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Faig v. Bioscrip, Inc.

United States District Court, Second Circuit

December 11, 2013

TIMOTHY FAIG, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
v.
BIOSCRIP, INC., RICHARD M. SMITH, HAI V. TRAN, MARY JANE GRAVES, and PATRICIA BOGUSZ, Defendants. WEST PALM BEACH POLICE PENSION FUND, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
v.
BIOSCRIP, INC., RICHARD M. SMITH, HAI V. TRAN, MARY JANE GRAVES, PATRICIA BOGUSZ, MYRON Z. HOLBUIAK, CHARLOTTE W. COLLINS, SAMUEL P. FRIEDER, DAVID R. HUBERS, RICHARD L. ROBBINS, STUART A. SAMUELS, GORDON H. WOODWARD, KIMBERLEE SEAH, JEFFRIES LLC, MORGAN STANLEY & CO. LLC, SUNTRUST ROBINSON HUMPHREY, INC., DOUGHERTY & COMPANY, and NOBLE INTERNATIONAL INVESTMENTS, INC., Defendants.

MEMORANDUM & ORDER

ALISON J. NATHAN, District Judge.

Before the Court are Faig v. Bioscrip, 13-cv-6992, and West Palm Beach Police Pension Fund v. Bioscrip, 13-cv-8175, two related securities class actions brought on behalf of all persons or entities that purchased BioScrip securities between August 2011, and late September 2013.[1] Motions to consolidate the cases, appoint lead plaintiff, and approve the selection of class counsel have been filed by Timothy Faig and the Fresno County Employees' Retirement Association ("Fresno").[2] Dkt. Nos. 6, 11. For the reasons that follow, the cases are consolidated, Fresno is appointed as lead plaintiff, and Fresno's selection of lead counsel is approved. Mr. Faig's motion for appointment as lead plaintiff and approval of his selection of class counsel is denied.

I. CONSOLIDATION

The Court must decide whether to consolidate the actions before deciding on the competing motions for appointment as lead plaintiff. See 15 U.S.C. § 78u-4(a)(3)(B)(ii) ("If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter has been filed, and any party has sought to consolidate those actions for pretrial purposes or for trial, the court shall not make the determination [on the lead plaintiff] after the decision on the motion to consolidate is rendered."). Consolidation is governed by Rule 42 of the Federal Rules of Civil Procedure, which provides that consolidation is appropriate "[i]f actions before the court involve a common question of law or fact." Fed.R.Civ.P. 42(a); see also In re CMED Sec. Litig., No. 11. Civ. 9297 (KBF), 2012 WL 1118302, at *1-2 (S.D.N.Y. Apr. 2, 2012). "The trial court has broad discretion to determine whether consolidation is appropriate, " Johnson v. Celotex Corp. 899 F.2d 1281, 1284-85 (2d Cir. 1990) (citing Midwest Community Council, Inc. v. Chicago Park Dist., 98 F.R.D. 491 (N.D. Ill. 1983); Stemler v. Burke, 344 F.2d 393 (6th Cir. 1965)), and may be guided in the exercise of that discretion by consideration of "both equity and judicial economy, " Devlin v. Transp. Comm. Int'l Union, 175 F.3d 121, 130 (2d Cir. 1999).

The two cases involve sufficiently overlapping questions of law and fact to justify consolidation. Both cases allege that BioScrip unlawfully and artificially inflated the price of its securities between approximately August 2011 and September 2013, and both cases allege violations of the Exchange Act. See generally Faig Br.; Dkt. No. 9 (WPB Br.), at 6. Both cases, moreover, concern the decline in stock price that occurred following the filing of BioScrip's September 23, 2013, Form 8-K, which revealed that the company had received a civil investigative demand from the U.S. Attorney's Office and a subpoena from the New York Attorney General's Medicaid Fraud Control Unit. See Faig v. BioScrip, et al., Dkt. No. 1 ¶¶ 3-4; West Palm Beach Police Pension Fund v. BioScrip, et al., 13-cv-8175, Dkt. No. 1 ¶¶ 10, 12. Under these circumstances, neither the fact that the two cases have slightly different proposed class periods and defendants, nor the fact that West Palm Beach alleges Securities Act violations in addition to Exchange Act violations, precludes consolidation. See Kaplan v. Gelfond, 240 F.R.D. 88, 91 (S.D.N.Y. 2007) ("Differences in causes of action, defendants, or the class period do not render consolidation inappropriate if the cases present sufficiently common questions of fact and law, and the differences do not outweigh the interests of judicial economy served by consolidation.") Accordingly, the motions to consolidate are granted.

II. APPOINTMENT OF LEAD PLAINTIFF AND SELECTION OF LEAD COUNSEL

A. Legal Standard

The PSLRA provides that the Court "shall 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). For purposes of appointing lead plaintiff, the Court is directed to "adopt a 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 advertising the filing of the class action, pursuant to 15 U.S.C. § 78u-4(a)(3)(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. § 78u-4(a)(3)(B)(iii)(I). This presumption may only be rebutted by proof that the purportedly most adequate plaintiff "(aa) will not fairly and adequately protected the interests of the class; or (bb) is subject to unique defenses that render such plaintiff incapable of adequately representing the class." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II).

Both movants have satisfied the first prong of the presumption, Faig by filing complaints, and Fresno by filing a timely motion to serve as lead plaintiff. See 15 U.S.C. § 78u-4(a)(3)(B)(i), (A)(i). The Court therefore proceeds to consider each prospective ...


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