleading statements. The appeals court remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had
asserted in its motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation. Further proceedings in the district court have not been scheduled.

STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%">Grasso Litigation

As
previously reported, in 2004 the New York Attorney General (“NYAG”) filed a lawsuit in New York Supreme Court against Richard A. Grasso, the NYSE’s former chairman and chief executive officer, and the NYSE. Mr. Grasso
subsequently asserted claims against the NYSE for defamation and breach of contract. In

 


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2006, the court granted the summary judgment motion of the NYSE and dismissed all of Mr. Grasso’s claims against the NYSE. In 2008, the claims
asserted by the NYAG against Mr. Grasso were dismissed. On July 31, 2008, a stipulation was filed in which the NYAG, Mr. Grasso and the NYSE agreed that no party would appeal the July 1, 2008 decision of the Appellate Division of
the Supreme Court which, among other things, affirmed the dismissal of Mr. Grasso’s claims against the NYSE.

At
December 31, 2003, the NYSE accrued compensation expense amounting to $36.0 million related to Mr. Grasso. Based upon the final termination of any claims by Mr. Grasso against the NYSE, no additional payments were or will be made, and
the above-referenced accrual was reversed and included in compensation in the consolidated statements of operations for the year ended December 31, 2008.

FACE="Times New Roman" SIZE="2">In addition to the matters described above, we are from time to time involved in various legal proceedings that arise in the ordinary course of our business. We do not believe, based on currently available
information, that the results of any of these various proceedings will have a material adverse effect on our operating results or financial condition.

FACE="Times New Roman" SIZE="2">Commitments

NYSE Euronext leases office space under non-cancelable operating leases and
equipment that expire at various dates through 2029. Rental expense under these leases, included in the consolidated statements of operations in both occupancy and systems and communications, totaled $85 million, $88 million and $76 million for the
years ended December 31, 2008, 2007 and 2006, respectively.

Future payments under these obligations as of December 31, 2008 are
as follows (in millions):

Operating leases and other commitments

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 


























































































































































Year

  Office
Space
  Equipment  Other
Commitments(1)
  Total

2009

  $109  $12  $621  $742

2010

   104   5   3   112

2011

   70   4   —     74

2012

   65   1   —     66

2013

   54   —     —     54

2014-Thereafter

   224   —     —     224
                
  $626  $22  $624  $1,272
                

 





(1)Including in 2009, $250 million for the acquisition of a 25% ownership interest in the Doha Securities Market and €260 million ($362 million) for NYSE Liffe Clearing. As
previously announced, we are currently in discussions to restructure the equity investment portion of the transaction, which will likely reduce our ownership interest to 20% and our cost to $200 million, payable over several years.

NYSE Euronext had accumulated excess activity assessment fees of approximately $24 million as of December 31, 2008.
NYSE Euronext is entitled to utilize the excess fees to fund special projects of NYSE Regulation, to reduce fees charged by NYSE Regulation to member organizations or the markets that it serves, or for a charitable purpose.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">In the normal course of business, NYSE Euronext may enter into contracts that require it to make certain representations and warranties and which provide
for general indemnifications. Based upon past experience, NYSE Euronext expects the risk of loss under these indemnification provisions to be remote. However, given that these would involve future claims against NYSE Euronext that have not yet been
made, NYSE Euronext’s potential exposure under these arrangements is unknown. NYSE Euronext also has obligations related to unrecognized tax positions, deferred compensation and other postretirement benefits. The date of the payment under these
obligations cannot be determined.

 


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This excerpt taken from the NYX 10-Q filed May 14, 2008.

In re NYSE Specialists Securities Litigation

On January 16, 2008, plaintiff CalPERS filed a Petition for Writ of Certiorari in the U.S. Supreme Court, seeking review of the portion of the Second Circuit’s decision relating to the NYSE’s self-regulatory immunity. On February 19, 2008, the NYSE filed a brief in opposition, and on March 24, 2008, the Supreme Court denied the petition.

