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Peil v. Nat'l Semiconductor Corp. - 86 F.R.D. 357 (E.D. Pa. 1980)

Rule:

A class representative need not be the best of all possible representatives but rather one that will pursue a resolution of the controversy with the requisite vigor and in the interest of the class. What is "requisite" is determined by considering the nature of the litigation and the factual and legal basis underlying it; necessarily a case-by-case analysis. To require a person unschooled in the realm of our complex and abstract securities laws to have first-hand knowledge of facts cloaked in an alleged conspiratorial silence and which present themselves as a wrongdoing that may be actionable would render the class action device an impotent tool. In order to responsibly allege and later adequately prove the accusations contained in the plaintiff's complaint, the plaintiff's counsel must have engaged in and will engage in extensive investigation and discovery conducted with a working knowledge of the securities laws. 

Facts:

Plaintiff investor R.K. Peil filed a claim against National Semiconductor Corporation, alleging that the other defendants Charles E. Sporck and Peter J. Sprague, who were the President and the Chairman of the Board of NSC, respectively, engaged in a conspiratorial course of conduct to artificially inflate the value of NSC stock in order to permit Sporck and Sprague to dispose of their privately owned shares at the inflated value. Peil contended that defendants Sporck and Sprague actively misrepresented and failed to disclose facts that hindered potential and actual investors from gaining an accurate portrayal of the financial condition of NSC. As a result, many investors sustained losses when the market finally reflected the actual value of the stock. Peil, who sought to represent all the persons or entities who purchased the National Semiconductor Corporation’s common stock and who were damaged by Sporck’s and Sprague’s conduct, thereafter filed a motion pursuant to Fed. R. Civ. P. 23(c)(1) for the action to be declared as a class action.

Issue:

Should the action be declared as a class action?

Answer:

Yes.

Conclusion:

The District Court granted the investor's motion. The Court concluded that the class was arithmetically numerous so that joinder would be inconvenient and impractical. The court determined that the investor's interests were not antagonistic to the common interests of the class, and he was an adequate class representative pursuant to the requirements of Fed. R. Civ. P. 23(a)(4). The Court found that the crux of the claims were typical with one another. The Court deemed that the class action was far superior to any alternative method of litigating the controversy. The best notice practicable under Fed. R. Civ. P. 23(c)(2) would be obtained by a first class mailing.

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