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Aude v. Kobe Steel, Ltd.

United States District Court, S.D. New York

April 4, 2018

DANIEL AUDE, Individually and On Behalf of All Others Similarly Situated, Plaintiff,

          Robert C. Finkel Wolf Popper LLP New York, New York Counsel for Plaintiff and Movant Daniel Aude

          Douglas H. Flaum Kevin P. Broughel Paul Hastings LLP New York, New York Counsel for Defendant Kobe Steel, Ltd.

          OPINION & ORDER

          VERNON S. BRODERICK, United States District Judge

         Before me is the unopposed motion of Plaintiff Daniel Aude, pursuant to Section 21D(a)(3) of the Securities and Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78u- 4(a)(3), as amended by the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) for and order (1) appointing Aude as Lead Plaintiff on behalf of a putative class of all persons or entities who purchased or otherwise acquired American Depositary Receipts (“ADRs”) of Defendant Kobe Steel, Ltd. (“Kobe Steel”) in the U.S. market between May 29, 2013 and October 12, 2017 (the “Class Period”), and (2) approving the selection of Wolf Popper LLP (“Wolf Popper”) as Lead Counsel for the putative class. Because Aude's motion is unopposed, and he meets all requirements set out by the PSLRA, Aude's motion requesting appointment as Lead Plaintiff and approval of Wolf Popper as Lead Counsel is GRANTED.

         I. Background and Procedural History[1]

         Kobe Steel is one of Japan's largest steel manufacturers and a major supplier of aluminum and copper products. (Compl. ¶ 2.)[2] On May 29, 2013, at the beginning of the Class Period, Kobe Steel launched a new business plan that purported to reduce, among other things, “quality error costs.” (Id. ¶ 37.) During the Class Period, Kobe Steel continually made statements emphasizing its compliance with corporate laws and rules, its focus on maintaining a culture of high ethical standards and corporate governance, and its commitment to product safety. (See, e.g., Id. ¶ 72.)

         Beginning on October 8, 2017, the public became aware of information regarding Kobe Steel's products and safety practices that caused its ADR price to tumble, including that: (i) certain Kobe Steel products did not comply with product specifications and data in inspection certificates had been improperly written, (id. ¶¶ 6, 80); (ii) Kobe Steel had fabricated data on components used in a variety of products that were used by major manufacturers, (id. ¶¶ 8, 82); (iii) the data fabrication scandal extended to Kobe Steel's core business of selling steel to numerous international companies, (id. ¶ 10); and (iv) there was an investigation into Kobe Steel's wrongdoing and that the number of impacted customers exceeded 400, (id. ¶¶ 11, 87-88). The price of Kobe Steel ADRs fell from $5.92 on October 8, 2017 to $3.55 on October 13, 2017, resulting in significant losses for investors, including Aude. (Id. ¶¶ 7, 12, 14.) On December 26, 2017, Plaintiff commenced the instant action by filing a complaint against Kobe Steel alleging that Kobe Steel's statements during the Class Period were materially false and misleading because Kobe Steel had falsified data on many of its products and sold products that failed quality control tests. (Id. ¶ 5.)

         On the same day that Plaintiff filed his Complaint, counsel for Plaintiff published a notice in Global Newswire announcing the initiation of this securities class action (the “Notice”). (Finkel Decl. Ex. A.)[3] The Notice informed shareholders that if they had purchased or acquired Kobe Steel ADRs during the Class Period, they would have until February 26, 2018 to file a motion to be appointed lead plaintiff. (Id.) On February 26, 2018, the date specified on the Notice, Aude file his motion requesting appointment of Lead Plaintiff and Lead Counsel, (Doc. 5), with a supporting memorandum and declaration, (Docs. 6-7). Aude filed a response in further support of his motion on March 12, 2018. (Doc. 8.) No other member of the putative class filed a motion to be appointed lead plaintiff.

         II. 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 “ensur[ing] 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 adequate 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. See 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 Aude 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 him as Lead Plaintiff.

         1. ...

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