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BARNET v. ELAN CORP.

August 4, 2005.

PHILIP BARNET, RICKIE D. FRAZIER and ZELMA T. FRAZIER, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
ELAN CORP., PLC., KELLY MARTIN, LARS ECKMAN and SHANE COOK, Defendants. GLENN G. MALLOFF, THE IRVING SHACK TRUST, and PATRICIA MARCONI MALLOFF, on behalf of themselves and all others similarly situated, Plaintiffs, v. ELAN CORP., PLC., KELLY MARTIN, LARS ECKMAN and SHANE COOK, 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 (the "SDNY Actions") brought against certain officers and directors of Elan Corporation, plc. ("Elan") and Elan itself (collectively, the "Defendants"). In each case, as well as in substantially similar cases pending in other districts, plaintiffs seek certification of a class of investors allegedly injured by a series of materially misleading press statements issued by Elan between February 18, 2004 and February 25 or 28, 2005 (the "Class Period"). The first-filed of these related actions was brought on March 4, 2005 in the District of Massachusetts under the caption Williams v. Elan Corp., plc, No. 05-CV-10413 (JLT) (the "Massachusetts Action"). On March 3, 2005, counsel in the Massachusetts Action caused a notice to be published in PrimeZone Media Network advising purchasers of Elan securities that (1) a class action against defendants had commenced in the District of Massachusetts; (2) the class included all plaintiffs who had purchased Elan securities between February 18, 2004 and February 25, 2005; (3) the complaint asserted claims charging defendants with, inter alia, artificially inflating its stock price during the class period by allegedly misrepresenting material information concerning a new drug called Tysabri; and (4) any class member wishing to serve as lead plaintiff and choose lead counsel was required to move the court within sixty days. The SDNY Actions were filed shortly thereafter.

On May 3, 2005, this Court received three motions for consolidation and appointment of lead plaintiff and lead counsel in the SDNY Actions: (1) the Institutional Investor Group asked that it be appointed lead plaintiff and that Milberg Weiss and Entwistle & Cappucci LLP be appointed co-lead counsel; (2) the Conus Fund, LP, The Conus Fund (QP), LP, The Conus Fund Offshore, Ltd., East Hudson Inc. (BVI), Steven & Julie Suran, and Gerald E. & Diane M. Harmon (collectively, the "Conus Fund Group") filed a similar motion and requested that Stull, Stull & Brody be appointed as lead counsel; and (3) Kyle Newcomer filed a motion asking that he be appointed lead plaintiff, and that his counsel, Schatz & Nobel, P.C., be appointed lead counsel. These three motions are now before the Court. For the reasons set forth below, the Court hereby consolidates the SDNY Actions, appoints MN Services, Activest Investmentgesellschaft mbH, Electronic Trading Group L.L.C., Third Millennium Trading, LLP, Horatio Capital LLC, and Donald S. Frank (collectively, the "Institutional Investment Group") as lead plaintiff, and designates the firms of Milberg Weiss Bershad & Schulman LLP ("Milberg Weiss") and Entwistle & Cappucci LLP to serve as co-lead counsel. The Court also orders the parties to show cause why this consolidated action should not be transferred to the District of Massachusetts pursuant to 28 U.S.C. § 1404(a).

  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", and generally favor 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). Indeed, several courts have noted that 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 SDNY Actions implicates similar or overlapping claims under Sections 10(b), rule 10b-5 promulgated thereunder, and 20(a) of the Securities and Exchange Act of 1934 (the "1934 Act"). Indeed, each complaint rest on the same fundamental assertion: that defendants made material misrepresentations regarding the results of clinical trials and the commercial potential of a drug known as "Tysabri". Each complaint also alleges that these misstatements were ultimately revealed and corrected when Elan issued a press release on February 28, 2005. 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). On this basis, the Court finds that the SDNY Actions involve "common issues of law and fact", and hereby consolidates them for all purposes.

  The caption of these consolidated actions shall hereinafter be referred to as "In re Elan Corp. Securities Litigation". All relevant documents and submissions shall be maintained as one file under Master File No. 05 Civ. 2860 (RJH). Any other actions now pending or later filed in this district that arise out of or are related to the same facts as alleged in the above cases shall be consolidated for all purposes, if and when they are brought to this Court's attention, whether by application to the Court or otherwise.

  II. Appointment of Lead Plaintiff

  A. The Notice and Filing Requirements Under the PSLRA

  As noted above, the Institutional Investor Group, the Conus Fund Group, and Kyle Newcomer have each moved to be appointed as lead plaintiff. The Private Securities Litigation Reform Act of 1995, Pub.L. 104-67, 109 Stat. 737 (1995), governs the procedure for appointing a lead plaintiff where, as here, claims are brought under the Securities and Exchange Act of 1934. As an initial matter, the PSLRA requires the plaintiff in the first-filed 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 pendancy 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). 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).

  In this case, notice was published on March 3, 2004 in PrimeZone Media Network. See 15 U.S.C. § 78u-4(a)(3)(A)(ii) (where multiple related actions are brought, notice shall be published only once). That notice set forth the pendancy 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 therefore triggered the sixty-day period in which class members could move to be appointed as lead plaintiff. The Investor Group, the Conus Fund Group, and Kyle Newcomer filed timely applications. The only question, then, is which among the three is the "most adequate" lead plaintiff under the terms of the PSLRA. 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"). Consistent with this goal, the PSLRA was designed to encourage "parties with significant holdings in issuers, whose interests are more strongly aligned with the class of shareholders" to participate in the litigation and exercise control over the selection and actions of counsel. Ferrari, 2004 WL 1637053, at *3 (internal citations and quotations omitted). In other words, by enacting the PSLRA, Congress sought to encourage class members with the largest purported losses to act as lead plaintiffs in private securities litigation. See H.R. Conf. Rep. No. 104-369.

  Not surprisingly, then, the PSLRA provides that the presumptively most adequate lead plaintiff is "the person or group of persons" that has "the largest financial interest" in the relief sought by the class and otherwise 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). The "financial interest" of any given class member is typically calculated in one of four ways: "(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 ...


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