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Myron Canson and Sandy Canson, Jointly and On Behalf of All Others: Similarly Situated v. Webmd Health Corp.

November 7, 2011

MYRON CANSON AND SANDY CANSON, JOINTLY AND ON BEHALF OF ALL OTHERS: SIMILARLY SITUATED,
PLAINTIFFS,
v.
WEBMD HEALTH CORP., WAYNE T. GATTINELLA, AND ANTHONY VUOLO, DEFENDANTS.
STEVEN MALLAND, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
v.
WEBMD HEALTH CORP., WAYNE T. GATTINELLA, AND ANTHONY VUOLO, DEFENDANTS.



The opinion of the court was delivered by: John F. Keenan, United States District Judge:

Opinion & Order

The above-captioned actions are brought against WebMD Health Corp., its Chief Executive Officer, Wayne T. Gattinella, and its Chief Operating Officer/Chief Financial Officer, Anthony Vuolo, on behalf of a purported class of investors who purchased WebMD securities between February 23, 2011 and July 15, 2011. Before the Court are three motions for consolidation of the two cases, appointment as lead plaintiff, and approval of lead plaintiff's choice of counsel. For the reasons that follow, the motions for consolidation are granted. Wayne County Employees' Retirement System and Carpenters Pension Trust Fund-Detroit and Vicinity's motion for appointment as lead plaintiff is granted, and Zwerling, Schachter & Zwerling, LLP is approved as lead counsel.

I.Background

The following allegations are taken from the first-filed complaint in this action, Canson v. WedMD Health Corp., No. 11 Civ. 5382 (JFK), which is substantially the same as the complaint in Malland v. WebMD Health Corp., No. 11 Civ. 6031 (JFK). WebMD provides health information services to consumers and healthcare professionals through public and private internet portals, mobile applications, and other publications. (Compl. ¶ 7). WebMD generates revenue on its public portal through advertising, while revenue on the private portals is generated through licensing agreements. (Id. ¶¶ 24, 26). On February 23, 2011, the beginning of the proposed class period, WebMD issued a press release announcing financial results for the fourth quarter of fiscal year 2010, as well as expectations for revenue growth in 2011. (Id. ¶ 27). On April 12, 2011, WebMD issued a press release stating that the company expected revenue for the quarter that ended March 31, 2011 to exceed analyst estimates; it also reaffirmed its financial guidance for 2011. (Id. ¶ 31). Plaintiffs allege that these statements were materially false and misleading because WebMD failed to disclose the fact that it was experiencing sponsorship cancellations and that WebMD customers were delaying advertising on the public website due to decreased budgets. (Id. ¶ 33). On July 18, 2011, WebMD issued a press release lowering its financial guidance for 2011. (Id. ¶ 37). Following this announcement, the price of WebMD shares fell about $14.00 to close at $32.48 per share, a 30% decline. (Id. ¶ 38).

In a complaint dated August 2, 2011, the Canson plaintiffs assert claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. That same day, a notice was published in Business Wire advising potential class members of the filing of the complaint, the claims asserted therein, the proposed class period, and the right to move for appointment as lead plaintiff within 60 days. On October 3, 2011, Wayne County Employees' Retirement System and Carpenters Pension Trust Fund -Detroit and Vicinity (the "Michigan Funds"), Cleveland Bakers and Teamsters Pension Fund ("Cleveland Bakers and Teamsters"), and James Every each filed a timely motion for: (1) consolidation of the two securities fraud class action cases; (2) appointment as lead plaintiff for the proposed class; and (3) approval of lead counsel.

II.Discussion

A.Consolidation

Under Rule 42(a) of the Federal Rules of Civil Procedure, consolidation is appropriate where multiple cases "involve a common question of law or fact." See Devlin v. Transp. Commc'ns Int'l Union, 175 F.3d 121, 130 (2d Cir. 1999); Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. LaBranche & Co., Inc., 229 F.R.D. 395, 402 (S.D.N.Y. 2004). Both the Canson and Malland complaints involve securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act brought on behalf of purchasers of WebMD securities between February 23, 2011 and July 15, 2011. The cases posit the same theory of fraud against the same corporate and individual defendants. No party has opposed the motions for consolidation. Therefore, the motions to consolidate Canson v. WedMD Health Corp., No. 11 Civ. 5382 (JFK), and Malland v. WebMD Health Corp., No. 11 Civ. 6031 (JFK), are granted.

B.Lead Plaintiff

The Private Securities Litigation Reform Act ("PSLRA") governs the appointment of a lead plaintiff in "each private action arising under [the Securities 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). Prior to such appointment, the first-filing plaintiff must publish notice of the action in a "widely circulated national business-oriented publication or wire service." 15 U.S.C. § 78u-4(a)(3)(A)(i). All lead plaintiff applications must be filed no later than 60 days after the publication of notice to potential class members.

15 U.S.C. § 78u-4(a)(3)(A)(i)(II). Both of these statutory prerequisites have been satisfied.

The PSLRA directs the Court to "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." 15 U.S.C. § 78u-4(a)(3)(B)(i). The statute creates a rebuttable presumption that the most adequate plaintiff is the person or group of persons that: (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i); (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. ยง 78u-4(a)(3)(B)(iii)(I). This presumption "may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff (aa) will not fairly and adequately protect the interests of the class; or (bb) is subject to unique defenses that render such plaintiff ...


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