LIONEL Z. GLANCY #134180 PETER A. BINKOW...

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5:05-CV-3395-JF DECLARATION OF CONOR R. CROWLEY

LIONEL Z. GLANCY #134180 PETER A. BINKOW #173848 MICHAEL GOLDBERG #188669 GLANCY BINKOW & GOLDBERG LLP 1801 Avenue of the Stars, Suite 311 Los Angeles, California 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 Email: [email protected] LABATON SUCHAROW & RUDOFF LLP Joel H. Bernstein (admitted pro hac vice) Christopher J. Keller (admitted pro hac vice) Conor R. Crowley (admitted pro hac vice) 100 Park Avenue New York, New York 10017 Telephone: (212) 907-0700 Facsimile: (212) 818-0477 Email: [email protected] Attorney’s for the Mercury Pension Fund Group Additional Counsel Listed on Signature Block

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ARCHDIOCESE OF MILWAUKEE SUPPORTING FUND, INC., On Behalf of All Others Similarly Situated, Plaintiff, vs. MERCURY INTERACTIVE CORPORATION, AMNON LANDAN, DOUGLAS P. SMITH, ANTHONY ZINGALE, SUSAN J. SKAER, BRAD BOSTON, IGAL KOHAVI, CLYDE OSTLER, GIORA YARON, YAIR SHAMIR, DAVID JAMES MURPHY III, YUVAL SCARLAT and BRYAN LEBLANC, Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Civil Action No.: 5:05-CV-3395-JF CLASS ACTION DECLARATION OF CONOR R. CROWLEY IN SUPPORT OF PROPOSED LEAD PLAINTIFF THE MERCURY PENSION FUND GROUP’S SUPPLEMENTAL REPLY BRIEF IN OPPOSITION TO THE PUBLIC EMPLOYEES’ RETIREMENT SYSTEM OF MISSISSIPPI’S REQUEST TO BE APPOINTED LEAD PLAINTIFF Honorable Jeremy Fogel Hearing Date: January 13, 2006 Time: 9:00 A.M. Courtroom: 3

Case 5:05-cv-03395-JF Document 47 Filed 01/06/2006 of 3

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5:05-CV-3395-JF DECLARATION OF CONOR R. CROWLEY

CONOR R. CROWLEY hereby declares as follows:

I am an attorney with the law firm of Labaton Sucharow & Rudoff LLP, counsel for the

Mercury Pension Fund Group (“MPFG”).

I am admitted pro hac vice in the above-captioned matter.

I respectfully submit this declaration in support of Proposed Lead Plaintiff The Mercury

Pension Fund Group’s Supplemental Reply Brief In Opposition To The Public Employees’

Retirement System Of Mississippi’s Request To Be Appointed Lead Plaintiff.

Annexed hereto as Exhibit A is a true and correct copy of the Memorandum Of Points And

Authorities Of Sachio Semmoto In Reply To The Opposition Memoranda Of Otter Creek Partners,

And Lauren Associates And Stanley Tomchin, And In Further Support Of The Motion To Appoint

Sachio Semmoto As Lead Plaintiff Pursuant To § 21D(a)(3)(B) Of The Securities Exchange Act Of

1934, And To Approve Lead Plaintiff’s Choice Of Counsel, filed by Wolf Popper in In re Clarent

Corp. Sec. Litig., Master File No. C-01-3361 CRB (N.D. Cal. 2001).

Annexed hereto as Exhibit B is a true and correct copy of the Transcript of Proceedings in

Hevesi v. Merck & Co., Inc., No. 04 Civ. 5866, at 52-53 (D.N.J. March 21, 2005).

Annexed hereto as Exhibit C is a true and correct copy of The Public Employees’

Retirement System of Mississippi’s Notice of Motion and Motion For Consolidation, Appointment

of Lead Plaintiff And Approval of Selection of Lead Counsel, in Weiss v. Friedman, 05-cv-04617

(S.D.N.Y.)

Annexed hereto as Exhibit D is a true and correct copy of The Institutional Investor

Group’s Memorandum in Reply To The Deka Group of Funds’ Opposition, in In re General Motors

Sec. Litig., 05-cv-8088 (S.D.N.Y.).

Annexed hereto as Exhibit E is a true and correct copy of Memorandum of Law of

Mississippi Public Employees Retirement System Responding To Competing Lead Plaintiff Motions

For Appointment And Consolidation, And Further Supporting Its Appointment As Lead Plaintiff,

In re Boston Scientific Corp., 05-cv-11934; 05-cv-12194 (D. Mass).


