United States District Court, S.D. New York
RAJAN CHAHAL, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
CREDIT SUISSE GROUP AG, DAVID R. MATHERS and TIDJANE THIAM, Defendants. GLEN EISENBERG, On Behalf of Himself and All Others Similarly Situated, Plaintiff,
v.
CREDIT SUISSE AG and JANUS INDEX & CALCULATION SERVICES LLC, Defendants. SHAOLEI QUI, On Behalf of Himself and All Others Similarly Situated, Plaintiff,
v.
CREDIT SUISSE GROUP AG and JANUS INDEX & CALCULATION SERVICES LLC, Defendants.
OPINION AND ORDER
SARAH
NETBURN, United States Magistrate Judge
This
litigation arises out of three securities class actions
pending before the Court against Credit Suisse Group AG
(“Credit Suisse”) on behalf of all investors who
purchased or otherwise acquired Credit Suisse VelocityShares
Daily Inverse VIX Short Term Exchange Traded Notes
(“Inverse VIX Short ETNs”) between January 29,
2018, and February 5, 2018 (the “Class Period”),
and were damaged thereby. The actions allege violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, 15 U.S.C. §§ 78j(b) and 78t(a). The Eisenberg
Action additionally alleges claims under Section 11 of the
Securities Act of 1933, 15 U.S.C. § 77k.
Before
the litigation can proceed, the Private Securities Litigation
Reform Act of 1995 (the “PSLRA”) requires the
Court to appoint the lead plaintiff and counsel for the
putative class. 15 U.S.C. §§ 77z-1(a)(3)(B),
78u-4(a)(3)(B). On May 14, 2018, seven parties filed motions
to be appointed class representative: Ekhlas Ahmed and
Shaolei Qui; a group called the XIV Investor Group (referred
to herein as the “Cannon Group”); Y-GAR Capital;
the Kershner Trading Group; a second group called the XIV
Investor Group (referred to herein as the “ACM
Group”); Andrew MacEntee; and the Princeton
Opportunistic Credit Fund. After reviewing the competing
motions, Ahmed and Qui and the Kershner Trading Group
withdrew their motions for appointment as lead plaintiff,
conceding that they did not have the largest financial
interest in the relief sought by the class. The Princeton
Opportunistic Credit Fund filed a Notice of Non-Opposition.
On May 29, 2018, the remaining movants opposed the
others' motions for appointment of Lead Plaintiff.
LEGAL
STANDARD
The
PSLRA establishes a “two-step competitive
process” to determine which plaintiff is most adequate.
In re eSpeed, Inc. Sec. Litig., 232 F.R.D. 95, 97
(S.D.N.Y. 2005). First, the PSLRA sets forth a rebuttable
presumption that the most adequate plaintiff is “the
person or group of persons” who or that (a) has either
filed the complaint or made a motion for appointment as lead
plaintiff, (b) has the largest financial interest in the
relief sought by the class, and (c) otherwise satisfies the
requirements of Rule 23 of the Federal Rules of Civil
Procedure. 15 U.S.C. §§ 77z-1(a)(3)(B)(iii)(I),
77u-4(a)(3)(B)(iii)(I). Once the Court has identified the
presumptive “most adequate plaintiff, ” other
members of the purported class may try to rebut the statutory
presumption by showing that the presumptive lead plaintiff
will not fairly and adequately protect the interests of the
class or is incapable of adequately representing the class
because of “unique defenses.” 15 U.S.C.
§§ 77z-1(a)(3)(B)(iii)(II),
78u-4(a)(3)(B)(iii)(II).
I.
Presumptive “Most Adequate Plaintiff”
In
deciding which proposed lead plaintiff has “the largest
financial interest in the relief sought by the class, ”
courts in this district tend to consider four criteria, known
as the Lax factors: (i) the gross No. of shares purchased;
(ii) the net No. of shares purchased; (iii) the net funds
spent; and (iv) the net loss suffered. Pirelli Armstrong
Tire Corp. v. LaBranche & Co., Inc., 229 F.R.D. 395,
404-05 (S.D.N.Y. 2004) (quoting Lax v. First Merch.
Acceptance Corp., 97-CIV-2715, 1997 WL 461036, at *5
(N.D.Ill. Aug. 11, 1997)). Courts generally find the fourth
factor to be the most compelling. Khunt v. Alibaba Grp.
Holding Ltd., 102 F.Supp.3d 523, 530 (S.D.N.Y. 2015).
