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DOLAN v. AXIS CAPITAL HOLDINGS LTD.

April 13, 2005.

JAMES DOLAN, individually and on behalf of others similarly situated, Plaintiffs,
v.
AXIS CAPITAL HOLDINGS LTD., et al., Defendants. ROBERT SCHIMPF, individually and on behalf of others similarly situated, Plaintiffs, v. AXIS CAPITAL HOLDINGS LTD., et al., Defendants.



The opinion of the court was delivered by: RICHARD HOLWELL, District Judge

MEMORANDUM OPINION AND ORDER

Presently before the Court are two securities fraud actions brought against certain officers and directors of Axis Capital Holdings, ("Axis") and Axis itself (collectively, the "defendants") on behalf of a purported class of investors who claim that defendants disseminated false and misleading statements regarding Axis' results and operations from August 6, 2003 to October 14, 2004 (the "Class Period"). The first such class action was filed on October 28, 2004, and is captioned Dolan v. Axis Capital Holdings, Ltd., et al., 04 Civ. 8564 (RJH) (S.D.N.Y., filed October 28, 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 action, Schimpf v. Axis Capital Holdings, Ltd., et al., 04 Civ. 8820 (RJH) (S.D.N.Y., filed November 5, 2004) followed. (hereinafter, the above-captioned actions are referred to as the "Actions").

Dolan and Schimpf have jointly moved for consolidation, appointment as co-lead plaintiffs, and to designate their selection of representation as co-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 James Dolan and Robert Schimpf as co-lead plaintiffs, and designates the firms of Lerach Coughlin Stoia Rudman & Robbins LLP and Schiffrin & Barroway ("Schiffrin") as co-lead counsel.

  BACKGROUND

  As noted, supra, James Dolan filed the first complaint in this matter on October 28, 2004; on that same day, Dolan's counsel, Lerach Coughlin Stoia Rudman & Robbins LLP ("Lerach"), caused notice to be published in Business Wire, advising purchasers of Axis 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 Axis stock between August 6, 2003 and October 14, 2004; (3) the complaint asserted claims charging defendants with, inter alia, artificially inflating its stock price by disseminating materially false and misleading statements; 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 February 14, 2005, Dolan and Schimpf jointly moved to consolidate the Actions and appoint themselves as co-lead plaintiffs, and Lerach and Schiffrin as co-lead counsel. Defendants do not oppose consolidation and take no position on the issue of lead plaintiff or lead counsel. DISCUSSION

  I. Consolidation of the Actions

  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). 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 (S.D.N.Y. 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"), along with Rule 10b-5. In particular, both complaints rest on the same fundamental allegations that defendants made material misrepresentations regarding Axis' participation in allegedly illegal "contingent commission agreements" that were the subject of an investigation by New York's Attorney General. Although Schimpf asserts claims against an additional insider defendant, the complaints are almost identical, and the class periods are coextensive.*fn1 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 pursuant to Rule 42(a). II. Appointment of Lead Plaintiff

  A. The Notice and Filing Requirements Under the PSLRA

  The PSLRA sets forth the procedures governing the appointment of lead plaintiffs 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). However, if a motion for consolidation has been made, the court should not appoint a lead plaintiff "until after the decision on the motion to consolidate is 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).

  Dolan filed the first complaint and caused notice to be published in Business Wire on October 28, 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. No party filed an application within that sixty-day period, which expired on December 27, 2004. The instant motion was filed more than a month later, on February 14, 2005, one week after this Court adjourned pre-trial conferences in both actions sine die pending a motion to consolidate. Having now consolidated the Actions, the Court turns to the parties' application to be appointed co-lead plaintiffs.

  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"). Those abuses largely stemmed from the fact that "professional plaintiffs" in securities fraud cases "tended to profit irrespective of the culpability of the defendants, most of whom chose settlement over prolonged and expensive litigation." In re Party City Sec. Litig., 189 F.R.D. 91, 103 (D.N.J. 1999). These professional plaintiffs ...


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