Fact That Some Class Members May Not Have Suffered Injury Does Not Make Class Certification Inappropriate
HERSHEY v. PACIFIC INVESTMENT MANAGEMENT CO. (JULY 7, 2009)
A number of investors sold 10-year U.S. Treasury notes short and, between May 9 and June 30, 2005, bought futures contracts in settlement of their obligations. These investors brought a class action against Pacific Investment Management Co. (PIMCO), alleging that PIMCO violated the Commodity Exchange Act by cornering the market in certain Treasury notes. The class alleges that PIMCO increased its ownership of the notes to the point where it created a monopoly price, resulting in losses to the class of more than $600 million. PIMCO challenged the class definition. It pointed out that many class members did not lose money because of the net effects of multiple trades. The district court certified the class. PIMCO appeals.
In their opinion, Judges Posner, Evans and Tinder affirmed. The Court rejected PIMCO's argument that a district court had to determine which class members suffered damages before certifying a class. The standing requirement is satisfied as long as one member of the class has a plausible damage claim. The fact that a class member ultimately is shown to have not been injured does not preclude class certification. The Court cautioned, however, that a class should not be certified if it appears that many class members have suffered no injury. Although the Court did not believe that to be the case, it invited PIMCO, on remand, to find out through a random sample of depositions. The Court also rejected PIMCO's argument that a conflict of interest existed among class members because they purchased the notes at different times. The conflict was only hypothetical and may never materialize.
