Plaintiffs’ lawyers must identify anonymous witnesses in Aeropostale securities fraud case

“There are no ‘confidential witnesses’ in this case,” judge writes

Some witnesses in a securities fraud lawsuit against clothing retailer Aeropostale Inc. are anonymous no more. U.S. District Judge Colleen McMahon has ordered the plaintiffs’ lawyers (representing the city of Providence, R.I.) to identify nine witnesses who were cited anonymously in the complaint.

The lawsuit itself dates back to October 2011, when Providence alleged that Aeropostale was concealing problems from its investors—namely too much inventory and not enough sales. Once revealed, the problems caused the company’s stock price to drop. When McMahon declined to dismiss the lawsuit in March, the case moved into discovery, prompting the order to reveal the witnesses.

According to Thomson Reuters, plaintiffs’ lawyers frequently include confidential witnesses in securities fraud cases, who are often former employees of the company being sued. But defendants tend to feel that the allegations of these witnesses can be unsound.

In this case, the plaintiffs’ lawyers strategy was to “dump them in a long list of names,” and let the defendants try to figure out who was who. But McMahon wasn’t having it.

"Actually, I can resolve this,” she wrote.  "There are no 'confidential witnesses' in this case. Identify them immediately."

 

For more InsideCounsel coverage of securities lawsuits, see below:

N.Y. attorney general drops damages claim against ex-AIG CEO

JPMorgan must face lawsuit over Lehman investments

Amgen’s effect on securities class actions

SEC’s fraud enforcement will likely slow down

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