EXHIBIT A

Case 3:01-cv-03361-CRB Document 61 Filed 11/30/2001 Page 1 of 1 2

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WOLF POPPER LLPMARIAN P. ROSNERPATRICIA 1. AVERY (Admitted Pro Hac Vice)JAMES A. HARROD845 Third AvenueNew York, NY 10022Telephone : 212/759-4600212/486-2093 (fax)

Attorneys for Dr . Sachio Semmoto, PlaintiffIn Case No . C-01 20852 PVT


NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re Clarent CorporationSecurities Litigation .

This Document Relates To :

ALL ACTIONS

Master File No. C-01-3361 CRB(consolidated action)

MEMORANDUM OF POINTS ANDAUTHORITIES OF SACHIOSEMMOTO IN REPLY TO THEOPPOSITION MEMORANDA OF

} OTTER CREEK PARTNERS, AND} LAUREN ASSOCIATES AND

STANLEY TOMCHIN, AND INFURTHER SUPPORT OF THEMOTION TO APPOINT SACHIOSEMMOTO AS LEAD PLAINTIFFPURSUANT TO § 211)(a)(3)(11) OFTHE SECURITIES EXCHANGE ACTOF 1934, AND TO APPROVE LEADPLAINTIFF'S CHOICE OF COUNSEL

DATE: Friday, December 14, 2001TIME: 10:00 AMCOURTROOM: 8, Ninth FloorJUDGE: The Honorable Charles R . Breyer

SEMMOTO LEAD PLAINTIFF REPLY MEMORANDUMC-01-3361 CRB


1 . INTRODUCTIO N

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Dr. Sachio Semmoto ("Semmoto" or "Movant") filed a complaint against Claren t

Corporation ("Clarent" or the "Company") in this consolidated action (the "Action") on behalf of

purchasers of common stock during the period April 26, 2000 through and including August 31,

2001 (the "Class" and the"Class Period," respectively) and subsequently moved this Court for an

order, (a) appointing him as lead plaintiff in this action; and (b) approving his selection of Wolf

Popper LLP as Lead Counsel . None of the opposition papers filed in this Action raise any arguments

concerning Semmoto's compliance with the procedural components of the PSLRA, his financial

interest in this litigation or his adequacy to represent the Class .

There are four competing movants seeking to be appointed lead plaintiff in this action, Dr .

Semmoto, Otter Creek Partners ("Otter Creek"), Lauren Associates ("Lauren") and Stanley Tomchin

("Tomchin")(collectively the "Lauren/Tomchin Group"), Yaakov Glatter ("Glatter") and the

Evergreen Hightech Fund ("Evergreen")(collectively the "Glatter/Evergreen Group") .' Other than

Semmoto, only Otter Creek and the Lauren/Tomchin submitted opposition memoranda to the Court .

It is presumed that the Glatter/Evergreen Group has effectively withdrawn its application to be

appointed lead plaintiff by not filing an opposition .

' On November 23, 2001, a Motion to Be Appointed Lead Plaintiff was filed by the "Jacobs Group ."This motion is not addressed herein and it is presumed that the motion will not be considered dueto the fact that is has not met the minimum requirements of the PSLRA or the Local Rules for theNorthern District of California . The PSLRA requires anyparty seeking to be appointed lead plaintiffto either file a complaint or move the court for such appointment within sixty days from the filingof the first notice that a class action is pending . 15 U.S .C. §78u-4(a)(3)(A)(i). The first noticeannouncing the Action against Clarentwas issued on September 5,200 1, and notified class membersof their opportunity to move this Court on or before November 5, 2001 . The Jacobs Group's motionwas not filed until over two weeks after the required date . As such, it utterly fails to comply withthe procedural requirements of the PSLRA and should be denied . Numerous courts have held thatlead plaintiff motions, even if made by otherwise adequate lead plaintiffs, must be denied if they failto comply with the procedural requirements of the PSLRA, specifically, the requirement that amovant file a motion or complaint within sixty days of the issuance of the notice . See In reMicroStrategy Inc . Sec. Litig., 110 F.Supp. 2d 427, 433 (E .D. Va. 2000) ; In re Telxon Corp. Secs.Litig ., 67 F.Supp. 2d 803, 818 (N.D. Ohio 1999) ; Lax v . First Merchants Accept . Coip., 1997 U .S .Dist. LEXIS 11866, at *4 (N . D . Ill . Aug 11, 1997) . Moreover, the Local Rules of Practice of thisCourt, Rule 3-7(b) provides that any party seeking to serve as a lead plaintiff in a class action underthe PSLRA must submit a signed certification similar to the certification required under the PSLRA .The Jacobs Group did not submit a certification with its motion . The Jacobs Group provides noexplanation for the tardiness of its motion . The Irwin Group's failure to comply with even the basicrequirements of the PSLRA and the Local Rules render them wholly inadequate .