“The
prevailing view in this District is that unrelated investors
may join together to 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-CIV-3599 (KMW), 2015 WL 7018024, at
*2 (S.D.N.Y. Nov. 12, 2015) (internal quotations omitted).
“The issue is not whether losses or holdings may be
aggregated by members of a group seeking to become the lead
plaintiff; indisputably, they may. But to enjoy the
rebuttable presumption that the statute confers, there must
be some evidence that the members of the group will act
collectively and separately from their lawyers.” In
re Tarragon Corp. Sec. Litig., No. 07-CIV-7972 (PKC),
2007 WL 4302732, at *2 (S.D.N.Y. Dec. 6, 2007).
“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.” Fries v. N. Oil & Gas, Inc., No.
16-CIV-6543 (ER), 2017 WL 1880819, at *2 (S.D.N.Y. May 8,
2017) (internal quotations omitted). “A group
consisting of persons that have no pre-litigation
relationship may be acceptable as a lead plaintiff candidate
so long as the group is relatively small and therefore
presumptively cohesive.” Janbay v. Canadian Solar,
Inc., 272 F.R.D. 112, 119 (S.D.N.Y. 2010).
As for
the requirements of Rule 23, at this stage a proposed lead
plaintiff need only make a “preliminary showing”
that it will satisfy the typicality and adequacy requirements
of Rule 23. Kaplan v. Gelfond, 240 F.R.D. 88, 94
(S.D.N.Y. 2007); In re Pub. Offering Sec. Litig.,
214 F.R.D. 117, 121 (S.D.N.Y. 2002). “Typicality is
established where each class member's claim arises from
the same course of events, and each class member makes
similar legal arguments to prove the defendant's
liability.'” Janbay, 272 F.R.D. at 120 (quoting
In re Drexel Burnham Lambert Group, Inc., 960 F.2d
285, 291 (2d Cir. 1992)). At this early stage, “[t]he
adequacy requirement is satisfied where: (1) class counsel is
qualified, experienced, and generally able to conduct the
litigation; (2) there is no conflict between the proposed
lead plaintiff and the members of the class; and (3) the
proposed lead plaintiff has a sufficient interest in the
outcome of the case to ensure vigorous advocacy.”
Foley v. Transocean Ltd., 272 F.R.D. 126, 131
(S.D.N.Y. 2011).
II.
Rebuttal of the Presumption
The
Court then proceeds to the second step of the two-step
appointment process. Once the Court has identified the
presumptive “most adequate plaintiff, ” other
members of the purported class may try to rebut the statutory
presumption by showing that the presumptive lead plaintiff
will not fairly and adequately protect the interests of the
class or is incapable of adequately representing the class
because of “unique defenses.” 15 U.S.C.
§§ 77z-1(a)(3)(B)(iii)(II),
78u-4(a)(3)(B)(iii)(II). “If the presumptive lead
plaintiff is disqualified [], the candidate's position is
forfeited and the court returns to the first phase to
determine a new presumptive lead plaintiff. The process
repeats itself until a candidate succeeds in both the first
and second phases of inquiry.” eSpeed, 232 F.R.D. at
98. But the Court does not need to determine whether other
plaintiffs may be more typical or adequate than the
presumptively adequate plaintiff. “So long as the
plaintiff with the largest losses satisfies the typicality
and adequacy requirements, he is entitled to lead plaintiff
status, even if the district court is convinced that some
other plaintiff would do a better job.” Khunt,
102 F.Supp.3d at 536 (quoting In re Cavanaugh, 306
F.3d 726, 732 (9th Cir. 2002)).
III.
Selection of Counsel
The
PSLRA further requires the Court to approve the lead
plaintiff's selection of counsel. 15 U.S.C. §§
77z-1(a)(3)(B)(v), 78u-4(a)(3)(B)(v). “The PSLRA
evidences a strong presumption in favor of approving a
properly-selected lead plaintiff's decisions as to
counsel selection and counsel retention.” Kaplan v.
S.A.C. Capital Advisors, L.P., 311 F.R.D. 373, 383
(S.D.N.Y. 2015) (quoting Varghese, 589 F.Supp.2d at 398).
Courts often rely on counsel's past experience when
determining whether the lead plaintiff's selection is
appropriate. See, e.g., In re Petrobras Sec. Litig.,
104 F.Supp.3d 618, 625 (S.D.N.Y. 2015) (relying on a
declaration detailing counsel's extensive experience with
complex class action litigations).
DISCUSSION
I.
...