United States District Court, S.D. New York
January 3, 2005.
DR. RICHARD BASSIN, individually and on behalf of others similarly situated, Plaintiffs,
DECODE GENETICS, INC., et al., Defendants. GIANNI ANGELONI, individually and on behalf of others similarly situated, Plaintiffs, v. DECODE GENETICS, INC., et al., Defendants. JANICE BROWN, individually and on behalf of others similarly situated, Plaintiffs, v. DECODE GENETICS, INC., et al., Defendants. ALEXANDER SELINGER HINE, individually and on behalf of others similarly situated, Plaintiffs, v. DECODE GENETICS, INC., et al., Defendants. GAIL P. GENTILY, individually and on behalf of others similarly situated, Plaintiffs, v. DARA KHOSROWSHAHI, JULIUS DECODE GENETICS, INC., et al., Defendants.
The opinion of the court was delivered by: RICHARD HOLWELL, District Judge
MEMORANDUM OPINION AND ORDER
Presently before the Court are five securities fraud actions
brought against certain officers and directors of deCODE
genetics, Inc. ("deCODE") and deCODE itself (collectively, the
"defendants") on behalf of a purported class of investors who
claim to have sustained losses arising out of defendants' alleged
misrepresentations in press releases circulated from October 29,
2003 to August 26, 2004 (the "Class Period"). The first such
class action was filed on September 1, 2004, and is captioned
Bassin v. deCODE genetics, Inc., 04 Civ. 7050 (RJH) (S.D.N.Y.,
filed September 1, 2004). Notice was published that same day in
the Business Wire, a national, business oriented newswire
service, as required by 15 U.S.C. §§ 78u-4(a)(3)(A)(i). The other
four actions followed. (hereinafter, the above-captioned actions
are referred to as the "Actions"). Only one party has moved for consolidation, appointment as lead
plaintiff, and to designate its selection of representation as
lead counsel pursuant to the procedures set forth by the Private
Securities Litigation Reform Act, 15 U.S.C. § 78u-4(a)(3)(B)
("PSLRA"). For the reasons set forth below, the Court hereby
consolidates the actions, appoints Gary E. Bullock, Velma V.
Bullock, June Snyder and James C. Manuola (collectively, the
"Bullock Group") as Lead Plaintiff, and designates the firm of
Lerach Coughlin Stoia Rudman & Robbins LLP ("Lerach Coughlin") as
The complaint in the first, above-captioned action was filed by
Dr. Richard Bassin on September 1, 2004. As noted, on that same
day, Bassin's counsel, Lerach Coughlin Stoia Rudman & Robbins
LLP, caused a notice to be published in Business Wire advising
purchasers of deCODE stock that (1) a class action against
defendants had commenced in the Southern District of New York;
(2) the class included all plaintiffs who had purchased deCODE
stock between October 29, 2003 and August 26, 2004; (3) the
complaint asserted claims charging defendants with, inter alia,
artificially inflating its stock price through alleged
misrepresentations regarding continuing internal control problems
that were eventually revealed in an August 24, 2004, 8-K filed
with the Securities and Exchange Commission ("SEC"); and (4) any
class member wishing to serve as lead plaintiff and choose lead
counsel was required to move the court within sixty days.
On November 1, 2004, the Bullock Group filed a motion to
consolidate the Actions and appoint itself as lead plaintiff and
Lerach Coughlin as lead counsel. That motion is presently before
the Court. DISCUSSION
I. Consolidation of the Actions
The Bullock Group moved to consolidate the Actions pursuant to
Rule 42(a) of the Federal Rules of Civil Procedure; no other
party in any related case has joined in or opposed that motion,
or filed one of their own. Rule 42(a) provides that a court may
order all actions consolidated if they involve "common issues of
law or fact." Fed.R.Civ.P. 42(a). In determining the propriety
of consolidation, district courts have "broad discretion"
although they generally espouse the view that "considerations of
judicial economy favor consolidation." Ferrari v. Impath, Inc.,
2004 WL 1637053, at *2 (S.D.N.Y. July 20, 2004) (citations and
quotations omitted). Moreover, consolidation is particularly
appropriate in the context of securities class actions if the
complaints are "based on the same `public statements and
reports'" and defendants will not be prejudiced. Id., 2004 WL
1637053, at *2 (quoting Mitchell v. Complete Mgmt., Inc., 1999
WL 728678, at *1 (Sept. 17, 1999)).
