Opinion
05 Civ. 769 (CSH), 05 Civ. 974 (CSH), 05 Civ. 1029 (CSH), 05 Civ. 1557 (CSH), 05 Civ. 1895 (CSH), 05-CV-2260 (CSH), 05 Civ. 2751 (CSH).
July 26, 2005
MEMORANDUM AND ORDER
The seven captioned putative class actions allege securities fraud in respect of American Depository Shares in defendant 51job, a Shanghai-based provider of human resources in China, purchased by investors in this country. The complaints are substantively identical, almost as if the several law firms involved shared the same word processor. Each complaint alleges that the plaintiff Class consists of purchasers of the securities of 51job between November 4, 2004 and January 14, 2005.
The three individual defendants are officers of 51job.
Two motions are presently pending: (1) to consolidate these actions, and (2) to appoint lead plaintiff and to approve a selection of lead counsel. These procedural issues are governed by the Private Securities Litigation Reform Act of 1995 ("PSLRA" or "the Act"), 15 U.S.C. § 78u-4, and by Rules 23 and 42, Fed.R.Civ.P. This opinion resolves both motions.
I. Motion to Consolidate
What I have said makes it plain that these seven cases should be consolidated pursuant to Rule 42(a) because they involve common questions of both fact and law. No discussion is required. The motion for consolidation will accordingly be granted and an appropriate order entered.
II. Motion for Appointment of Lead Plaintiff and Selection of Lead Counsel
Two groups of investors vie with each other for these procedural plums. These are the so-called "Webster Group," consisting of eight investors in 51job securities, and the so-called "Mayeri Group" consisting of seven investors. Each Group moves to be appointed lead plaintiff. The Webster Group moves for the selection of the firm of Milberg Weiss Bershad Schulman LLP ("Milberg Weiss") as lead counsel. The Mayeri Group moves for the selection of the firm of Stull, Stull Brody.
A third group of investors, self-designated "the Zhou Group," had moved for comparable orders, but subsequently withdrew its motion, leaving the Court with the two competing groups identified in text.
When such competitive circumstances arise, the PSLRA mandates that the Court first decide whether the actions should be consolidated. 15 U.S.C. § 78u-4(a)(3)(B)(ii). In Part II held that an order of consolidation will be made.
The motions of the Webster Group and the Mayeri Group were timely filed under the PSLRA. The Act provides that the Court "shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereinafter in this paragraph referred to as the `most adequate plaintiff')." Subsection (a)(3)(B)(I). The Act further provides that once the Court has made that determination and appointment, "the most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class." Subsection (a)(3)(B)(v). The Act establishes a rebuttable presumption that the "most adequate plaintiff" is that plaintiff who "(aa) has either filed the complaint or made a motion [to be appointed as lead plaintiff]; (bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure."
These statutory presumptions can be rebutted only by proof that the presumptively most adequate plaintiff "(aa) will not fairly and adequately protect the interests of the class; or (bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class." Subsection (3)(B)(iii)(II). The PSLRA's reference to Rule 23, Fed.R.Civ.P., quoted in text presumably refers to the typicality and adequacy requirements of Rule 23(a).
Applying these criteria, I conclude that the Webster Group should be appointed the lead plaintiff and Milberg Weiss lead counsel.
It appears to be undisputed that the of the two remaining competitors, Webster Group has the larger (if not the largest) financial interest in the relief sought by the class, namely, money damages 51job investors suffered as the result of defendants' fraud in connection with purchases of the company's securities. The Webster Group's initial brief in support of the present motions stated that Group members "suffered losses of $311,710.13 in connection with transactions in 51job securities during the Class Period." Brief at 1. The Mayeri Group's brief estimated its members' losses at $176,641.03, Brief at 1, and went on to say that they "have not received notice of any other competing applicant for lead plaintiff that has sustained greater financial losses in connection with the purchase of 51job securities," id. at 6. The Webster and Mayeri Groups both filed their motions for appointment on March 22, 2005. Accepting that at that time the Mayeri Group had no knowledge of an applicant for lead plaintiff with greater financial losses, it acquired that awareness from the Webster Group's simultaneous filing; and the Webster Group's reply brief filed on April 5 reiterates these respective totals with minor alterations that are not material. The Mayeri Group has not responded to the Webster Group's calculations of losses, and I regard them as established on this record. It follows that the Webster Group has the largest financial interest in the relief sought, and has accordingly satisfied the second of the three requirements for the PSLRA's presumption that it is the "most adequate plaintiff."
