United States District Court, S.D. California
December 31, 2003.
In re SUREBEAM CORPORATION SECURITIES LITIGATION
The opinion of the court was delivered by: JEFFREY MILLER, District Judge
ORDER GRANTING IN PART DENYING IN PART FMC PENSION
GROUP'S MOTION FOR APPOINTMENT AS LEAD PLAINTIFF;
GRANTING FMC PENSION GROUP'S MOTION FOR APPROVAL OF LEAD
COUNSEL; DENYING COMPETING MOTIONS FOR APPOINTMENT AS LEAD
PLAINTIFF AND APPROVAL OF LEAD COUNSEL
This is a motion to appoint lead plaintiff and approve lead counsel
in a securities class action. Six individuals or groups are moving for
appointment as lead plaintiff: (1) FMC Ltd. Pension Plan &Trust,
Jamerica Financial Inc., Joseph Brogan, and Spear Capital Management Inc.
("FMC Pension Group"), (2) Glen Leason, Mary Ann Richason, Paul Berger,
Gregory Lavdanski, and Olive Branch-Leason ("Leason Group"), (3) Jonathan
David Dobis, (4) Eva Searcy, Manuel Wilkey, Paul and Amelia Strick, and
Richard Shay ("Searcy Group"), (5) Albert Bemi, and (6) Bernhard
Surebeam Corporation ("Surebeam") provides electronic food irradiation
systems and services for the food industry. Allegedly, Surebeam developed
trouble acquiring customers and began to misstate the company's financial
status. Surebeam entered into a joint venture with a Brazilain
corporation Tech Ion Industrial Brazil S.A. ("Tech Ion"). Surebeam
allegedly failed to disclose problems that arose with the Tech Ion
project, forgave much of Tech Ion's debt, and recognized revenue from the Tech Ion deal despite the fact that the company
could not repay the debt. Surebeam allegedly made false and misleading
statements both in its Prospectus for the company's initial public
offering ("IPO") as well as in several subsequent financial statements.
These misrepresentations allegedly caused Surebeam's stock to trade at
Approximately eighteen complaints have been filed in this district
against Surebeam, its officers and directors, its parent company Titan
Corporation, and the underwriters on the IPO. While each complaint
alleges its own specific time period, the class period is generally from
March of 2001 to August of 2003. On October 6, 2003, this court entered
an order consolidating the actions then pending as well as any
subsequently filed related actions.
The Private Securities Litigation Reform Act of 1995 ("PSLRA") dictates
the process for determining lead plaintiff in a securities class action
brought under the Securities and Exchange Act of 1935 ("Exchange Act") as
well as the Securities Act of 1933 ("Securities Act").
15 U.S.C. § 78u-4(a)(3)(B); 15 U.S.C. § 77z-1(a)(3)(B); In re
Cavanaugh. 306 F.3d 726, 729 (9th Cir. 2002).*fn1 The PSLRA
requires prompt publication of notice advising class members of the
existence of the class action and of their right to move within 60 days
of the publication to be appointed lead plaintiff.
15 U.S.C. § 78u-4(a)(3)(A). In this case, on August 27, 2003, the plaintiff in
Weiss v. Surebeam Corp. published a notice on the Business
Wire*fn2 advising class members of the existence of the lawsuit
and of the time limit for filing a motion to be appointed lead plaintiff.
Twelve individuals or groups have moved within the sixty-day time period
for appointment as lead plaintiff. Only six of those individuals or
groups continue to seek appointment as lead plaintiff.*fn3 The standard for appointment of lead plaintiff is established in the
PSLRA. That statute mandates that the court "shall 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," referred to as the "most adequate
plaintiff." 15 U.S.C. § 78u-4(a)(3)(B)(i). There is a rebuttable
presumption that the most adequate plaintiff is "the person or group of
persons" that meet the following three requirements:
1. has either filed the complaint or made a
motion in response to a notice;
2. has, in the determination of the court, the
"largest financial interest" in the relief
sought by the class; and
3. otherwise satisfies the requirements of Rule
23 of the Federal Rules of Civil Procedure.