SEMMOTO LEAD PLAINTIFF REPLY MEMORANDUM -1-C-01-3361 CRB

Case 3 :01-cv-03361-CRB Document 61 Filed 11/30/2001 Page 3 of 1 2

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Dr. Semmoto now submits this Memorandum of Points and Authorities in further suppor t

of his motion, and in reply to the memoranda submitted by Otter Creek Partners and the

Lauren/Tomchin Group, in support of their motions to be appointed lead plaintiffs . As addressed

in Semmoto's Opposition Memorandum, in light of the motion made by Otter Creek, Semmoto

would be willing to serve as sole lead plaintiff or co-lead plaintiff along with Otter Creek .

II . ARGUMENT

A. OTTER CREEK SHOULD NOT BE APPOINTED SOLE LEAD PLAINTIFF

Movant is not arguing that a hedge fund such as Otter Creek should never be appointed a s

a lead or co-lead plaintiff, or as a class representative . However, Otter Creek has been less than

forthcoming with the Court . The lack of complete disclosure by Otter Creek concerning potential

issues of typicality and adequacy underscores the need for a co-lead plaintiff to serve in conjunction

with Otter Creek, or alternatively, for discovery of Otter Creek's trading and trading strategy to

ensure that substantial questions will not be raised about Otter Creek during class certification .

A declaration submitted with Otter Creek's opposition memorandum provided anothe r

amendment to Otter Creek's original certification, revealing additional transactions in Clarent during

the Class Period, specifically, the purchase of call options which recently expired . Otter Creek

further corrected its "corrected" certification by disclosing that certain trades were transposed

between the two partnership entities which invested in Clarent . A declaration submitted by Roger

Keith Long amended his certification which had failed to comply with the requirement under the

PSLRA and the Local Rules that a movant state his willingness to provide testimony in the action .

A review of the information provided in the trading schedules attached to the Declaration of Roger

Keith Long In Further Support of Otter Creek Partners' Application To He Appointed Lead Plaintiff

(Exhibit A to the Declaration ofBlairA . Nicholas In Support of Otter Creek Partners' Memorandum

of Points and Authorities In Opposition To The Competing Motions For Appointment of Lead

Plaintiff (the "Nicholas Decl ."), reveals additional factual inaccuracies . The schedules report

purchases of Clarent stock by both Otter Creek Partners I L .P. and Otter Creek International L .P. on

July 20, 2001 at $6 .8150 per share . The trading range for Clarent shares on July 20, 2001 was $6 .90

to $8 .09. If the July 20, 2001 low price for Clarent was $6 .90 per share, Otter Creek could not hav e



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purchased 10,000 shares of Clarent at $6 .815 . The schedule attached to Exhibit A to the Nicholas

Dccl . illustrating Otter Creek International's trading reflects a purchase of 10,000 shares of Clarent

on June 5, 2001 at a price of $10 .65 per share . The trading range for Clarent shares on June 5, 2001

was $9 .68 to $10 .34. If the June 5, 2001 high price for Clarent was $10 .34 per share, Otter Creek

could not have purchased 10,000 shares of Clarent at $10 .65. The trade information supplied by

Otter Creek for its trades on both June 5, 2001 and July 20, 2001 is outside the price range in which

Clarent shares traded on those days . The information regarding these purchases is either incorrect

or requires further explanation or amendment to Otter Creek's certification .

Throughout its opposition , Otter Creek refers to itself as a financial institution or as an

institutional investor . As pointed out in Dr. Semmoto's Opposition Memorandum, Otter Creek is

more accurately described as a hedge fund . Hedge funds are privately owned investment companies,

usually structured as limited partnerships, in which the advisor is the general partner and the

investors, who are often high-net-worth individuals or entities, are the limited partners . Hedge funds

are typically structured so as to avoid registration under the Investment Company Act of 1940 (by

having fewer than 100 investors) and are thus not subject to regulatory oversight and reporting

requirements . In addition, hedge funds are able to engage in highly leveraged transactions, far

beyond the limits of leverage permitted to registered investment companies . These characteristics

distinguish Otter Creek from typical "institutional investors" who are usually subject to stringent

investment requirements and reporting requirements .

