Opinion
Civil Action No: 99-3831 Section: "R"(5).
April 13, 2000.
ORDER AND REASONS
Before the Court are plaintiffs' motions for the appointment of co-lead plaintiffs, for the appointment of co-lead counsel, and for the appointment of liaison counsel, pursuant to Section 21D of the Securities and Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4. For the following reasons, plaintiffs' motions are granted.
I. Background
Movants purchased the securities of defendant McDermott during the period May 21, 1999 through November 11, 1999. McDermott is incorporated in Panama with its chief executive office and principal place of business in New Orleans, Louisiana. It manufactures steam-generating and environment equipment and other products for the United States Government, and provides engineering and construction services to industrial, hydrocarbon processing facilities and to the offshore oil and natural gas industry. On December 21, 1999, plaintiff Andrew Tarica, individually and on behalf of all others similarly situated, filed this private securities class action complaint in this Court. He alleges that McDermott and certain of its senior officers and directors made material misrepresentations regarding, inter alia, McDermott's liability for asbestos-related products liability claims, that these misrepresentations artificially inflated the price of McDermott's securities and allowed defendants to improperly manipulate executive bonuses for fiscal years 1999 and 2000, in violation of §§ 10(b), 20(a) and Rule 10b-5 of the Securities Exchange Act, and that he and all others similarly situated suffered losses as a result.
Subsequently, this Court consolidated this case with two related securities class actions.
Movants herein, who claim to have suffered combined losses of approximately $622,000, now seek to appoint as lead plaintiffs in this matter Great Fish Co., whose alleged losses approximate $306,000, Andrew Tarica, whose alleged losses exceed $169,000, SSGA World Funds-US Matrix, whose alleged losses exceed $54,000, and Grady Hobbs, whose alleged losses exceed $59,000. ( See Pls.' Mot. Ex. C.) They also seek to appoint as lead counsel the law firms Milberg Weiss Bershad Hynes Lerach LLP ("Milberg Weiss") and Weiss Yourman, and to appoint Gauthier, Downing, Labarre, Beiser Dean, PLC ("Gauthier Downing") as liaison counsel.
Movants initially requested co-liaison counsel, but they withdrew this request.
In response, defendants state that they take no position on plaintiffs' motion for the appointment of lead plaintiffs at this time, but reserve the right to object to any of the proposed lead plaintiffs once they have received plaintiffs' consolidated complaint and have reviewed plaintiffs' class allegations. Defendants take no position regarding plaintiffs' motion for the approval of their selection of lead counsel or liaison counsel.
II. Discussion
A. PSLRA and Motion to Appoint Lead Plaintiffs
Plaintiffs' motions arise under the PSLRA, 15 U.S.C. § 78u-4, which amended the Securities Exchange Act of 1934. Pub.L. No. 104-67, 109 Stat. 743, 748 (1995). The PSLPA applies to private securities class actions brought pursuant to the Federal Rules of Civil Procedure, and Congress enacted it "[t]o ameliorate perceived abuses [by the plaintiff's bar] of the class action device in actions brought under federal securities laws[.]" Greebel v. FTP Software, Inc., 939 F. Supp. 57, 58 (D. Mass. 1996); see Cluck v. Cellstar Corp., 976 F. Supp. 542, 543-44 (N.D. Tex. 1997); Lax v. First Merchants Acceptance Corp., 1997 WL 461036 at *2 (N.D. Ill. Aug. 11, 1997). Section 21D, amended by § 78u-4, sets forth disclosure requirements for the plaintiff filing the lawsuit and establishes the procedure for the appointment of a lead plaintiff. See Greebel, Inc., 939 F. Supp. at 58. Specifically, this section requires certification and notice, sets forth the timing for applications for appointment as lead plaintiff, establishes a rebuttable presumption about who best represents the class, and provides that the lead plaintiffs shall select and retain lead counsel. See 15 U.S.C. § 78u-4(a)(2), (a)(3)(A), (a)(3)(B). The Court will address each of these provisions in turn.
1. Certification
Under the PSLPA, parties filing complaints ( i.e., named plaintiff(s)) must file a certification that complies with subsection 78u-4(a)(2)(A). See Greebel, 939 F. Supp. at 61-62 (holding that only named plaintiffs, rather than all parties moving to be appointed as lead plaintiffs, need comply with the certification requirement). Subsection (a)(2)(A) provides:
Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that —
(i) states that the plaintiff has reviewed the complaint and authorized its filing;
(ii) states that the plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff's counsel or in order to participate in any private action arising under this chapter;
(iii) states that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;
(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint;
(v) identifies any other action under this chapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve as a representative party on behalf of a class; and
(vi) states that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff's pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4).15 U.S.C. § 78u-4(a)(2)(A). Andrew Tarica filed with his complaint a sworn certification that complies with each of these six requirements, and the other proposed lead plaintiffs filed certifications with this motion. ( See Complaint; Pls.' Mot. Ex. A.) Therefore, the Court finds that movants have satisfied the certification provision.