Id. § 78u-4(a)(3)(B)(iii)(I). The presumption
established above may be rebutted "only upon proof by a member of the
purported plaintiff class that the presumptively most adequate plaintiff'
either 1) "will not fairly and adequately protect the interests of the
class," or 2) "is subject to unique defenses that render such plaintiff
incapable of adequately representing the class." Id. §
The Ninth Circuit in Cavanaugh held that the district court is required
to strictly follow a three-step process in the determination of lead
plaintiff. 306 F.3d at 729. First, the district court must determine if
the procedural requirements are satisfied. Id. The second step
requires the district court to compare the financial stakes of the
parties and determine who has the highest financial interest.
Id. at 729-30. Once the individual or group with the
largest financial interest is identified, the court "must then focus its
attention on that plaintiff' and determine whether they meet the
requirements of Rule 23. Id. at 730 (emphasis in original). The
court may not consider the merits of the other plaintiffs' claims.
Id. at 732. If the individual or group with the largest stake
in the controversy does not meet Rule 23's requirements the court must
inquire into the adequacy of the individual or group with the second
largest stake. Id. at 731. If the individual or group with the
highest financial stake in the litigation does meet the requirements of
Rule 23, they must be the presumptive lead plaintiff. Id.
"[T]he only basis on which a court may compare plaintiffs
competing to serve as lead is the size of their financial stake in the
controversy." Id at 732 (emphasis in original). Once the
presumptive lead plaintiff is chosen, step three allows the other
candidates to attempt to rebut the presumption by attacking that
individual or group's qualifications under Rule 23. Id A. The Candidates for Lead Plaintiff
Six individuals or groups have moved to be appointed lead plaintiff:
(1) FMC Pension Group, (2) Leason Group, (3) Dobis, (4) Searcy Group, (5)
Bemi, and (6) Bildstein.
1. Procedural Requirements
In order to be considered for lead plaintiff status, each proposed lead
plaintiff must, within 60 days of published notice of the pendency of the
action, move to be appointed lead plaintiff.
15 U.S.C. § 78u-4(a)(3)(A). Each prospective plaintiff must provide a sworn
certification representing that he or she has read the complaint, did not
purchase the security at the direction of counsel or in order to
participate in any private action, and is willing to serve as a
representative party. Id. § 78u-4(a)(3)(A)(i)-(iii). The
sworn certification must set forth "all of the transactions of the
plaintiff in the security that is the subject of the complaint during the
class period specified in the complaint." Id. §
78u-4(a)(2)(A)(iv). Each of the movants in this case has brought a motion
within the appropriate time limit and has included the requisite
2. Largest Financial Interest
The second step under the PSLRA asks which proposed lead plaintiff "has
the largest financial interest in the relief sought by the class."
Id. § 78u-4(a)(3)(B)(iii)(I). The district court must
compare the losses allegedly suffered by the various plaintiffs to
determine the financial stakes. Cavanaugh, 306 F.3d at 730.
Although the PSLRA does not dictate the process for determining which
party has the largest financial interest, several courts have suggested
considering: (1) the number of shares purchased during the class period;
(2) the number of net shares purchased during the class period; (3) the
total net funds expended during the class period; and (4) the approximate
losses suffered during the class period. Aronson v. McKesson HBOC.
Inc., 79 F. Supp.2d 1146, 1157-58 (N.D. Cal. 1999); In re Olsten
Corp. Sec. Litig., 3 F. Supp.2d 286, 295 (E.D.N.Y. 1998) (citing
Lax v. First Merchs. Acceptance Corp., 1997 U.S.
