In recent cases involving the issuance of multiple classes of securities under shelf-registration statements, shareholders who purchased certain classes of securities, but not others, have attempted to assert securities fraud claims on behalf of purchasers in all classes. Certain courts have adopted this liberal view of standing, and widespread adoption of that position raises a clear threat: claimants' attorneys would only need to find a single disgruntled shareholder to bring a potentially massive class action lawsuit that dramatically raises the stakes for defendants and creates insurmountable pressure to settle early.

In In re Countrywide Financial Corporation Securities Litigation (588 F.Supp. 2d 1132, 1164 (C.D. Cal. 2008)) (Countrywide), a shareholder asserted claims under Section 11 of the Securities Act of 1933 based not only on debt instruments it purchased, but also on three classes of notes it did not buy; according to claimant, it had standing to assert claims with respect to all of these securities because they were offered under the same shelf-registration statement.

The defendants moved to dismiss on the ground that the claimant lacked standing with respect to the notes, arguing that the plain language of Section 11 limits claims to "any person acquiring such security" (Countrywide, at 1165). Although acknowledging that the offerings were made under different pricing supplements (and so different registration statements), the Court decided that the claimant nonetheless had statutory standing to assert claims for all the securities at issue, regardless of whether the claimant actually purchased them. The Court explained that "[s]o long as (1) the securities are traceable to the same initial shelf registration statement and (2) the registration statements share common 'parts' that (3) were false and misleading at each effective date, there is Section 11 standing" (Countrywide, at 1166).

While claimants in subsequent suits jumped on the Countrywide bandwagon, several courts have recently rejected that Court's analysis. For example, in Plumbers' Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corporation (658 F.Supp. 2d 299, 303 (D. Mass. 2009)) (Nomura), the Court was presented with the question of whether the claimants could assert claims based on mortgage-backed certificates issued by eight trusts when it had only purchased in two of the offerings. The court held that plaintiffs did not have standing with respect to all of the certificates because each of the trusts was a separate legal entity that issued its own securities backed by different pools of mortgages and the claimants could not therefore "allege an injury caused by the purchase of Certificates that they themselves never purchased." (Nomura, at 303).

Nomura is also noteworthy because the claimant attempted to delay the Court's ruling on standing by arguing that the question should be resolved at the class certification stage (when the Court is asked to decide, among other things, whether the questions of law and fact underlying the claims of the putative class members are sufficiently common), not on the pleadings. Such a delay would cause the defendants to incur substantial costs – federal law only stays discovery until resolution of the defendants' motions to dismiss.

The Court refused the claimant's invitation to postpone consideration of what it considered to be a "threshold inquiry," explaining that the fact "[t]hat a suit may be a class action . . . adds nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured." (Nomura, at 304). It reasoned that "to hold otherwise would shunt aside the inevitable risk that any plaintiff could sue a defendant against whom the plaintiff has no claim in a putative class action on the theory that some member of the hypothetical class, if a class were certified, might have a claim." (Nomura, at 304).

Two cases decided earlier this year (NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 08 Civ. 10783 (S.D.N.Y. Jan. 28, 2010) and In re Lehman Brothers Securities and ERISA Litigation, No. 09 MD 2017, 2010 U.S. Dist. LEXIS 13856 (S.D.N.Y. Feb. 17, 2010)) also rejected Countrywide and dismissed for lack of standing all claimants' claims based on offerings of mortgage-backed certificates which they did not purchase. Both dismissals were significant for defendants. In Goldman Sachs, the Court dismissed the claimants' claims with respect to 15 of the 17 offerings at issue. And in Lehman Brothers, the Court dismissed the claimants' claims with respect to 85 of the 94 offerings in question. Like Nomura, the courts in Goldman Sachs and Lehman Brothers rejected the claimants' arguments that resolution of the standing inquiry should be delayed until class certification as well as the claimants' theory that allegations of "common" misrepresentation and omissions are sufficient to create standing. Therefore, while the outcome remains uncertain, courts appear to be moving in the direction of dismissal of class claims based on securities that claimants did not purchase.