The first and third requirements are satisfied as well. The first is satisfied because the Webster Group (whose members were enlisted from the universe of 51job investors in a manner that the record doers not reveal but is not relevant to these motions) has made the instant motion to be appointed lead plaintiff. The third requirement is satisfied because there is no reason to doubt that the Webster Group and the claims of its members satisfy the typicality and adequacy requirements of Rule 23(a). The Mayeri group does not assert, let alone attempt to prove, that a basis exists for rebutting the statutory presumption in the Webster Group's favor. See footnote 3, supra.
There is one seeming anomaly in the Webster Group's submissions on these motions. Its reply brief argues at 5 that "[t]he motion of the seven-member Mayeri Group should be denied because its membership far exceeds the number of movants recommended by the SEC," quoting an SEC amicus brief in an unrelated case that lead plaintiff groups should be comprised of no more than "three to five persons." The Webster Group's main brief at 1 identifies eight investors as members, which would seem to invite an et tu quoque response from the Mayeri Group. The answer may lie in the fact that the surname of three Group members is "Webster" and that of two others is "Rabhan." If one regards these apparent family members as single investor entity (much as churches regard the members of a parishioner family living together as a single "pledging unit'), the SEC-approved total of five "persons" is achieved. I do not pursue this question further because it is not argued as a basis for objection to the Webster Group's appointment as the lead plaintiff under the PSLRSA.
The Webster Group having been appointed lead plaintiff, it is entitled under the Act to select counsel to represent the class, subject to the Court's approval. The Webster Group has selected Milberg Weiss as "lead counsel" (the phrase used in its motion papers) and asks the Court to approve that selection. There is no reason to withhold that approval. Milberg Weiss is experienced and competent in the area of representing plaintiff investor classes in securities litigation.
The PSLRA refers to a "lead plaintiff," but does not use the phrase "lead counsel." No class has as yet been certified in this case. In that circumstance, and if the case was governed solely by Rule 23, the Court would be limited to designating " interim counsel to act on behalf of the putative class before determining whether to certify the action as a class action." Rule 23(g)(2)(A) (emphasis added). However, the PSLRA, by its use of the phrase "purported plaintiff class" in the provisions quoted in text, signifies the intention of Congress that counsel may be appointed before the certification of a class. Accordingly I discern no obstacle to referring to Milberg Weiss as "lead counsel."
Class certification must be sought without undue delay. The Order implementing this Opinion will contain an appropriate direction in that regard.
III. Conclusion
For the foregoing reasons, the Court makes the following Order:
1. The seven captioned cases are consolidated for all purposes. All future filings shall be made in the first-captioned case as they appear supra.
2. The motion of the Webster Group for appointment as lead plaintiff and for approval of its selection of the firm of Milberg Weiss Bershad Schulman LLP as lead counsel is granted in all respects. Accordingly, the Webster Group is appointed lead plaintiff and its selection of Milberg Weiss as lead counsel is approved.
3. The motion of the Mayeri Group is granted as to consolidation of the actions, and denied as to its applications for appointment as lead plaintiff and approval of its selection of lead counsel.
4. Lead counsel are directed to move for class certification on appropriate papers and in accordance with the provisions of the governing law and rules of procedure, not later than August 31, 2005.
It is SO ORDERED.