While Otter Creek' s characterization of itself as an institutional investor may be arguable ,

it is not entirely accurate or fully descriptive . A hedge fund maybe an "institutional investor" to the

extent that it invests funds on behalf of others, but it also engages in trading strategies which

distinguish it from a public pension fund . In its opposition Otter Creek cites numerous cases which

discuss the virtues of appointing "institutional investors" as lead plaintiffs under the PSLRA, but

most of the cases cited for that proposition concern the appointment of public pension funds or other



institutions which are unlikely to fall victim to the same questions of typicality that Otter Cree k

2 may.2

Due to its investment strategies, a hedge fundis more likely than other investors to be subject

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to the defense of atypicality at the class certification stage . A defense of atypicality may arise when

the investor is shown to have a strategy or engage in practices which make it different than the class .

If the Court appoints Otter Creek sole lead plaintiff, and the defendants can establish that Otter Creek

is not a typical class member under Rule 23, the Class will not be certified . See In re Critical Path,

Inc. Sec. Litig., 156 F .Supp. 2d 1102, 1108 (N.D. Cal. 2001) . See In re Bank One Shareholders

Class Actions, 96 F. Supp. 2d 780, 783 (N.D .111. 2000) (rejecting a hedge fund as lead plaintiff) ; In

re MicroStrategy Inc. Sec. Litig., 110 F .Supp. 2d 427, 437 (E .D. Va. 2000) . Obviously, this would

have a substantially adverse impact on the claims of the absent class members .

There is no question that Otter Creek is a hedge fund , as demonstrated by the article attached

as Exhibit 2 to the Declaration of Patricia I. Avery ( filed in support of the Oppositio n

2 In its opposition memorandum, Otter Creek cites numerous cases in support of the argument thatits application should be granted because the PSLRA endorses the selection of "institutionalinvestors" as lead plaintiffs . See Otter Creek Opposition Memorandum, at 3 - 4 (fn . 3), 7 (fn 9) .Otter Creek urges the Court to appoint it lead plaintiff because "Congress made clear that the leadplaintiff provision was specifically designed to encourage sophisticated institutional investors, likeOtter Creek Partners , to become lead plaintiffs ." Otter Creek Opposition Memorandum, at 7(emphasis added) . However, the majority of the cases cited in support of this proposition discussor appoint public pension or retirement funds as lead plaintiffs, none appoint hedge funds . Osherv. Guess?, Inc ., 2001 U .S. Dist . Lexis 6057, *12 ("Here, as a public pension fund with asset s

Reform Act." emphasis added)(appointing institutional investor the Policemen and FiremenRetirement System of the City of Detroit lead plaintiff and appointing Bernstein Litowitz Berger &Grossman lead counsel) ; Armour v. Network Associates, 2001 U.S. Dist . Lexis 7566, *35 (June 4,2001) (appointing institutional investor the Teachers' Retirement System of Louisiana lead plaintiff,selecting Bernstein Litowitz Berger & Grossman lead counsel) ; Aronson v. McKesson HBOC, Inc .,79 F.Supp. 2d 1146,1157 (N .D. Cal . 1999)(decision narrowing choice of lead plaintiff to the NewYork City Pension Funds and the New York State Common Retirement Fund, both represented byBernstein Litowitz Berger & Grossman) ; Bowman v. Legato Systems, 195 F.R.D . 655,658-659 (N.D .Cal . 2000)(appointing institutional investor the Policemen and Firemen Retirement System of theCity of Detroit lead plaintiff and appointing Bernstein Litowitz Berger & Grossman lead counsel) ;Yousefi v. Lockheed Martin Corp ., 70 F .Supp. 2d 1061, 1070-1071 (C .D. Cal . I999)(appointing theCity of Philadelphia Board of Pensions and Retirement co-lead plaintiff) . As discussed above, noneof the cases cited consider an entity similar to Otter Creek a financial institution for purposes ofappointing a lead plaintiff under the PSLRA, the authorities establish that the commonunderstanding of the term "institutional investor" is that it refers to public or labor pension funds .It is also clear that Otter Creek's counsel, Bernstein Litowitz Berger & Grossman is aware of thisdistinction, as it was appointed lead counsel, representing a public pension fund in three of the casesOtter Creek relies on .