Dist. LEXIS 11866, at *5 (N.D. Ill. Aug. 11, 1997)); In re Enron
Corp. Sec. Litig., 206 F.R.D. 427, 440 (S.D. Tex. 2002). The financial interest of each proposed lead plaintiff is as follows:
Proposed Lead Plaintiff shares purchased total amount approx. losses
individual members of group, if spent
FMC Pension group 235,500 1,671,400 1,281,628
Spear Capital 77,450 836,728 654,713
Jamerica 84,550 398,561 287,420
Brogan 50,000 291,255 225,530
FMC Pension 23,500 144,856 113,965
Leason group 90,000 204,086
Glen Leason 43,000 94,493
Mary Ann Richason 20,000 49,051
Paul Berger 20,000 25,357
Gregory Lavdanski 2,000 20,517
Olive Branch-Leason 5,000 14,669
Dobis 41,750 189,671 107,823
Searcy Group 51,931 107,235
Manuel Wilkey 31,00 105,220 63,779
Paul/Amelia Strick 12,000 56,640 24,756
Richard Shay 6,931 21,860 12,594
Eva Searcy 2,000 8,776 6,105
Berni 20,500 38,575
Bildstein 200 2,000 1,700
None of the numbers provided to this court have been challenged.
Therefore, FMC Pension Group has the largest financial interest in this
litigation, dwarfing all other claims with their claim of $1.2 million.
Proposed lead plaintiff Dobis objects to FMC Pension Group on the
ground that the group consists of four unrelated entities or individuals
whose claims should not be aggregated for purposes of appointing lead
plaintiff. The PSLRA does not explicitly state whether individuals may
aggregate their losses for consideration as lead plaintiff. Likewise, the
Ninth Circuit has not ruled on the issue of aggregation.
Cayanaugh, 306 F.3d at 732 n.8. However, many district courts
have stated that by using the language "member or members of the
purported plaintiff class" the statute envisions aggregation.
Yousefi v. Lockheed Martin Corp., 70 F. Supp.2d 1061, 1067 (C.D.
Cal. 1999;): In re Network Ass'n Sec. Litig., 76 F. Supp.2d 1017, 1024 (N, D.
Cal. 1999); In re Universal Access. Inc., 209 F.R.D. 379, 384
(E.D. Tex. 2002).
Most district courts will not aggregate "huge amalgamations of
unrelated persons as lead plaintiff." In re Advanced Tissue Scis.
Sec. Litig., 184 F.R.D. 346, 352 (S.D. Cal. 1998) (refusing to
aggregate 250 or 165 members); Aronson, 79 F. Supp.2d at 1146
(refusing to aggregate 4,000 plaintiffs); Network Ass'n,
76 F. Supp.2d at 1024 (refusing to aggregate 1,725 plaintiffs);
Yousefi.70 F. Supp.2d at 1068 (refusing to aggregate group of
over one hundred); Takeda v. Turbodyne, 67 F. Supp.2d 1129 (C.D.
Cal. 1999) (refusing to appoint several hundred investors lead
plaintiff). To appoint a massive group would render the litigation too
unwieldy and defeat the objective of the PSLRA to put control in the
plaintiffs' hands rather than in the hands of lawyers. Id.
However, the majority of courts to have considered the issue allow
aggregation in small groups. Yousefi. 70 F. Supp.2d at 1071
(two); Takeda, 67 F. Supp.2d at 1129 (seven); Advanced
Tissue, 184 F.R.D. at 352 (six); In re Oxford Health Plans.
Inc. Sec. Litig., 182 F.R.D. 42, 45-48 (S.D.N.Y. 1998) (three);
Chill v. Green Tree Fin. Corp., 181 F.R.D. 398, 409 (D.Minn.
1998) (six); In re Versata. Inc., Litig., 2001 U.S. Dist. LEXIS
24270, at *17 (N.D. Cal. Aug. 17, 2001) (finding small groups of
unrelated individuals or entities may aggregate); Inre Baan Co. Sec.
