United States District Court, S.D. New York
JEFFREY FRIES, Individually and On Behalf of All others Similarly Situated, Plaintiff,
NORTHERN OIL AND GAS, INC., MICHAEL L. REGER, and THOMAS W. STOELK, Defendants.
OPINION AND ORDER
EDGARDO RAMOS, U.S.D.J.
case arises out of alleged violations of the Securities
Exchange Act of 1934 by Northern Oil and Gas, Inc.
(“Northern Oil”), Michael L. Reger
(“Reger”), and Thomas W. Stoelk (collectively,
the “Defendants”). Plaintiff Jeffrey Fries
(“Fries”) brings this class action on behalf of
all persons, other than Defendants, who purchased or
otherwise acquired Northern Oil securities between March 1,
2013 and August 15, 2016 (the “Class Period”).
Plaintiffs Matthew Atkinson (“Atkinson”) and
Richard Miller (“Miller”) move for joint
appointment as lead plaintiffs of the proposed class (the
“Class”), and for approval of Pomerantz Grossman
Hufford Dahlstrom & Gross LLP (“Pomerantz”)
and Goldberg Law PC (“Goldberg”) as co-lead
counsel. Plaintiff Vittorio Franceschi
(“Franceschi”) also moves for appointment as lead
plaintiff and approval of Hagens Berman Sobol Shapiro LLP as
reasons set forth below, Atkinson and Miller's motion is
GRANTED in part and DENIED in part without prejudice.
Franceschi's motion is DENIED.
Northern Oil is an independent energy company engaged in the
acquisition, exploration, development, and production of oil
and natural gas properties in the United States. Class Action
Compl. (“CAC”) at ¶¶ 2, 17. Throughout
the Class Period, Defendants allegedly made materially false
and misleading statements regarding Northern Oil's
business, operational and compliance policies. Id.
at ¶ 4. Specifically, Plaintiff Fries alleges on behalf
of the Class that because of its inadequate internal controls
concerning Securities and Exchange Commission
(“SEC”) regulations and ethics policies, Reger,
Northern Oil's Chief Executive Officer
(“CEO”), was able to engage in illegal stock
manipulation. Id. Consequently, Northern Oil's
public statements filed between March 1, 2013 and March 3,
2016 describing, inter alia, its purported
commitment to the promotion of ethical conduct by its
officers and its internal controls were allegedly materially
false and misleading. Id. at ¶¶ 19-35. On
August 16, 2016, Northern Oil terminated Reger after Reger
revealed that he received a Wells Notice from the SEC and
faced federal sanctions related to the SEC's
investigation of trading patterns in the securities of Dakota
Plains Holdings, Inc., a company that Reger had invested in.
Id. at ¶ 37. Plaintiff Fries claims that Class
members have suffered significant losses and damages due to
Defendants' wrongful acts and omissions, and the
subsequent decline in the market value of Northern Oil's
securities upon Reger's termination. Id. at
August 18, 2016, Plaintiff Fries, through his counsel
Pomerantz, filed the instant Class Action Complaint
(“CAC”) against Defendants. Doc 1. On the same
day, Pomerantz announced the filing over Global
Newswire as required by the Private Securities
Litigation Reform Act (“PSLRA”), and advised
investors that the deadline to file a motion for appointment
as lead plaintiff is October 17, 2016. Doc 8 Ex. A. On
October 17, 2016, Plaintiffs Atkinson and Miller filed the
instant motion for joint appointment as lead plaintiffs and
approval of Pomerantz and Goldberg as co-lead counsel. Doc.
6. Later that day, Plaintiff Franceschi also moved for
appointment as lead plaintiff and approval of Hagens Berman
Sobol Shapiro LLP as lead counsel. Doc. 9. On October 27,
2016, Plaintiff Franceschi filed a notice of non-opposition
to Plaintiffs Atkinson and Miller's motion, but noted
that if the Court determined that Plaintiffs Atkinson and
Miller were not suited to serve as lead plaintiffs, he would
be ready and able to fill that position. Doc. 12. Defendants
take no position on the issue of appointment of lead
plaintiff or counsel. Doc. 19.
Appointment of Lead Plaintiff
PSLRA governs motions for the appointment of lead plaintiffs
of putative class actions brought under the federal
securities laws. See, e.g., In re Braskem S.A.
Sec. Litig., No. 15 CIV. 5132 (PAE), 2015 WL 5244735, at
*4 (S.D.N.Y. Sept. 8, 2015). The PSLRA instructs 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 sets forth a rebuttable presumption “that the
most adequate plaintiff . . . is the person or group of
persons” that (i) “has either filed the complaint
or made a motion in response to” public notice of the
filing of the class action, (ii) “has the largest
financial interest in the relief sought by the class, ”
and (iii) “otherwise satisfies the requirements of Rule
23 of the Federal Rules of Civil Procedure.” §
78u-4(a)(3)(B)(iii)(I). This presumption is rebutted
“only upon proof by a member of the purported plaintiff
class” that the presumptively 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.” §
Filing Complaint or Motion
it is undisputed that all movants have satisfied the first
requirement by filing timely motions on October 17, 2016 in
response to public notice of this suit. Docs. 6, 9.
Largest Financial Interest
next, most critical question is which “person or group
of persons” seeking lead-plaintiff status has the
largest financial interest in the relief sought by the
putative class. The Second Circuit has not yet addressed
whether unrelated class members may aggregate their claims in
order to establish the “largest financial
interest” element. Goldberger v. PXRE Grp.,
Ltd., No. 06-CV-3410 (KMK), 2007 WL 980417, at *3
(S.D.N.Y. Mar. 30, 2007). Nevertheless, the prevailing view
in this District is that unrelated investors can aggregate
their financial losses only “if such a grouping would
best serve the class.” Int'l Union of Operating
Engineers Local No. 478 Pension Fund v. FXCM Inc., No.
15-CV-3599 (KMW), 2015 WL 7018024, at *2 (S.D.N.Y. Nov. 12,
2015) (citing In re CMED Sec. Litig., No. 11-CV-9297
(KBF), 2012 WL 1118302, at *2 (S.D.N.Y. Apr. 2, 2012)).
Determination of whether the grouping would best serve the
class is made “on a case-by-case basis, ” and
hinges on whether the members of the group can
“function cohesively and . . . effectively manage the
litigation apart from their lawyers.” Varghese v.
China Shenghuo Pharm. Holdings, Inc., 589 F.Supp.2d 388,
392 (S.D.N.Y. 2008); see also Khunt v. Alibaba Grp.
Holding Ltd., 102 F.Supp.3d 523, 532 (S.D.N.Y. 2015)
(“Many courts-including this one-have turned away
pastiche plaintiffs whose grouping appears to be solely a
product of the litigation, because, ‘To allow an
aggregation of unrelated plaintiffs to serve as lead
plaintiffs defeats the purpose of choosing a lead
plaintiff.'” (quoting In re Veeco Instruments,
Inc., 233 F.R.D. 330, 334 (S.D.N.Y. 2005)).
in this district have considered the following factors in
evaluating the ...