 

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In addition to the matter described above and in the prior discussions incorporated by reference herein, NYSE Euronext is from time to time involved in various legal proceedings that arise in the ordinary course of its business. NYSE Euronext does not believe, based on currently available information, that the results of any of these various proceedings will have a material adverse effect on its operating results, financial condition or cash flow.

These excerpts taken from the NYX 10-K filed Mar 25, 2008.

In re NYSE Specialists Securities Litigation

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">In 2003 the California Public Employees’ Retirement System (“CalPERS”) filed a class action complaint, later consolidated with related
actions, in the U.S. District Court for the Southern District of New York (“Southern District”) against the NYSE, NYSE specialist firms, and others, alleging various violations of federal securities laws and breach of fiduciary duty,
on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003, and seeking unspecified money damages. In 2005 the trial court granted the NYSE’s motion to dismiss, holding that the NYSE, as a
self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function, and thus dismissed all the claims asserting that the NYSE had failed to effectively regulate specialists during the
relevant period. The district court also held that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market. The plaintiffs appealed that decision to the U.S.
Court of Appeals for the Second Circuit (“Second Circuit”).

In September 2007, the Second Circuit issued an opinion affirming in
part, and vacating and remanding in part, the district court’s decision. The Second Circuit upheld the district court’s ruling as to the NYSE’s self-regulatory immunity, but vacated the district court’s holding that the
plaintiffs lacked standing to assert their claims that the NYSE made false and misleading statements. The appeals court remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had asserted in its
motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation.

On January 16, 2008, plaintiff
CalPERS filed a Petition for Writ of Certiorari in the U.S. Supreme Court, seeking review of the portion of the Second Circuit’s decision relating to the NYSE’s self-regulatory immunity. On February 19, 2008, the NYSE filed a brief in
opposition to the petition, asserting that further review of the Second Circuit’s decision is unwarranted. The Supreme Court denied the Petition on March 24, 2008.

FACE="Times New Roman" SIZE="2">We are one of numerous defendants named in a separate class action complaint in the Southern District that alleges violations of federal antitrust laws, federal securities laws, and common law, in connection with the
placing of market orders through NYSE’s SuperDOT order routing system. The complaint, which was served in August 2007, contains allegations similar to those asserted in the Specialists matter described above and seeks unspecified compensatory
damages, subject to trebling under the antitrust laws. The defendants have not yet responded to the complaint.

In re NYSE Specialists Securities Litigation

In 2003 the California Public Employees’ Retirement System (“CalPERS”) filed a purported class action complaint, later consolidated with related actions, in the U.S. District Court for the Southern District of New York (“Southern District”) against New York Stock Exchange, Inc. (“the NYSE”), NYSE specialist firms, and others, alleging various violations of federal securities laws and breach of fiduciary duty, on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003, and seeking unspecified money damages. In 2005 the trial court granted the NYSE’s motion to dismiss, holding that the NYSE, as a self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function, and thus dismissed all the claims asserting that the NYSE had failed to effectively regulate specialists during the relevant period. The district court also held that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market. The plaintiffs appealed that decision to the U.S. Court of Appeals for the Second Circuit (“Second Circuit”).

In September 2007, the Second Circuit issued an opinion affirming in part, and vacating and remanding in part, the district court’s decision. The Second Circuit upheld the district court’s ruling as to the NYSE’s self-

 

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regulatory immunity, but vacated the district court’s holding that the plaintiffs lacked standing to assert their claims that the NYSE made false and misleading statements. The appeals court remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had asserted in its motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation.

On January 16, 2008, plaintiff CalPERS filed a Petition for Writ of Certiorari in the U.S. Supreme Court, seeking review of the portion of the Second Circuit’s decision relating to the NYSE’s self-regulatory immunity. On February 19, 2008, the NYSE filed a brief in opposition to the petition, asserting that further review of the Second Circuit’s decision is unwarranted.

NYSE Euronext is one of numerous defendants named in a separate class action complaint in the Southern District that alleges violations of federal antitrust laws, federal securities laws, and common law, in connection with the placing of market orders through NYSE’s SuperDOT order routing system. The complaint, which was served in August 2007, contains allegations similar to those asserted in the Specialists matter described above and seeks unspecified compensatory damages, subject to trebling under the antitrust laws. The case is in its initial stages and the defendants have not yet responded to the complaint.