Litig., 186 F.R.D. 214, 216-17 (D.D.C. 1999) (citing the SEC's
amicus brief stating small groups of three to five may serve as lead
plaintiff). A few courts have concluded that the proposed group must have
some pre-litigation relationship outside their common choice of counsel.
Aronson, 79 F. Supp.2d at 1153 (allowing only a small number of
members "that share such an identity of characteristic, distinct from
those of almost all other class members, that they can almost be seen as
being the same person"); In re Critical Path, 156 F. Supp.2d 1102,
1111 (N.D. Cal. 2001) (finding a group may aggregate only if they
have a preexisting relationship).
Although the statute allows a member or members of the plaintiff class
to qualify as lead plaintiff, absent direction from the United States
Supreme Court or the Ninth Circuit, this court will not decide the
propriety of aggregation. It may well be that aggregation is permissible
in limited circumstances as suggested by the court in Aronson,
but the issue does not require resolution in this case. The shareholder
suffering the largest loss within any of the groups is Spear Capital, a
member of FMC Pension Group. Spear Capital's loss of $654,713 is well
above the next largest loss of $287,420 claimed by Jamerica, also a
member of FMC Pension Group. Spear Capital alone qualifies as the
presumptive lead plaintiff. It makes no practical difference if Spear
Capital chooses to associate with other shareholders in order to further
distance itself from the next proposed lead plaintiff. Therefore, the
court will treat FMC Pension Group as the presumptive lead plaintiff with
the largest financial interest without deciding the issue of
Because FMC Pension Group is the presumptive lead plaintiff, only that
group's adequacy under Rule 23 is discussed below. See
Cavanaugh. 306 F.3d at 730-32 (requiring a sequential process by
which only the plaintiff with the largest financial interest is examined
for typicality and adequacy under Rule 23).
3. Rule 23 Requirements
Although Rule 23 contains four basic requirements (numerosity,
commonality, typicality, and adequacy of representation), a presumptive
lead plaintiff need only make a "preliminary showing" of typicality and
adequacy. Aronson, 79 F. Supp.2d at 1158. At this stage, the
district court is to rely on the presumptive lead plaintiffs complaint
and sworn certification. Cavanaugh. 306 F.3d at 731.
Adequacy of representation under Rule 23 contains two factors: "1) that
the representative party's attorney be qualified, experienced and
generally able to conduct the litigation; and 2) that the suit not be
collusive and plaintiffs interests not be antagonistic to those of the
remainder of the class." In re United Energy Corp. Solar Power
Modules Tax Shelter Invs. Sec. Litig., 122 F.R.D. 251, 257 (C.D.
Cal. 1998); Lerwill v. Inflight Motion Pictures. Inc.,
582 F.2d 507, 512 (9th Cir. 1978). While the district court has wide latitude
concerning the type of information to consider in determining adequacy,
the court may not consider whether the plaintiff has chosen the best
possible lawyer or the best possible fee arrangement.
Cavanaugh. 306 F.3d at 732. The choice of attorney may
disqualify a plaintiff only if it is "so irrational, or so tainted by
self-dealing or conflict of interest, as to cast genuine and serious doubt on that plaintiffs willingness or ability
to perform the functions of lead plaintiff." Id. at 733.
In this case, there is no reason to believe that any of the law firms
vying for lead counsel are not qualified or otherwise generally able to
conduct this case. Furthermore, there are no allegations and no reason to
believe that FMC Pension Group has an antagonistic relationship to the
remaining class members or that the group's claim is collusive.
Typicality requires that the plaintiffs claim is aligned with the
claims of the remainder of the class. United Energy.
