The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
Linda Greene ("Greene") and Elizabeth Rick ("Rick") have each moved
under the Private Securities Litigation and Reform Act ("PSLRA"),
15 U.S.C. § 78u-4(a)(3), for appointment as lead plaintiff and the
appointment of lead counsel in this securities fraud class action.
Thereafter, Greene and Rick agreed to jointly represent the class as
co-lead plaintiffs, with their respective counsel as co-lead counsel. For
the reasons set forth below, Greene and Rick are appointed co-lead
plaintiffs and Goodkind Labaton Rudoff & Sucharow LLP ("GLR&S")
and Schiffrin & Barroway, LLP ("Schiffrin & Barroway") are
appointed co-lead counsel. Rick's motion to appoint liaison counsel is
denied without prejudice to renewal.
Prior Proceedings and Background
The instant action was commenced on October 20, 2003 with the filing of
a class action complaint against Van der Moolen Holding N.V. ("Van der
Moolen"), a securities trading firm, and several of its officers:
Friedrich M.J. Bottcher ("Bottcher"), James P. Cleaver, Jr. ("Cleaver"),
Frank F. Dorjee ("Dorjee"), and Casper F. Rondeltap ("Rondeltap"). The
complaint alleges that Van der Moolen, through one of its four
operational segments known as VDM Specialists, acts as a specialist firm
on the New York Stock Exchange ("NYSE"). Specialist firms, according to
the complaint, are responsible for maintaining a fair and orderly market in one or
more specific securities and must adhere to NYSE rules that require
specialist firms to refrain from trading on the specialist firm's own
account when enough public investor orders exist to pair up naturally,
without undue intervention.
The complaint alleges that between October 18, 2001 and October 15,
2003, inclusive (the "proposed class period"), Van der Moolen repeatedly
violated its duties by engaging in "front-running" and "trading ahead,"
both activities by which Van der Moolen is alleged to have improperly
made trades in its own interest to the disadvantage of public investors.
As a result of these activities, Van der Moolen is alleged to have
materially overstated and artificially inflated its earnings, net income,
and earnings per share in violation of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (the "Exchange Act"),
15 U.S.C. § 78j(b) and 78t(a), and Rule 10b-5, 17 C.F.R. § 240.10b-5,
promul-gated thereunder. This class action is brought on behalf of all
persons who purchased American Depository Receipt shares ("ADRs") in Van
der Moolen during the proposed class period and who were damaged thereby.*fn1 Van der Moolen ADRS are alleged to have been
traded actively on the NYSE throughout the proposed class period.
Two investors, Greene and Rick, claim to have sustained losses as a
result of their investment in Van der Moolen ADRs and have moved for
appointment as lead plaintiff and for designation of each investor's
choice of lead counsel in the litigation.*fn2 On December 19, 2003,
Greene moved to be appointed as lead plaintiff based on alleged losses of
approximately $36,980. On that same date, Rick moved for appointment as
lead plaintiff, alleging approximate losses of $6,495. Each movant has
submitted a certificate pursuant to 15 U.S.C. § 78u-4(a)(2)(A) in
support of her motion.
By a letter dated January 13, 2004, the movants announced their
intention to jointly represent the class as co-lead plain-tiffs with
their respective counsel as co-lead counsel, and submitted a stipulation to that effect. No oral arguments were
held, and the case was reassigned to this Court on February 27, 2004.
I. Appointment of Lead Plaintiff
In 1995, Congress enacted the Private Securities Litigation Reform Act
(the "PSLRA") in order to address perceived abuses in securities fraud
class actions. See S. Rep. No. 104-98 (1995), reprinted
in 1995 U.S.C.C.A.N. 679; H.R. Conf. Rep. No. 104-369 (1995),
reprinted in 1995 U.S.C.C.A.N. 730. The PSLRA was intended to
prevent "lawyer-driven" litigation, and to ensure that parties with
significant financial interests in the litigation "`will participate in
the litigation and exercise control over the selection and actions of
plaintiffs counsel.'" In re Oxford Health Plans, Inc. Sec.
Litig., 182 F.R.D. 42, 43-44 (S.D.N.Y. 1998) (quoting H.R. Conf.
Rep. No. 104-369, at 32, reprinted in 1995 U.S.C.C.A.N. at
731); see also In re Initial Public Offering Sec. Litig.,
214 F.R.D. 117, 123 (S.D.N.Y. 2002); In re Donnkenny Inc. Sec.
Litig., 171 F.R.D. 156, 157-58 (S.D.N.Y. 1997). This goal could best
be achieved, according to Congress, by encouraging institutional
investors to serve as lead plaintiffs. See Sofran v. LaBranche &
Co., Inc., F. Supp.2d , 2004 WL 569550, at *4
(S.D.N.Y. Mar. 22, 2004); In re Oxford Health Plans,
182 F.R.D. at 46. Accordingly, the PSLRA amended the Exchange Act*fn3 by, among other
things, setting forth a procedure governing the appointment of a lead
plaintiff or plaintiffs in "each action arising under the [Exchange Act]
that is brought as a plaintiff class action pursuant to the Federal Rules
of Civil Procedure." 15 U.S.C. § 78u-4 (a)(1).
