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Springer v. Code Rebel Corp.

United States District Court, S.D. New York

March 2, 2017

Robert Springer, et al, Plaintiffs,
v.
Code Rebel Corporation, et al., Defendants.

          MEMORANDUM & ORDER

          ALISON J. NATHAN, District Judge

         Before the Court are two sets of motions. First, Plaintiffs William Tran and Adrian Ybarra seek appointment as Lead Plaintiffs in this purported securities class action, and to have their chosen counsel, The Rosen Law Firm, P.A., and Pomerantz, LLP, approved as co-lead counsel for the purported class. See Dkt. No. 23. Second, the individual defendants in this case, Arben Kryeziu a/k/a Arben Kane ("Kane") and Reid Dabney ("Individual Defendants"), move for an order extending the automatic bankruptcy stay to the claims asserted against the Individual Defendants. See Dkt. No. 35. For the reasons that follow, Plaintiffs' Tran and Ybarra's motions are granted, and the Court defers to the United States Bankruptcy Court for the District of Delaware to decide, in the first instance, the appropriateness of staying this action as against the Individual Defendants.

         I. Appointment of Lead Plaintiff and Lead Counsel

         As noted, on July 11, 2016, Plaintiffs William Tran and Adrian Ybarra moved for the Court to appoint them as lead plaintiffs in this securities class action. Dkt. No. 23. Tran and Ybarra also moved for approval of their chosen counsel, The Rosen Law Firm, P. A., and Pomerantz LLP, as co-lead counsel for the purported class. Id. Three competing motions were originally filed on the same day by George Torres, Dkt. No. 24, Afaq Shaik, Dkt. No. 28, and Larry Strowbridge, Dkt. No. 31, but all three have since been withdrawn, and Torres, Shaik, and Strowbridge have all indicated that they do not oppose appointment of Tran and Ybarra as lead plaintiffs. See Dkt. No. 41; Dkt. No. 44; Dkt. No. 46. No other opposition been filed. For the reasons articulated below, the Court appoints Tran and Ybarra Lead Plaintiffs and approves their chosen law firms as co-counsel for the class.

         A. Appointment of Lead Plaintiffs

         Though Tran and Ybarra's motion is now unopposed, the Court nevertheless addresses the requirements under the Private Securities Litigation Reform Act of 1995 (the "PSLRA") for appointment of lead plaintiffs, as other courts have done so even in the context of unopposed motions. See, e.g., In re Symbol Techs., Inc. Sec. litig., No. 05-CV-3923 (DRH)(JO), 2006 WL 1120619, at *2 (E.D.N.Y. Apr. 26, 2006) (engaging in a similar inquiry to address the merits of an unopposed motion for appointment of lead plaintiff and class counsel); accord Yousefi v. Lockheed Martin Corp., 70 F.Supp.2d 1061, 1070 (CD. Cal. 1999) ("When determining which class member to appoint lead plaintiff, a court should consider the rebuttable presumption factors enumerated in the Act, even when the motion is unopposed.").

         Under the PSLRA, "the Court is required to appoint the 'most adequate plaintiff as lead plaintiff." Maliarov v. Eros Intern. PLC, Nos. 15-cv-8956 (AJN), 16-cv-223 (AJN), 2016 WL 1367246, at *2 (Apr. 5, 2016) (quoting 15 U.S.C. § 78u-4(a)(3)(B)(i)). The statute establishes a rebuttable presumption that the "most adequate plaintiff is a plaintiff who, first, "has either filed the complaint or made a motion in response to a notice, " second, "has the largest financial interest in the relief sought by the class, " and third, "otherwise satisfies the requirements of Rule 23." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(aa)-(cc). "This presumption may only be rebutted by proof that the purportedly most adequate plaintiff 'will not fairly and adequately protect the interests of the class' or 'is subject to unique defenses that render such plaintiff incapable of adequately representing the class.'" Maliarov, 2016 WL 1367246, at *2 (quoting 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa), (bb)).

         As an initial matter, Tran and Ybarra satisfied the first requirement, making a motion in response to a notice, when they moved for appointment as lead plaintiffs. See In re Deutsche Bank Aktiengesellschqft Sec. Litig., No. 16-cv-03495 (AT) (BCM), 2016 WL 5867497, at *4 (S.D.N.Y. Oct. 4, 2016).

         Second, Tran and Ybarra have the "largest financial interest in the relief sought by the class" of any plaintiff who moved for appointment of class counsel. § 78u-4(a)(3)(B)(iii)(I)(bb).

         Courts in this district, in determining which plaintiff has the greatest such interest, look to the following factors:

(1) the total number of shares purchased during the class period; (2) the net shares purchased during the class period ...; (3) the net funds expended during the class period...; and (4) the approximate losses suffered.

Maliarov, 2016 WL 1367246, at *2 (quoting Peters v. Jinkosolar Holding Co., Ltd., No. 11-CV-7133 (JPO), 2012 WL 946875, at *5 (S.D.N.Y. Mar. 19, 2012)). The last factor, financial loss, is the most important of the four. Peters, 2012 WL 946875, at *5.

         Tran and Ybarra represent that they purchased a total of 39, 004 shares during the class period; that they purchased 27, 032 net shares (subtracting the total sold from the total purchased); that they expended $98, 586.28 in net funds; and that they lost $97, 775.32. See Dkt. No. 25, Ex. 3. The other plaintiffs, in withdrawing their respective motions, acknowledged that their financial interest was not as great. See Dkt. No. 27, Ex. 3 (noting that Torres purchased 22, 786 total shares and 14, 486 net shares, expended $55, 251.60 in net funds, and lost $53, 740.71); Dkt. No. 30, Ex. 3 (noting that Shaik purchased 9, 000 total shares and 6, 500 net shares, expended $22, 255.00 in net funds, and lost $21, 657.06); Dkt. No. 33, Ex. 2 (noting that Strowbridge purchased 69, 735 total shares and 26, 425 net shares; expended $73, 990.00 in net funds; and lost $69, 836.25). No additional plaintiff has come forward suggesting she has a greater financial interest in this litigation.

         Third, Tran and Ybarra have made a sufficient preliminary showing that they can satisfy the relevant requirements of Federal Rule of Civil Procedure 23. Rule 23(a) permits a party to sue ...


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