122 F.R.D. at 256. This factor mandates that the presumptive lead
plaintiffs claim "arise from the same event or course of conduct
giving rise to the claims of other class members" and be based on
the same legal theory. Id. (citing In re Unioil Sec. Litig.,
107 F.R.D. 615, 620 (C.D. Cal. 1985)) ("The theory behind this
prerequisite is that a plaintiff with typical claims will pursue her
own self-interest and advance the interests of class members
accordingly."). In general, the test considers whether other members
of the class "have the same or similar injury, whether the action is
based on conduct which is not unique to the named plaintiffs, and
whether other class members have been injured by the same course of
conduct." Schwartz v. Haro, 108 F.R.D. 279, 282 (C.D. Cal. 1995).
Therefore, "differences in the amount of damages, the size or manner
of [stock] purchaser, the nature of the purchaser, and even the
specific document influencing the purchase will not render a claim
atypical in most securities cases." Weinberger v. Thornton.
114 F.R.D. 599, 603 (S.D. Cal. 1986). The typicality
requirement does not mandate that all claims be identical. Id.
The factual allegations made by FMC Pension Group are typical of the
class. Every proposed plaintiff alleges essentially the same
misrepresentations in Surebeam's financial statements. In fact, the
allegations and complaints are practically identical. While differences
exist in the times the different individuals purchased their shares of
Surebeam, this difference does not defeat typicality. Schwartz.
108 F.R.D. at 282: Halev v. Medtronic. Inc., 169 F.R.D. 643, 649 (C.D.
Cal. 1996) (holding "plaintiffs claim can still be typical even if the
class members' injuries were suffered at different times");
Takeda, 67 F. Supp.2d at 1137 (finding slightly different class
periods do not preclude a finding of typicality because varying class
periods may be harmonized). The only attack on the typicality of FMC Pension Group is on the ground
that the group's interests are not typical of plaintiffs whose claims
arise under the Securities Act because the group only asserts claims
under the Exchange Act. However, on a number of occasions, courts have
found a class representative typical even if the class representative is
representing claims of both Securities Act and Exchange Act claimants.
Thornton. 114 F.R.D. at 603. See, e.g., Cameron v. E.M.
Adams Co., 547 F.2d 473 (9th Cir. 1976) (class included both public
offering and aftermarket buyers); In re Activision Sec.
Litig., 621 F. Supp. 415, 433 (N.D. Cal. 1985) ("It is no barrier
that [a] plaintiff may have purchased . . . stock pursuant to the
initial offering yet he seeks to represent purchasers in the
aftermarket."); Weinbereer v. Jackson, 102 F.R.D. 839, 842
(N.D. Cal. 1984); hi re Victor Technologies Sec.
Litig., 102 F.R.D. 53 (N.D. Cal. 1984) (certified class includes
public offering purchasers and aftermarket purchasers). Therefore, FMC
Pension Group has made a preliminary showing of both adequacy and
typicality under Rule 23.
4. Rebutting the Presumption
The final step under the PSLRA allows competing plaintiffs to attempt
to rebut the presumptive lead plaintiffs qualifications under Rule 23.
Cavanaugh. 306 F.3d at 729. The presumption concerning lead
plaintiff can only be rebutted in two ways: 1) by a showing that the
presumptively most adequate plaintiff will not fairly or adequately
protect the interests of the class, or 2) by a showing that the
presumptively most adequate plaintiff is subject to unique defenses that
render the plaintiff incapable of adequately representing the interests
of the class. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II); Advanced
Tissue. 184 F.R.D. at 250-51. At this step of the inquiry, the
process is adversarial and the other plaintiffs may present evidence
disputing the lead plaintiffs prima facie showing of typicality and
adequacy. Cavanaueh, 306 F.3d at 729.
Leason Group objects to FMC Pension Group on the grounds that one of
the group's members, Jamerica Financial Inc. ("Jamerica"), is "incurably
tainted" by securities industry misconduct. Leason Group maintains that
the President and principal representative of Jamerica, Mr. Sherwin
Brown, is subject to over sixty complaints to securities regulators
including misrepresentation, unauthorized trading in client accounts, and
use of unsuitable investments. In fact, Mr. Brown has had his National
Association of Securities Dealers ("NASD") membership terminated. It is
unclear at this time whether these accusations involve Surebeam securities or bear any relation
to the present action.
