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McKenna v. Dick's Sporting Goods, Inc.

United States District Court, S.D. New York

February 27, 2018

BRANDON MCKENNA, Individually and On Behalf of All Others Similarly Situated, Plaintiff,
v.
DICK'S SPORTING GOODS, INC., EDWARD W. STACK, and LEE J. BELITSKY, Defendants.

          Joseph Alexander Hood, II Michael Grunfeld Jeremy Alan Lieberman Pomerantz LLP New York, New York Counsel for Plaintiff and Movant Ironworkers Locals 40, 361 & 417 - Union Security Funds and Iron Workers Local 580 - Joint Funds

          Adam M. Apton Levi & Korsinsky LLP Washington, D.C. Counsel for Movant Brenda Powell

          Lesley Frank Portnoy Glancy Prongay & Murray LLP New York, New York Counsel for Movant Elliot Stamler

          David Avi Rosenfeld Robbins Geller Rudman & Dowd LLP Melville, New York Counsel for Movant Oklahoma Police Pension & Retirement System

          OPINION & ORDER

          VERNON S. BRODERICK, United States District Judge:

         The instant action is brought by Plaintiff Brandon McKenna against Dick's Sporting Goods, Inc. (“Dick's”), Edward W. Stack (“Stack”), and Lee J. Belitsky (“Belitsky, ” and collectively, “Defendants”) on behalf of all persons who purchased or otherwise acquired Dick's securities between March 7, 2017 and May 15, 2017 (“Class Period”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act (“Exchange Act”), 15 U.S.C. §§ 78j(b), 78t(a), as well as Rule 10b-5 promulgated by the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Exchange Act. (See Compl. ¶ 1.)[1]

         Before me are four motions to appoint Lead Plaintiff and Lead Counsel pursuant to Section 21D of the Exchange Act, 15 U.S.C. § 78u-4(a)(3)(B), as amended by the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4(a)(3). The motions have been filed by four movants: (1) Brenda Powell (“Powell”), (2) Elliot Stamler (“Stamler”), (3) Oklahoma Police Pension & Retirement System (“Pension & Retirement System”), and (4) Ironworkers Locals 40, 361 & 417 - Union Security Funds and Iron Workers Local 580 - Joint Funds (“Ironworkers, ” and collectively, “Movants”). (Docs. 10, 13, 16, 19.) Because Ironworkers's motion is unopposed, and Ironworkers meets all requirements set out by the PSLRA, Ironworkers's motion requesting appointment as Lead Plaintiff and approval of Pomerantz LLP (“Pomerantz”) as Lead Counsel, (Doc. 19), is GRANTED. The remaining three motions requesting appointment of Lead Plaintiff and approval of Lead Counsel, filed by Powell, Stamler, and Pension & Retirement System, (Docs. 10, 13, 16), are DENIED.

         I. Background and Procedural History [2]

         Dick's is a sporting goods retailer offering a wide range of brand-name sporting goods and equipment. (Compl. ¶ 2.) It was founded in 1948 under the name Dick's Clothing and Sporting Goods, Inc., and in April 1999, changed its name to Dick's Sporting Goods, Inc. (Id. ¶ 3.) Dick's is headquartered in Coraopolis, Pennsylvania, and its stock trades on the New York Stock Exchange under the ticker symbol DKS. (Id.)

         On May 16, 2017, Plaintiff commenced the instant action by filing a complaint against Dick's alleging that throughout the Class Period Defendants made materially false and misleading statements regarding Dick's business and operations (“Complaint”). (Id. ¶ 4.) In particular, Plaintiff alleges that Defendants “made false and/or misleading statements and/or failed to disclose that: (i) Dick's had overstated its adjusted EBITDA amounts; (ii) accordingly, the Company lacked effective internal controls; and (iii) as a result of the foregoing, Dick's public statements were materially false and misleading at all relevant times.” (Id.) Plaintiff alleges that as a result of these material misstatements, which were revealed by a Form 8-K/A report filed with the SEC on May 12, 2017, Dick's share price fell as much as $6.82, resulting in significant losses and damages for Plaintiff and other class members. (See Id. ¶¶ 5-9.)

         On the same day that Plaintiff filed his Complaint, counsel for Plaintiff published notices announcing the initiation of this securities class action (“Notices”). (Apton Decl. Ex. 3; Portnoy Decl. Ex. A; Lieberman Decl. Ex. A; Rosenfeld Decl. Ex. A.)[3] The Notices informed Retirement System filed a response stating that it “recognize[d] that it did not suffer the greatest loss.” (Doc. 23.) On August 1, 2017, Ironworkers filed a notice that its motion was unopposed. (Doc. 25.)

         IL Discussion

         A. Appointment of Lead Plaintiff

         The procedures set forth in the PSLRA, 15 U.S.C. § 78u-4, govern the appointment of lead plaintiff in securities class actions. The PSLRA was enacted with the goal of “preventing] lawyer-driven litigation” and “ensuring] that parties with significant holdings in issuers, whose interests are more strongly aligned with the class of shareholders, will participate in the litigation and exercise control over the selection and actions of plaintiffs' counsel.” Peters v. Jinkosolar Holding Co., No. 11 Civ. 7133(JPO), 2012 WL 946875, at *4 (S.D.N.Y. Mar. 19, 2012) (quoting Weltz v. Lee, 199 F.R.D. 129, 131 (S.D.N.Y. 2001)); see also In re Oxford Health Plans, Inc., Sec. Litig., 182 F.R.D. 42, 43-44 (S.D.N.Y. 1998); H.R Conf. Rep. No. 104-369. Before its enactment, “professional” plaintiffs overwhelmingly and disproportionately profited, “irrespective of the culpability of the defendants” and “at the expense of shareholders with larger stakes.” Schulman v. Lumenis, Ltd., No. 02 Civ.1989(DAB), 2003 WL 21415287, at *2 (S.D.N.Y. June 18, 2003) (quoting In re Party City Sec. Litig., 189 F.R.D. 91, 103 (D.N.J. 1999)).

         Consistent with this intent, under the PSLRA, courts are 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). There is a rebuttable presumption that the appropriate plaintiff is the person or group of persons that (1) filed the original complaint or filed a motion in response to the notice, (2) has the largest financial interest in the relief being requested, and (3) meets the requirements of Rule 23 of the Federal Rules of Civil Procedure. Id. § 78u-4(a)(3)(B)(iii)(I). Other class members may rebut this presumption by providing evidence that the presumptively 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.” Id. § 78u-4(a)(3)(B)(iii)(II).

         Here, because Ironworkers filed a timely motion, has the largest financial interest, and otherwise meets the requirements of Rule 23 of the Federal Rules of Civil Procedure, as further detailed below, I appoint it Lead Plaintiff.

         1. ...


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