plaintiff presumption is partially based upon that plaintiffs
efforts to select class counsel. By demonstrating the
willingness and ability to retain competent counsel at a
negotiated fee that conforms with the interests of the class, a
proposed lead plaintiff can confirm its position as the "most
adequate plaintiff." Conversely, a proposed lead plaintiff who
utterly fails to fulfill its fiduciary duties in selecting
appropriate class counsel will in most cases be unable to prove
that it can adequately protect the class as lead plaintiff. See
Hernandez, at *4-5.
The Court recognizes that a clearly unfair fee arrangement
may, in itself, rebut the lead plaintiff presumption. See Bank
One, 96 F. Supp.2d at 784; Raftery, 1997 WL 529553, at *2.
However, such a situation is undeniably absent in this case. As
discussed above, the declarations submitted by Reeves indicate
that Louisiana Teachers engaged in a careful, multi-faceted
selection process before choosing Bernstein Litowitz to
represent it in this action. Reeves' assertions demonstrate
Louisiana Teachers' willingness and ability to perform the
duties of a lead plaintiff, including the obligation to seek out
competent counsel who will represent the class at a
cost-effective fee. Indeed, this Court's in camera review of
the specific fee arrangement negotiated between Louisiana
Teachers and Bernstein Litowitz reveals that their agreement
sets forth fair and reasonable fee percentages for Bernstein
Litowitz's legal services. In light of Louisiana Teachers'
counsel-selection efforts in this case and the reasonableness of
its the representation arrangement with Bernstein Litowitz, the
Court concludes that Louisiana Teachers' presumptive status as
lead plaintiff under the PSLRA has not been rebutted. To the
contrary, Louisiana Teachers' has effectively demonstrated its
willingness and ability to adequately protect the interests of
the class in the ensuing litigation.
VI. Approval of Lead Plaintiffs Choice of Counsel
While the PSLRA gives the "most adequate plaintiff" the
authority to "select and retain counsel to represent the class,"
it makes that selection "subject to the approval of the court."
15 U.S.C. § 78u4(a)(3)(B)(v). This provision implicates multiple
interests in the selection of counsel for securities class
actions. On the one hand is the plain language of the statute
which states that the lead plaintiff "shall" choose counsel.
Accordingly, some level of deference to the lead plaintiffs
selection is envisioned by the PSLRA. On the other hand, the
fiduciary duties owed to the class under Rule 23 by both the
lead plaintiff and the court require the selection of the "best"
counsel for the litigation. A determination of the "best"
counsel is dependent on various factors. One is the proposed
counsel's experience with securities class actions. Another
factor involves its resources to pursue the litigation. The fees
to be paid for counsel's services are also crucial because the
lower the fees, the more money available to the class from any
recovery in the case. The lowest fee, however, is not
necessarily the preferable fee in all cases. For example, more
experienced counsel or counsel with a stellar track record in
similar cases may demand a premium for their services. Also,
counsel serving at a reduced fee may be inclined to settle the
case at an early juncture in the case, not necessarily for the
benefit of the class, but rather to limit their litigation
In light of these various considerations, it is reasonable to
conclude that the PSLRA does not permit a court to substitute
its judgment for that of the lead plaintiff regarding the
selection of counsel so long as the representation arranged by
the lead plaintiff is reasonable and thus does not interfere
with that plaintiffs presumed
adequacy to represent the entire class. Several courts have made
class counsel determinations that are consistent with the
above-stated interpretation of the PSLRA. Where the appointed
lead plaintiff is found capable of selecting and monitoring
counsel, courts have permitted that plaintiff to select class
counsel and have given deference to its selection. See, e.g.,
Quintus, at 980; Bowman, 195 F.R.D. at 659; Network
Associates Inc., 76 F. Supp.2d 1017; California Micro Devices
I, 168 F.R.D. at 275-76; In re California Micro Devices Sec.
Litig., 168 F.R.D. 276, 278 (N.D.Cal. 1996). This approach is
typically used when an institutional investor is appointed lead
plaintiff. See, e.g., Quintus, at 978 (reasoning that
"Congress has found, and most courts would agree, that
institutional investors are better equipped than individuals to
serve as lead plaintiffs"); see also id. at 977 ("the court
would be hesitant to employ competitive bidding if an
institutional investor had come forward and negotiated a fee
arrangement that appeared reasonable"). In contrast, where
courts find that the lead plaintiff is incapable of negotiating
a competitive fee arrangement, deference is not afforded to that
plaintiff's choice of counsel, and, in some cases, the court
itself selects class counsel through a competitive bidding
process. See, e.g., Quintus, at 973-74, 975; Wenderhold, 188
F.R.D. at 587; see also Brief of the Securities and Exchange
Commission as Amicus Curiae in Support of Appellants on the
Issued Specified, In re Cendant Corp. Litig., Nos. 00-2769,
00-3653 (3d Cir.) (decision pending), at 23 ("the Commission
believes that the district court should take responsibility for
[selecting and retaining lead counsel] away from the lead
plaintiff only where the circumstances of the case clearly and
substantially depart from the [PSLRA] model").
In this case, Louisiana Teachers, an institutional investor,
has sufficiently demonstrated that it utilized an appropriate
selection process to choose counsel and that the fee arrangement
it negotiated with Bernstein Litowitz is reasonable. These
factors not only require Louisiana Teachers' appointment as lead
plaintiff, they also compel this Court's approval of Louisiana
Teachers' choice of Bernstein Litowitz to serve as lead counsel.
As mentioned earlier, where the presumptively most adequate
plaintiff has satisfactorily negotiated a representation
arrangement with counsel, the court "need not, and indeed should
not, substitute its judgment for that of the lead plaintiff."
Quintus, at 973; see also Bowman, 195 F.R.D. at 659. Indeed,
the rejection of Louisiana Teachers' choice of counsel in this
case would unjustifiably risk conflict with the express
provisions of the PSLRA. See 15 U.S.C. § 78u4(a)(3)(B)(v);
Steiner, at 9-10; Microstrategy, 110 F. Supp.2d at
Louisiana Teachers is the most adequate plaintiff under the
PSLRA's lead plaintiff presumption, and that presumption has not
been rebutted in this case. Therefore, the Court GRANTS the
Louisiana Teachers' motion to be appointed lead
plaintiff pursuant to section 21D(a)(3)(B) of the Securities
Exchange Act of 1934 and to approve Louisiana Teachers' choice
of counsel. Louisiana Teachers is hereby APPOINTED lead
plaintiff in these consolidated actions, and its selection of
Bernstein Litowitz to serve as lead counsel is APPROVED.
The Bakers Pension Funds' motion for appointment of lead
plaintiff and approval of selection of lead counsel is DENIED.
Morales' motion to be appointed lead plaintiff or, in the
alternative, for competitive bidding is DENIED.
IT IS SO ORDERED.