On more than one occasion courts have found that an individual is an
inadequate lead plaintiff due to unrelated misconduct which implicates
the individual's ability to serve as a fiduciary. See Newman v.
Eagle Bide. Techs., 209 F.R.D. 499, 504-05 (S.D. Fla. 2002) (holding
two public citations for violations of SEC and NASD's rules render
proposed lead plaintiff inadequate due to concerns about potential
defenses and his moral character); Network Ass'n. 76 F. Supp.2d
at 1029 (holding presumptive lead plaintiff inadequate due to unrelated
fraud investigation). Without comment or consideration of Mr. Brown's
guilt or innocence as to the underlying charges, this court finds that
there is at least a potential that Jamerica will be subject to unique
defenses and will not fairly and adequately protect the interests of the
class. Therefore, the court finds that Jamerica is incapable of serving
as lead plaintiff.
FMC Pension Group requests that if Jamerica is found inadequate the
court sever Jamerica from the group and consider the group's motion
independent of Jamerica. The competing lead plaintiffs object to
severance of Jamerica from FMC Pension Group on the grounds that
individual members of a group should not be allowed to segment and that
all members of FMC Pension Group are tainted by inclusion in the group
Competing plaintiffs' argument that a group rises and falls as a group
and should not be allowed to segment is not supported by the case law. In
fact, courts in this circuit routinely break apart a proposed group in
search of the most adequate plaintiff. See, e.g., Yousefi,
70 F. Supp.2d at 1070; Takeda, 67 F. Supp.2d at 1135; Advanced
Tissue. 184 F.R.D. at 346. Competing plaintiffs cite In re
Critical Path. 156 F. Supp.2d 1102 (N.D. Cal. 2001), for the
proposition that a group cannot be segmented during the determination of
lead plaintiff. Id. at 1111. However, the court in In re
Critical Path never found segmentation impermissible. In fact, the
In re Critical Path court eventually appointed an entity lead
plaintiff that was severed from a larger group. Id. The court
merely found that each individual or entity, once segmented, must
independently establish adequacy and typicality. Id.
Competing plaintiffs also argue that the entire FMC Pension Group is
inadequate by virtue of the fact that they moved together with Jamerica
and that FMC Pension Group apparently did not discover, through due diligence, Jamerica's negative circumstance.
FMC Pension Group responds that Jamerica's misconduct should not reflect
on the remaining group members. FMC Pension group cites Newman v.
Eagle Buildmg Technologies. 209 F.R.D. 499, from the Southern
District of Florida for the proposition that even after one member of a
group is eliminated due to serious misconduct, the remaining group
members remain untainted. Id. at 505. In Newman. one
member of the presumptive lead plaintiff group had been publicly cited as
violating Securities and Exchange Commission and NASD rules on two
occasions. Id. at 504. The court held the infringing individual
inadequate for lead plaintiff status but found the remaining members of
the group adequate. Id. at 505. "The only entity that is
inadequate for the position of lead plaintiff due to Mr. Kashner's
violations of securities laws is Mr. Kashner himself. . . . Such a
finding does not kill the ability of the remaining Davidson Group to
serve as lead plaintiff." Id.
This court chooses to follow the reasoning of the Southern District of
Florida in Newman. There is no evidence before the court that
the remaining members of FMC Pension Group were involved in securities
misconduct of any kind. Any alleged misconduct by Mr. Brown only reflects
on the adequacy of Jamerica and not the other members of FMC Pension
Group. Therefore, the court finds that despite Jamerica's inadequacy to
serve as lead plaintiff, the remaining members of FMC Pension Group meet
the adequacy requirement.