First, the plaintiff who files the initial action must, within 20 days
of filing the action, publish a notice to the class informing class
members of their right to file a motion for appointment as lead
plaintiff. 15 U.S.C. § 78u-4 (a)(3)(A)(i). Plaintiff in this
action caused a detailed notice to be published on October 20, 2003 on
PR Newswire, which is deemed to satisfy the notice requirement.
See Sofran, 2004 WL 569550, at *2 (approving a notice published
on PR Newswire).
Within 60 days after publication of the required notice, any member or
members of the proposed class may apply to the Court to be appointed as
lead plaintiff (s). 15 U.S.C. § 78u-4(a)(3)(A)(i). Both Greene
and Rick so moved on December 19, 2003, the last of the applicable 60
days; therefore, their motions are timely. The PSLRA next provides that within 90 days after publication of the
notice, the Court shall consider any motion made by a class member and
shall appoint as lead plaintiffs the member or members of that class that
the Court determines to be most capable of adequately representing the
interests of the class members. 15 U.S.C. § 78u-4(3)(B)(i). In
determining the "most adequate plaintiff," the PSLRA provides that:
[T]he 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 a notice . . .;
(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.
15 U.S.C. § 78u-4(a)(3)(B)(iii); see also Weinberg v.
Atlas Air Worldwide Holdings, Inc., 216 F.R.D. 248, 252 (S.D.N.Y.
2003); Albert Fadem Trust v. Citigroup Inc., 239 F. Supp.2d 344,
347 (S.D.N.Y. 2002).
Once the court "`identifies the plaintiff with the largest stake in the
litigation, further inquiry must focus on that plaintiff alone and be
limited to determining whether he satisfies the other statutory
requirements.'" Sofran, 2004 WL 569550, at *2 (quoting In
re Cavanaugh, 306 F.3d 726, 732 (9th Cir. 2002) (The district court's belief that "another plaintiff may be `more
typical' or `more adequate' is of no consequence. So long as the
plaintiff with the largest losses satisfies the typicality and adequacy
requirements, he is entitled to lead plaintiff status, even if the
district court is convinced that some other plaintiff would do a better
job.")); see also In re Cendant Corp. Litig., 264 F.3d 201,
262 (3d Cir. 2001) ("Once the court has identified the movant with `the
largest financial interest in the relief sought by the class, `it should
then turn to the question whether that movant `otherwise satisfies the
requirements of Rule 23 of the Federal Rules of Civil
Procedure'. . . ."); Schulman v. Lumenis, Nos. 02 Civ. 1989
(DAB), et al., 2003 WL 21415287, at *4-6 (S.D.N.Y. June 18,
2003) (commenting that the Second Circuit "has not ruled whether the
requirements of the most adequate plaintiff presumption are to be applied
serially in order, or whether each requirement is applied to the motion
or complaint despite its inability to satisfy all of the presumption's
requirements," but applying the requirements in sequence).
Both Greene and Rick have moved for lead plaintiff appointment in
response to the notice published on October 20, 2003, thereby satisfying
the first requirement. By announcing their joint candidacy Greene and
Rick have bypassed the traditional contest for lead plaintiff appointment
and made the pivotal issue in this matter the propriety of their
alliance. It has become a common phenomenon to see "`groups' of class members who
form to be named as lead plaintiffs jointly, and who seek to aggregate
their losses to enhance their chances of winning selection as lead
plaintiff (and hence, to enhance their counsel's chances of winning
selection as lead counsel)." In re MicroStrategy Inc. Sec.
Litig., 110 F. Supp.2d 427, 434 (E.D. Va. 2000). The PSLRA plainly
allows at least some variations of this practice, permitting a "group of
persons" to be deemed the "most adequate plaintiff" under the Exchange
Act. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I); see also
15 U.S.C. § 78u-4(a)(3)(B)(i) (indicating 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") (emphasis
added); accord In re American Bank Note Holographics, Inc. Sec.
Litig., 93 F. Supp.2d 424, 436 (S.D.N.Y. 2000) ("The nomination of
a group of investors as co-lead plaintiffs is specifically contemplated
by the PSLRA."). Courts are divided, however, as to what sorts of
groupings of persons or entities may be appointed lead plaintiff.
Some courts have denied a motion aggregating unrelated class members on
the ground that groups of unrelated class members are more likely to
abdicate their responsibility to coordinate the litigation to their
attorneys, in contravention of the PSLRA's goal to eliminate
lawyer-driven litigation. See, e.g., In re Donnkenny,
171 F.R.D. at 157-58; see also In re Razorfish, Inc. Sec. Litig., 143 F. Supp.2d 304, 309 (S.D.N.Y. 2001). Other courts have
concluded that a group consisting of previously unrelated ...