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SHI v. SINA CORPORATION

July 1, 2005.

XIANGLIN SHI, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
v.
SINA CORPORATION, et al., Defendants. ALEXANDER O'RIORDAN, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. SINA CORPORATION, et al., Defendants. SONGOING ZHU, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. SINA CORPORATION, et al., Defendants. RICK LIN, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. SINA CORPORATION, et al., Defendants. ROBERT HERRITY, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. SINA CORPORATION, et al., Defendants. GANG WEI, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. SINA CORPORATION, et al., Defendants.



The opinion of the court was delivered by: NAOMI BUCHWALD, District Judge

MEMORANDUM AND ORDER

Presently before this Court are six securities actions brought against SINA Corporation ("SINA") and certain of its officers and directors on behalf of a purported class of investors who purchased securities of SINA between October 26, 2004, and February 7, 2005 inclusive (the "Class Period"). The first class complaint was filed on February 15, 2005, and notice was published that same day in PR Newswire, a national newswire, in accordance with the requirements of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). 15 U.S.C. § 78u-4(a)(3)(B). The other five actions were filed shortly thereafter.

Two groups of class members have filed motions to consolidate the actions, to appoint their respective groups as lead plaintiff, and to designate their lawyers as lead counsel.*fn1 Class members City of Sterling Heights General Employees' Retirement System, City of St. Clair Shores Police and Fire Retirement System, and Charter Township of Clinton Police and Fire Retirement System (collectively the "MAPERS Funds Group") have moved for selection as lead plaintiff and the selection of Lerach Coughlin Stoia Gellar Rudman & Robbins LLP ("Lerach Coughlin") as lead counsel for the class. Class members E. James Souvagis, Jian Wen Zang on behalf of Lek Ka Chang, Warren Zeikowitz, Cai Yao Chen and Cai Deng Chen, and Dominador Mangonon and Maria Belen Mangonon (collectively the "SINA Individual Investor Group")*fn2 have moved for selection as lead plaintiff and the appointment of Milberg Weiss Bershad & Schulman LLP ("Milberg Weiss") as lead counsel. Both groups support consolidation of the action, and oppose each other's motions. For the reasons set forth below, we consolidate the actions, appoint the MAPERS Funds Group as lead plaintiff, and designate the firm of Lerach Coughlin as lead counsel.

  DISCUSSION

  I. Consolidation of the Actions

  Under Rule 42(a) of the Federal Rules of Civil Procedure, consolidation is appropriate when the actions involve common questions of law or fact. Fed.R.Civ.P. 42(a). District courts have broad discretion in determining whether to consolidate actions, and consider whether judicial economy favors consolidation. Johnson v. Celotex Corp., 899 F.2d 1281, 1285 (2d Cir. 1990).

  In the instant case, each of the actions involves the same allegedly false and misleading statements by defendants and the same alleged violations of the Securities and Exchange Act of 1934. Because each complaint is premised on the same facts and legal theories, judicial economy would be served by consolidating the actions. Accordingly, the actions are hereby consolidated pursuant to Rule 42(a). II. The PSLRA

  In 1995, Congress passed the PSLRA in order to curb abuses in securities fraud class actions. The PSLRA was designed to prevent lawyer-driven litigation, and to "encourage the most capable representatives of the plaintiff class to participate in class action litigation and to exercise supervision and control of the lawyers for the class." H.R. Conf. Rep. 104-369, at 34, reprinted in 1995 U.S.C.C.A.N. 730, 733. To that end, the PSLRA provides that a court "shall appoint as lead plaintiff the member . . . of the purported plaintiff class that the court determines to be the most capable of adequately representing the interests of class members," known as the "most adequate plaintiff." 15 U.S.C. § 78u-4(a)(3)(B)(i). This appointment is to be done in a timely fashion after the consolidation decision. 15 U.S.C. § 78u-4 (a)(3)(B)(ii).

  The PSLRA provides a rebuttable presumption regarding the appointment of lead plaintiff. Under the statutory provision, a plaintiff is presumed to be the most adequate plaintiff if it (i) has brought the motion for lead counsel in response to the publication of notice; (ii) has the "largest financial interest in the relief sought by the class;" and (iii) otherwise satisfies the requirements of Federal Rule of Civil Procedure 23. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). This presumption may be rebutted by proof that the presumptive lead plaintiff will not "fairly and adequately protect the interests of the class" or is subject to "unique defenses" that render the plaintiff incapable of adequately representing the class. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II).

  III. The Proposed Lead Plaintiffs

  A. The Presumptive Lead Plaintiff

  There are currently two groups of class members seeking appointment as Lead Plaintiff: the SINA Individual Investor Group and the MAPERS Funds Group. Both groups have satisfied the first requirement for lead plaintiffs by filing complaints and submitting motions for lead plaintiff status. Accordingly, we turn to the second requirement for the presumption of lead plaintiff status — the plaintiff's financial interest in the action.

  The PSLRA does not state how to determine which plaintiff has the largest financial interest in the relief sought by the class. In certain situations, this omission can lead to disputes over the appropriate method to calculate the largest financial interest among potential lead plaintiffs. See Pirelli Armstrong Tire Corp. v. LaBranche & Co., No. 03 Civ. 8264, 2004 WL 1179311, at *7 (S.D.N.Y. May 27, 2004). In the instant case, however, it is undisputed that the SINA Individual Investor Group has largest financial interest in the case, with approximately $570,438.76 in claimed losses. The members of the MAPERS Funds Group claim only $190,248.15 in alleged losses and concede that the SINA Individual Investor Group has the larger financial interest. However, the MAPERS Funds Group contends that other factors make the MAPERS Funds Group the most adequate lead plaintiff. These arguments will be addressed after determining whether the SINA Individual Investor Group has satisfied the final requirement for presumptive lead plaintiff status.

  To satisfy the third requirement for the presumption of lead plaintiff, the proposed lead plaintiff must meet the requirements of Rule 23 of the Federal Rules of Civil Procedure. In applying Rule 23, "[t]ypicality and adequacy of representation are the only provisions relevant to the determination of lead plaintiff under the PSLRA." In re Oxford Health Plans, Inc. Sec. Litig., 182 F.R.D. 42, 49 (S.D.N.Y. 1998). At this stage, only a preliminary showing of typicality and adequacy is required. Ferrari v. Impath, Inc., No. 03 Civ. 5667, 2004 WL 1637053, at *4 (S.D.N.Y. Jul. 20, 2004). Furthermore, in making this initial assessment, ...


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