Following the elimination of Jamerica, FMC Pension Group remains the
presumptive lead plaintiff. Without deciding the issue of aggregation,
FMC Pension Group is still the plaintiff with the largest financial
interest. FMC! Pension still includes the single investor with the
largest sustained loss, Spear Capital. Furthermore, as a group FMC
Pension has still faced the largest loss. The modified group's losses
include: (1) Spear Capital's loss of $654,713, (2) Joseph Brogan's loss
of $225,530, and (3) FMC Pension's loss of $113,965. Thus, without
Jamerica FMC Pension Group's aggregate losses amount to $994,208. The
second largest proposed plaintiff, Leason Group, has only suffered losses
of approximately $204,086. Finally, FMC Pension Group's typicality is not
defeated by elimination of Jamerica. Therefore, even after Jamerica is
removed from the group, FMC Pension Group remains the presumptive lead
The only other argument that FMC Pension Group will not fairly and
adequately represent the class comes from Bildstein in his motion to be appointed as a
separate lead plaintiff on the claims arising under the Securities Act.
B. "Niche" Lead Plaintiffs
Bildstein moves for this court to appoint co-lead plaintiffs, sometimes
referred to as "niche" plaintiffs, that is one lead plaintiff for the
claims under §§ 10(b) and 20(a) of the Exchange Act ("the section
10 claims") and one lead plaintiff for the claims under §§ 11 and
15 of the Securities Act ("the section 11 claims"). Bildstein argues he
is the most appropriate plaintiff for the section 11 claims. Former
proposed lead plaintiff Anthony Segalle joins in Bildstein's motion. FMC
Pension Group objects to the appointment of multiple lead
Bildstein argues that a separate lead plaintiff is needed to represent
the interests of the section 11 plaintiffs because section 11 has
different legal requirements. Section 11 claims may proceed on a strict
liability theory whereas section 10 claims require scienter be proven.
Bildstein asserts this difference in scienter creates an "inherent
conflict" between the two classes of investors and consequently FMC
Pension Group will not pursue the section 11 claims vigorously.
In support of his argument, Bildstein cites a few cases in which
district courts have appointed "niche" lead plaintiffs. See In re
Cendant Corp. Litig., 182 F.R.D. 144, 149-50 (D.N.J. 1998)
(appointing co-lead plaintiffs because the presumptive lead plaintiff had
a conflict of interest due to investments in defendant's institution);
In re Nanophase Tech. Corp. Litig., 1999 U.S. Dist. LEXIS
16171, at * 16 (N.D. Ill. Sept. 27, 1999) (appointing co-lead plaintiffs
on section 10 and section 11 claims because the legal standards and facts
were "exceedingly different"); In re Peregrine Sys., Inc. Sec.
Litig., Civil No. 02cv870-J (RBB) (S.D. Cal. Oct. 11, 2002)
(appointing co-lead plaintiffs on the section 11 and section 10 claims).
Although Bildstein argues that because the Securities Act and the
Exchange Act are two different statutes the court is required to appoint
two different lead plaintiffs, he provides no authority to support this proposition.
In fact, the majority of courts have refused to appoint niche lead
plaintiffs, arguing that such a practice defeats the PSLRA's goal of
"minimizing lawyer-driven litigation." See, e.g., Advanced
Tissue. 184 F.R.D. at 352 (refusing to appoint co-lead
plaintiffs because one group had already satisfied the PSLRA's
requirements); Aronson, 79 F. Supp.2d 1159; Enron
Corp., 206 F.R.D. at 454-56 (refusing to subdivide into multiple
"niche" lead plaintiffs based on the type of security purchased because
it would "undermine the purpose of the PSLRA"); Greenberg v. Bear
Stearns &Co., 80 F. Supp.2d 65, 70-71 (E.D.N.Y. 2000) (refusing
to appoint subclasses with separate lead plaintiffs because it would "run
counter to one of the stated purposes of the PSLRA which is to `minimize
costs; and to give control of the litigation to lead plaintiffs");
Gluck v. Cell Star Corp., 976 F. Supp. 542, 549 (N.D. Tex. 1997)
("Increasing the number of Lead Plaintiffs would detract from the Reform
Act's fundamental goal of client control, as it would inevitably delegate
more control and responsibility to the lawyers for the class and make the
class representatives more reliant on the lawyers."); Weinberg v.