Each of the Actions implicates similar or overlapping claims
under Sections 10(b) and 20(a) of the Securities and Exchange Act
of 1934 (the "1934 Act"). The complaints rest on the same
fundamental allegations that defendants made material
misrepresentations regarding internal control problems that were
ultimately revealed in the August 24, 2004, 8-K deCODE filed with
the SEC. See In re Olsten Corp. Securities Litigation,
3 F. Supp. 2d 286, 292-93 (E.D.N.Y. 1998) (consolidating cases despite
slight differences in claims and alleged class periods).
Accordingly, the Actions involve "common issues of law and fact"
and are hereby consolidated. II. Appointment of Lead Plaintiff
A. The Notice and Filing Requirements Under the PSLRA
As noted above, the Bullock Group has moved to be appointed as
lead plaintiff. The PSLRA sets forth the procedures governing the
appointment of lead plaintiff in "each action arising under the
[Securities and Exchange Act of 1934] that is brought as a
plaintiff class action pursuant to the Federal Rules of Civil
Procedure." 15 U.S.C. § 78u-4(a)(1). As an initial matter, the
PSLRA requires the plaintiff in the initial action to cause a
notice to be published in a national, business-oriented
publication within 20 days of filing the complaint.
15 U.S.C. § 78u-4(a)(3)(A)(i). The notice must inform members of the
purported class of (1) the details and pendency of the action;
and (2) their right to seek appointment as lead plaintiff within
60 days after the date on which notice is published. Id. Within
90 days after the publication of such notice, a court shall
consider any motion made by any class member, regardless of
whether they are individually named as plaintiffs in any of the
actions, and shall appoint the "most adequate plaintiff" as lead
plaintiff. 15 U.S.C. § 78u-4(a)(3)(B)(i). Moreover, the PSLRA
instructs courts to appoint lead plaintiff in a timely fashion
after the consolidation decision has been rendered. See
15 U.S.C. § 78u-4(a)(3)(B)(ii); The Constance Sczesny Trust v. KPMG
LLP, et al., 223 F.R.D. 319, 322 (S.D.N.Y. 2004).
Dr. Bassin filed the first complaint and caused a notice to be
published in Business Wire on September 1, 2004. That notice
set forth the pendency of the action, the claims asserted
therein, the purported class action period and the right of any
class member to seek appointment as lead plaintiff. Accordingly,
the notice satisfied the requirements of the PSLRA and triggered the sixty-day period in
which class members could move to be appointed as lead plaintiff.
Only the Bullock Group filed such an application within the
sixty-day period, which means that only the Bullock Group has
satisfied the procedural requirements of the PSLRA. The Court
will limit its consideration accordingly.
B. The Most Adequate Plaintiff
In 1995, Congress enacted the PSLRA to address perceived abuses
in securities fraud class actions created by lawyer-driven
litigation. Ferrari, 2004 WL 1637053, at *3; see H.R. Conf.
Rep. No. 104-369 (1995), reprinted in 1995 U.S.C.C.A.N. 730
("H.R. Conf. Rep. No. 104-369"). The PSLRA sought to ensure that
"parties with significant holdings in issuers, whose interests
are more strongly aligned with the class of shareholders, will
participate in the litigation and exercise control over the
selection and actions of plaintiffs counsel." Ferrari, 2004 WL
1637053, at *3 (internal citations and quotations omitted). As
such, Congress sought to encourage institutional investors and
other class members with large amounts at stake to step forward
as the ideal lead plaintiffs in private securities litigation.
See H.R. Conf. Rep. No. 104-369.
The PSLRA thus provides that the most adequate plaintiff has
(1) "the largest financial interest" in the relief sought by the
class and (2) satisfies the requirements set forth in Rule 23 of
the Federal Rules of Civil Procedure.
