Opinion
Civil No. 02-611-KI.
September 24, 2002
Marc L. Godino, Michael D. Braun, Stull, Stull Brody, Los Angeles, CA, Justine Fischer, Portland, Oregon, Attorneys for Plaintiff.
Rodney E. Lewis, Jr., Davis Wright Tremaine, LLP, Portland, Oregon, Attorney for Defendant.
N. Robert Stoll, Gary M. Berne, Timothy S. DeJong, David F. Rees, Stoll Stoll Berne Lokting Shlachter, P.C., Portland, Oregon, Attorneys for Movant and Proposed Lead Counsel.
OPINION AND ORDER
Several related proposed class actions have been filed in which investors allege that defendant Computerized Thermal Imaging, Inc. ("CTI") and the individual defendants violated the Securities Exchange Act of 1934 and Rule 10b-5. Several individuals are competing to be lead plaintiff. Before the court is the Motion to Appoint Croft Group as Lead Plaintiffs and Stull Stull Brody Lead Counsel and for Consolidation of all Related Actions (#6) and Motion to Appoint John Moranville Lead Plaintiff and to Approve his Choice of Lead Counsel (#9).
DISCUSSION
The Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C. § 78u-4, sets forth a mechanism for selecting the lead plaintiff in a securities class action litigation. The court is to select as lead plaintiff the one "most capable of adequately representing the interests of class members." Id. at § 78u-4(a)(3)(B)(i). There is a rebuttable presumption that the plaintiff with the largest stake in the controversy will be the lead plaintiff. Id. at § 78u-4(a)(3)(B)(iii).
Thus, the court is to compare the financial stakes of the various candidates for lead plaintiff, using rational and consistent accounting methods, and decide who has the most to gain from the lawsuit. Then, based on information provided by that plaintiff in pleadings and declarations, the court is to determine if he satisfies the requirements of Fed.R.Civ.P. 23(a), in particular the requirements of "typicality" and "adequacy." If so, he becomes the presumptively most adequate plaintiff. If not, the court repeats the inquiry with the candidate having the next-largest financial stake until locating a plaintiff who is willing to serve and who satisfies the requirements of Rule 23. In re Cavanaugh, 2002 U.S. App. Lexis 18846, *9 n. 4 (9th Cir. 2002).
Then, the other prospective plaintiffs have an opportunity to rebut the presumptive lead plaintiff's showing that he satisfies Rule 23's typicality and adequacy requirements. Id. at *10.
John Moranville has damages of $50,762, calculated using the mean trading price of CTI's common shares over a 90-day period beginning with the last day of the class period. The Croft Group consists of Crawford and Catherine Croft with $151,171 in damages, Jeffrey Arceri with $89,446 in damages, and Robert Dressler with $75,877 in damages, for a group total of $316,494. The Croft Group has the largest financial stake among the proposed lead plaintiffs in this action. I acknowledge Moranville's arguments concerning groups formed to compete for the position of lead plaintiff and agree that this issue was not analyzed inCavanaugh. The statute allows for a group of persons to collectively serve as lead plaintiff, however, and a group was approved in Cavanaugh. I do not see adequate reasons to distinguish the situation before me. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I).
Moranville's motion stated his losses in excess of $57,000 but he has not objected to the recalculation. The analysis would be the same using either figure.
Now, I must examine the Croft Group in light of the requirements of Rule 23.
The class certification typicality requirement assures that the interests of the named representative aligns with the interests of the class. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). Typicality factors are whether: (1) other members have the same or similar injury; (2) the action is based on conduct which is not unique to the named plaintiffs; and (3) other members have been injured by the same course of conduct. Id.
All members of the Croft Group purchased CTI shares of stock on the open market during the class period. Thus, their injury, alleged caused by defendants' misrepresentations, is typical of the injury alleged on behalf of the proposed class.
Two factors are considered for the adequacy requirement: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members; and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class? Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998).
I know of no possible conflicts between the Croft Group, and their counsel, versus other class members. All suffered the same injury differing only in magnitude. The Croft Group members have certified that they are willing to undertake the responsibilities of lead plaintiff. All spoke directly with one of their attorneys concerning their duties if selected. Their losses are sufficiently large to assure vigorous prosecution. The Croft Group has selected a law firm with extensive experience in securities cases, litigating hundreds of actions with recoveries as high as $200 million. I conclude that the Croft Group has made an sufficient showing on the adequacy requirement.
Thus, the Croft Group is the presumptively most adequate plaintiff.
Moranville has had an opportunity to rebut the Croft Group's showing that they satisfy Rule 23's typicality and adequacy requirements. He focuses on adequacy, contending that the Croft Group's law firm picked a collection of class members who satisfy the financial requirements but do not know each other. Moranville argues that this unconnected group will be controlled by its lawyers, rather than the other way around as contemplated by the PSLRA.
Moranville's arguments are speculative. The size of the investments by the individual members of the Croft Group indicate their experience as investors. They all made the initial contact with to law firm. To conclude that the Croft Group is unable to adequately represent the group would require a large leap.
Moranville has not rebutted the presumption that the Croft Group should be named lead plaintiff.
CONCLUSION
Motion to Appoint Croft Group as Lead Plaintiffs and Stull Stull Brody Lead Counsel and for Consolidation of all Related Actions (#6) is granted in its entirety. Motion to Appoint John Moranville Lead Plaintiff and to Approve his Choice of Lead Counsel (#9) is denied. Lead Counsel shall immediately submit to the court an original order in the form of the proposed order. Within 30 days, lead counsel shall confer with the other attorneys and either file a motion proposing a stipulated schedule to the court or contact the court to request a scheduling conference.
IT IS SO ORDERED.