Atlas Air Worldwide Holdings. Inc., 216 F.R.D. 248, 254 (S.D.N.Y,
2003) ("In sum, there is no need to appoint multiple Lead Plaintiffs in
order to represent different causes of action when subclasses or separate
representatives may be appointed, if necessary, as the litigation
One district court in the Northern District of California specifically
rejected the argument made by Bildstein in this case. See
Aronson, 79 F. Supp.2d at 1151. The Aronson plaintiffs
requested different lead plaintiffs on the claims under the Securities
Act and the Exchange Act on the grounds that the two acts "involved
different showings of scienter and proof." Id. The
Aronson court specifically held that differences in scienter do
not amount to an inherent conflict necessitating multiple lead
plaintiffs. Id. See also In re Diasonics Sec. Litig.,
599 F. Supp. 447, 454 (N.D. Cal. 1984) ("The Ninth Circuit has explicitly
rejected the suggestion that there is an incipient conflict between early
purchasers and later purchasers in a stock offering.") (citing
Blackie v. Barrack, 524 F.2d 891, 908-10 (9th Cir. 1975)).
Because "all claims are based on the same financial disclosures, the
existence of different pleading standards does not create the need for a
separate lead plaintiff." Aronson, 79 F. Supp.2d at 1151. While
a conflict of interest is an adequate reason to appoint niche lead
plaintiffs, the court may not rely on speculations about possible future
conflicts. Id. The statute presumes that "one lead plaintiff can vigorously pursue all
available causes of action against all possible defendants under all
available legal theories." Id.
In this case, Bildstein has failed to prove a conflict between the
section 10 and section 11 plaintiffs. The claims of the section 10 and
section 11 plaintiffs are based on the same facts and the different
scienter standards do not defeat the presumption that one lead plaintiff
can vigorously pursue all available legal claims. The presumptive lead
plaintiff, FMC Pension Group, claims to have standing to assert section
11 claims and any argument that the group will not vigorously represent
the interests of the section 11 plaintiffs is completely speculative at
C. Lead Counsel
Finally, all parties move for the approval of their choice of counsel.
The PSLRA dictates that the lead plaintiff is to select the lead counsel
subject to the court's approval. 15 U.S.C. § 78u-4(a)(3)(B)(v). The
court may refuse to approve a lead plaintiffs choice of counsel if it is
necessary "to protect the interests of the class." Id. §
78u-4(a)(3)(B)(iii)(II)(aa). In this case, FMC Pension Group has selected
Milberg Weiss Bershad Hunes &Lerach, LLP ("Milberg Weiss") as well as
Schatz &Noble, P.C. as their counsel. These firms are experienced in
securities litigation and the court finds no reason to reject FMC Pension
Group's selection. III. Conclusion
In sum, FMC Pension Groups's motion for appointment as lead plaintiff
[Doc. No. 24-1] is granted conditioned on the removal of
Jamerica from the FMC Pension Group. FMC Pension Group's motion for
approval of Milberg Weiss and Schatz & Noble as lead counsel [Doc.
No. 24-2] is granted.
Leason Group [Doc. Nos. 18-1, 18-2], Dobis [Doc. Nos. 35-1, 35-2],
Searcy Group [Doc. Nos. 7-1, 7-2], Berni [Doc. Nos. 10-1, 10-2], and
Bildstein's [Doc. Nos. 30-1, 30-2] motions for appointment as lead
plaintiff and for approval of lead counsel are denied without
prejudice. Bildstein's motion for consolidation is denied as
moot [Doc. No. 30-3] because the court has already entered an order
consolidating the actions pending and any subsequently filed related
actions [Doc. No. 5].
IT IS SO ORDERED.