This excerpt taken from the NYX 10-Q filed Nov 13, 2007.

In re NYSE Specialists Securities Litigation

On September 18, 2007, the U.S. Court of Appeals for the Second Circuit (“Second Circuit”) issued an opinion affirming in part, and vacating and remanding in part, the district court’s dismissal of all claims against the NYSE. The Second Circuit agreed with the district court that the NYSE, as a self-regulatory organization, is immune from private lawsuits challenging the manner in which it exercises its regulatory function and therefore affirmed dismissal of all the claims asserting that the NYSE had failed to effectively regulate specialists during the period 1998-2003. The Second Circuit, however, vacated the district court’s holding that the plaintiffs lacked standing to assert that the NYSE made false and misleading statements concerning the regulation and operation of its market, and remanded the matter to the district court for consideration of other grounds for dismissal that the NYSE had asserted in its motion to dismiss, including the plaintiffs’ failure to allege reliance or loss causation. Additional proceedings with respect to the NYSE have not yet been scheduled by the district court.

NYSE Euronext is one of numerous defendants named in a separate class action complaint in the U.S. District Court for the Southern District of New York that alleges violations of federal antitrust laws, federal securities laws, and common law, in connection with the placing of market orders through NYSE’s SuperDOT order routing system. The complaint, which was served in August 2007, contains allegations similar to those asserted in the Specialists matter described above and seeks unspecified compensatory damages, subject to trebling under the antitrust laws. The case is in its initial stages and the defendants have not yet responded to the complaint.

This excerpt taken from the NYX 10-K filed May 1, 2007.

In re NYSE Specialists Securities Litigation

On December 16, 2003, the California Public Employees’ Retirement System (“CalPERS”) filed a purported class action complaint in the U.S. District Court for the Southern District of New York against NYSE, NYSE specialist firms, and others, alleging various violations of the Exchange Act and breaches of fiduciary duty, on behalf of a purported class of persons who bought or sold unspecified NYSE-listed stocks between 1998 and 2003. The court consolidated CalPERS’ suit with three other purported class actions and one other non-class action suit into an action entitled In re NYSE Specialists Securities Litigation. The court also appointed CalPERS and Empire Programs, Inc. as co-lead plaintiffs.

Plaintiffs filed a consolidated complaint on September 16, 2004. The consolidated complaint asserts claims for alleged violations of Sections 6(b), 10(b) and 20(a) of the Exchange Act, and alleges that, with the NYSE’s knowledge and active participation, the specialist firms engaged in manipulative, self-dealing and deceptive conduct, including interpositioning, front-running and “freezing” the specialist’s book and falsifying trading records to conceal their misconduct. Plaintiffs also claim that the NYSE constrained its regulatory activities in

 

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order to receive substantial fees from the specialist firms based on their profits, which “caused investors to purchase or sell shares on the NYSE at distorted and manipulated prices, enriching Defendants and damaging Plaintiffs and the Class.” The consolidated complaint also alleges that certain generalized NYSE statements concerning the operation of its market were rendered false and misleading by the NYSE’s non-disclosure of its alleged failure to properly regulate specialists, and that the NYSE was motivated to participate in or permit the specialist firms’ alleged improper trading in order to maintain or enhance its fee revenues and the compensation of its executives, including its former chairman and chief executive officer Richard A. Grasso. The consolidated complaint seeks unspecified compensatory damages against defendants, jointly and severally.

On November 16, 2004, the specialist firms and the NYSE filed motions to dismiss the complaint. On December 12, 2005, the court issued an order granting the NYSE’s motion and dismissing all of the claims against it with prejudice, and granting in part and denying in part the specialist defendants’ motion to dismiss. On February 17, 2006, the court entered a final judgment in favor of the NYSE. Plaintiffs appealed the judgment to the U.S. Court of Appeals for the Second Circuit. The Court of Appeals heard oral argument on the appeal on February 26, 2007, but has not rendered a decision.

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