2. Notice
Subsection 78u-4(a)(3)(A) provides that the plaintiffs bringing the class action must publish early notice of the suit to purported class members:
(i) In general
Not later than 20 days after the date on which the complaint is filed, the plaintiff or plaintiffs shall cause to be published, in a widely circulated national business-oriented publication or wire service, a notice advising members of the purported plaintiff class —
(I) of the pendency of the action, the claims asserted therein, and the purported class period; and
(II) that, not later than 60 days after the date on which the notice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class.
(ii) Multiple actions
If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter is filed, only the plaintiff or plaintiffs in the first filed action shall be required to cause notice to be published in accordance with clause (i).
(iii) Additional notices may be required under Federal rules
Notice required under clause (i) shall be in addition to any notice required pursuant to the Federal Rules of Civil procedure.15 U.S.C. § 78u-4(a)(3)(A). On December 22, 1999, plaintiff published notice of this suit in compliance with the statute. ( See Pls.' Mot. Ex. B.) The December 22 notice, published in Business Wire, named the pending action, enumerated the claims asserted therein, set forth the purported class period (May 21, 1999 through November 11, 1999), and stated that any member of the purported class could move to serve as lead plaintiff within sixty days after the date of notice. Courts have repeatedly recognized Business Wire as a business-oriented wire service within the meaning of the PSLRA, and as an acceptable means of publishing notice under the statute. See, e.g., Greebel, 939 F. Supp. at 62-63 (noting that reliance on Business Wire is not subject to happenstance of buying a newspaper on the day that notice appears, as press release remains accessible for substantial period of time); accord In re Nice Systems Sec. Lit., 188 F.R.D. 206, 216 (D.N.J. 1999). Moreover, the use of Business Wire is particularly appropriate in this case, because McDermott repeatedly issued press releases on this wire service, increasing the likelihood that purported class members would see the December 21, 1999 notice. ( See Complaint at ¶¶ 629, 38.) Finally, because this suit involves multiple actions asserting substantially similar claims, only Tarica, the plaintiff in the first-filed action, was required to publish notice under the PSLRA. See § 78u-4(a)(3)(A)(ii). This Court thus finds the notice requirement of the statute satisfied.
3. Timeliness
First, plaintiffs seeking to be appointed as lead plaintiffs timely filed their motion on February 22, 2000, the day on which the sixty-day period expired. Second, because this case involves multiple actions which the parties moved to consolidate, consideration of plaintiffs' motion and the appointment of lead plaintiffs was delayed until after the Court ordered the cases consolidated on January 28, 2000, and February 3, 2000, respectively. Subsection 78u-4(a)(3)(B)(ii) provides that in such a case, the Court should appoint lead plaintiffs as soon as practicable after rendering a decision on whether to consolidate the cases:
(ii) Consolidated actions
If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter has been filed, and any party has sought to consolidate those actions for pretrial purposes or for trial, the court shall not make the determination required by clause (i) [regarding the appointment of lead plaintiff] until after the decision on the motion to consolidate is rendered. As soon as practicable after such decision is rendered, the court shall appoint the most adequate plaintiff as lead plaintiff for the consolidated actions in accordance with this paragraph.
The motion is therefore timely.
4. Rebuttable Presumption
Subsection 78u-4(a)(3)(B)(iii) establishes a rebuttable presumption, subject to objection by purported class members, regarding who will serve as the most adequate lead plaintiffs. It provides:
(iii) Rebuttable presumption
(I) In general
Subject to subclause (II), for purposes of clause (i), the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that —
(aa) has either filed the complaint or made a motion in response to notice under subparagraph (A)(i);
(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.
Tarica filed the complaint in the earliest lawsuit, and he and the other proposed lead plaintiffs filed motions in response to notice pursuant to subparagraph (A)(i), above. Although the PSLRA does not define "largest financial interest," one court found four factors relevant to this inquiry; they are the (1) number of shares purchased; (2) number of net shares purchased; (3) total net funds expended by plaintiffs during class period; and (4) approximate losses plaintiffs suffered. See Lax, 1997 WL 461036 at *5. The proposed lead plaintiffs purchased a total of 56,300 shares during the class period, and expended $1,078,958.42. As stated above, the alleged losses of Great Fish Co. approximate $306,000, those of Andrew Tarica exceed $169,000, those of SSGA World Funds-US Matrix exceed $54,000, and those of Grady Hobbs exceed $59,000, totaling a collective loss of approximately $588,000. ( See Pls.' Mot. Ex. C.) In addition, movants assert that they have not received notice of any other applicant or applicant group that has suffered greater financial loss or that has applied to serve as lead plaintiff in this matter. ( See id. at 8-9.) On the record before the Court, it appears that these four plaintiffs have the greatest collective financial stake in the relief sought by the class. See In re Nice, 188 F.R.D. at 216-17 (finding that group of proposed lead plaintiffs appeared to represent largest financial interest of class members).