15 U.S.C. § 78u-4(a)(3)(B)(iii). In light of the PSLRA's silence in
prescribing a method for assessing a movant's financial interest,
courts have examined several factors such as: "(1) the number of
shares purchased during the class period; (2) the number of net
shares purchased during the class period; (3) the total net funds
expended during the class period; and (4) the approximate losses suffered." Pirelli Armstrong Tire Corp. v. LaBranche &
Co., Inc., 2004 WL 1179311, at *7 (S.D.N.Y. May 27, 2004)
(quoting Lax v. First Merchants Acceptance Corp., 1997 WL
461036, at *5 (N.D. Ill. Aug. 11, 1997)); The Constance Sczesny
Trust, 223 F.R.D. at 323; Ferrari, 2004 WL 1637053, at *4.
The Bullock Group has submitted affidavits along with its
moving papers in support of its claims that it has individually
suffered the greatest financial loss, which it calculates to be
$52,450.59. Without access to financial information from other
parties, the Court is constrained to conclude that the Bullock
Group's alleged loss best qualifies it to serve as lead
However, the Bullock Group must also satisfy the requirements
articulated in Rule 23. Rule 23 sets forth four prerequisites
universally referred to as numerosity, commonality, typicality
and adequacy to be considered in evaluating the propriety of
class certification, although only the typicality and adequacy
criterions are relevant to the selection of lead plaintiff. The
Constance Sczesny Trust, 223 F.R.D. at 323-24. The Bullock
Group's typicality is easily met here as his "claim arises from
the same course of events" and "each class member makes similar
legal arguments to prove the defendants' liability" even if there
are minor variations in the factual allegations. Id. at 324
(internal citations and quotations omitted). The Bullock Group,
like the other purported class members in this action, has
asserted that it purchased deCODE stock during the class period
and was injured by false and misleading representations made by
defendants in violation of the 1934 Act.
Similarly, the Court is convinced that the Bullock Group "will
fairly and adequately protect the interests of the class."
Fed.R.Civ.P. 23(a). In evaluating adequacy, courts have assessed factors such as: (1) the size,
available resources and experience of the proposed lead
plaintiff, Pirelli Armstrong Tire Corp., 2004 WL 1179311, at
*20 (citing cases); (2) the qualifications of the proposed class
counsel, The Constance Sczesny Trust, 223 F.R.D. at 324 (citing
In re Deutsche Telekom Ag Securities Litigation,
229 F. Supp.2d 277, 282 (S.D.N.Y. 2002)); and (3) any potential
conflicts or antagonisms rising among purported class members. In re
Deutsche Telekom Ag Securities Litigation,
229 F. Supp.2d at 282 (citations omitted).
The Bullock Group indicated in its certification that it is
willing to assume the responsibilities of lead plaintiff and
class representation. After reviewing the materials submitted by
the Bullock Group, the Court is convinced that it will adequately
represent the class even though it is not an institutional
investor. See Pirelli Armstrong Tire Corp., 2004 WL 1179311, at
*22 (remarking that some courts have interpreted the PSLRA to
favor heavily institutional investors); In re Cable & Wireless,
PLC Securities Litigation, 217 F.R.D. 372, 376 (E.D. Va. 2003)
("the purpose of the PSLRA's selection-of-lead-plaintiff
provision was to get institutional investors involved in the
prosecution of securities class action suits").
The Court is aware that disagreements may arise throughout this
action, and as such, reserves the right to modify this single
lead plaintiff structure in the event that litigation is stalled,
expenses become unnecessarily duplicative or wasteful, or the
structure becomes otherwise unmanageable. In the meantime, the
action shall proceed with the Bullock Group as sole lead
plaintiff. III. Appointment of Lead Counsel
The Bullock Group has further moved to designate their selected
law firm as lead counsel, asking the Court to appoint Lerach
Coughlin as lead counsel.
The PSLRA provides that the "most adequate plaintiff shall,
subject to the approval of the court, select and retain counsel."
15 U.S.C. § 78u-4(a)(3)(B)(v). The resumes submitted by the
Bullock Group indicate that Lerach Coughlin has served as lead
counsel in several securities fraud class actions, and is
otherwise well qualified and free of conflicts. Accordingly, the
Court appoints Lerach Coughlin as lead counsel.
The Court consolidates the Actions, appoints the Bullock Group
as lead plaintiff, and designates Lerach Coughlin as lead
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