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Abstract
In December 2004, Judge Denise Cote of the Southern District of New York ruled on summary judgment motions by the defendant underwriters of two WorldCom public securities offerings. The opinion (In re WorldCom, Inc Securities Litigation) is of great interest - and concern - to underwriters and their advisers. It contains, after a long judicial silence, an extensive analysis of underwriters' defences under Section 11 of the Securities Act and highlights challenges in establishing them, particularly at the summary judgment stage of a lawsuit. As a result of the decision, investment banks must reconsider the due diligence burden they face in preparing to underwrite shelf-registered securities offerings. WorldCom is a class action focusing on the company's $5 billion and $11.9 billion debt offerings made in May 2000 and May 2001, respectively. At the heart of the case is WorldCom's fraudulent accounting, which caused the registration statements to contain misleading financial information.