5. Rule 23 Requirements
Courts have consistently held that in a motion for appointment of lead plaintiffs, plaintiffs need only make a preliminary showing of typicality and adequacy under Rule 23(a) See In re Oxford Health Plans, Inc., Sec. Lit., 182 F.R.D. 42, 49 (S.D.N Y 1998); Greebel, 939 F. Supp. at 64. Under Rule 23(a), typicality is satisfied when "the claims or defenses of the representative parties are typical of the claims or defenses of the class, and adequacy is met when "the representative parties will fairly and adequately protect the interests of the class." See FED. R. Civ. P. 23(a)(3), (4). The Fifth Circuit has held that "the test for typicality is not demanding. It focuses on the similarity between the named plaintiffs' legal and remedial theories and the theories of those whom they purport to represent." Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620, 625 (5th Cir. 1999), internal quotation marks and citation omitted. Here, plaintiffs all purchased McDermott securities during the class period at allegedly inflated prices; their claims arise out of the same alleged material misrepresentations by defendants, and they all claim damages as a result. The plaintiffs have made a sufficient preliminary showing of typicality.
In order to satisfy adequacy of representation, counsel must be qualified, experienced, and able to prosecute the action vigorously, and the class representatives must not have interests antagonistic to the class members. See, e.g., In re Lease Oil Antitrust Lit. (No. II), 186 F.R.D. 403, 421 (S.D. Tex. 1999). In this case, the proposed lead plaintiffs make a sufficient preliminary showing of adequacy of representation. Because their injuries arise out of the same conduct as those of the class members, their interests appear to be aligned with those members. In addition, the proposed lead plaintiffs have obtained competent and experienced counsel to represent them in this action. This Court has reviewed the firm résumés of Milberg Weiss and Weiss Yourman, which have successfully prosecuted shareholder and securities class actions, and have frequently served as counsel in major actions in this and other courts. ( See Pls.' Mot. Exs. D, E, firm résumés.) See In re Oxford, 182 F.R.D. at 50.
The Court therefore finds that Great Fish Co., Andrew Tarica, SSGA World Funds-US Matrix and Grady Hobbs satisfy the legal requirements to be appointed co-lead plaintiffs in this matter. The Court's determination is without prejudice to revisit this issue in considering a motion for class certification. See Greebel, 939 F. Supp. at 60-61; Gluck, 976 F. Supp. at 547. In appointing these four plaintiffs as lead plaintiffs, the Court observes that several courts have approved the appointment of more than one lead plaintiff in large securities class actions. See, e.g., Greebel, 939 F. Supp. at 64; In re Oxford, 182 F.R.D. at 46, 49 (noting that appointment of multiple lead plaintiffs provides the proposed class with benefits of joint decision-making and funding, is consistent with the language and purpose of the PSLRA, and allows plaintiffs as a group to wield more control over counsel). Courts have also recognized that the PSLRA specifically encourages the appointment of institutional investors, such as SSGA, as lead plaintiffs. See In re Oxford, 182 F.R.D. at 46; Gluck, 976 F. Supp. at 548.
B. Appointment of Co-Lead Counsel and Liaison Counsel
Subsection 78u-4(a)(3)(B)(v) provides that "[t]he most adequate plaintiff[s] shall, subject to the approval of the court, select and retain counsel to represent the class." As discussed above, this Court finds that lead plaintiffs have retained competent, experienced counsel and therefore grants plaintiffs' motion to appoint Milberg Weiss and Weiss Yourman as co-lead counsel in this action, provided that (1) there shall be no duplication of attorneys' services; (2) the use of co-lead counsel will not in any way increase attorneys' fees and expenses. See Lax, 1997 WL 461036 at *7 (granting motion to appoint co-lead counsel subject to these provisions), citing In re Donnkenny, Inc. Sec. Lit., 171 F.R.D. 156, 158 (S.D.N.Y. 1997). Co-lead counsel shall have the authority to speak for lead plaintiffs in all matters regarding pretrial and trial procedures, and, in making work assignments, shall facilitate the orderly and efficient prosecution of this case.
The Court also grants plaintiffs' motion to appoint Gauthier Downing as liaison counsel. Gauthier Downing will be responsible for advising lead counsel on local procedural matters, for the creation and maintenance of a master service list of all parties and their respective counsel, for distributing communications between the Court and counsel, for apprizing counsel of developments and scheduling matters in the case, and for generally assisting in coordination of the case. See In re Oxford, 182 F.R.D. at 50.
III. Conclusion
For the foregoing reasons, this Court grants plaintiffs' motion for the appointment of co-lead plaintiffs (consisting of Great Fish Co., Andrew Tarica, SSGA World Funds-US Matrix and Grady Hobbs) and it appoints Milberg Weiss and Weiss Yourman as co-lead counsel. The firm of Gauthier Downing is appointed liaison counsel.
New Orleans, Louisiana, this 13th day of April, 2000.