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Memorandum)(the "Avery Dccl ."), and in fact is a hedge fund which engages in various techniques,

including short selling, to insulate itself from downside risk . See id. While these qualities certainly

do not per se disqualify Otter Creek, the lack of disclosure about the nature of the entity and its

trading strategy must be questioned . Otter Creek criticized the other movants in its opposition for

failing to provide additional information to the Court about each movant's capacity to serve as lead

plaintiff, but it is apparent that Otter Creek has not provided full information about its own

qualifications and background . Accordingly, Movant has requested limited discovery of Otter Creek

to ensure that any argument raised about Otter Creek's typicality could be defeated . Without such

discovery it is impossible to determine if arguments concerning Otter Creek's typicality will be

overcome during class certification . The alternative is to appoint Dr . Semmoto as a co-lead plaintiff .

Semmoto's typicality and adequacy are unquestioned and it is inconceivable that any colorable

challenge could be made in opposition to his appointment as a class representative in this Action .'

B. LAUREN ASSOCIATES AND STANLEY TOMCHIN ARE NOTAPPROPRIATE LEAD PLAINTIFFS

The Lauren/Tomchin "Group" fails to provide any justification for its appointment as lead

plaintiff in this Action . As discussed in the Opposition Memorandum, Lauren's certi fication is

inadequate on its face and fails to complywith the provisions of Civil L .R. 3-7(b) . The certi fication

does not provide any detail regarding the transactions which Lauren claims relate to a loss of more

than $370 , 000. Lauren made no attempt in its opposition to correct the de ficiencies in its

certi fication or provide additional information about its trading in Clarent . Without providing

additional information or correction , it must be assumed that Lauren ' s loss is either not what it

claims or is complicated by undisclosed factors . As such , the certification must be discounted in

total and the loss claimed by Lauren must be ignored in determining the aggregate loss of the

Lauren/Tomchin Group . Tomchin reports an estimated loss of approximately $455,000 , which is

less than the loss incurred by Semmoto .

3 Otter Creek 's opposition memorandum confirms that it has not sold Clarent shares sho rt, and thisclarifies the issues regarding Otter Creek' s adequacy to an extent . However, given the partnerships'public statements about the nature of its trading practices , potential issues may still exist whichsuggest that it would be prudent to appoint Movant as a co-lead plaintiff, at a minimum .



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The Lauren/Tomchin group also fails to offer any information about the constituent member s

of the "group" or about how they would work together to manage and control the litigation . After

two submissions to the Cou rt the Lauren/Tomchin Group has provided no information about its

membership . The PSLRA was enacted , in pa rt, for the remedial purpose of limiting lawyer run

litigation . See Greebel v. FTP Software, 939 F . Supp . 57, 58 (D.Mass. 1996) ; In re Milestone

Sciences Securities Litigation , 187 F.R.D. 165, 174 (D .N.J . 1999) ; Gluck v . Cellstar Corporation,

976 F . Supp . 542, 544 (N .D. Tex. 1997). Until Lauren and Tomchin can establish that they are a

group which was not assembled by their lawyers for the purpose of repo rt ing a greater total loss it

cannot be assumed that they are group with any preexisting relationship , as preferred by the many

courts who have addressed the issue of what a proper group is for the purposes of selecting lead

plaintiffs . Aronson v. McKesson HBOC, Inc., 79 F .Supp . 2d 1146, 1153 (N .D. Cal . 1999) ; Bowman

v. Legato Systems , 195 F .R.D. 655 , 658 (N.D. Cal. 2000 ) ; In re Network Associates Securities

Litigation , 76 F.Supp . 2d 1017, 1023 (N .D . Cal . 1999) .

C. SACHIO SEMMOTO IS THE "MOST ADEQUATE PLAINTIFF"

As demonstrated heretofore by Semmoto's previous submissions in support of his motio n

to be appointed leadplaintiff, Dr . Sachio Semmoto is the most adequate lead plaintiffin this Action .

Among the movants who meet the procedural and substantive requirements of the PSLRA Semmoto

has the largest financial interest in this case . Dr. Semmoto has demonstrated his willingness to serve

in this action by submitting a certification outlining his trading in Clarent .Q Dr . Semmoto further

established his willingness and adequacy to lead the Class and control the litigation by submittin g

" In the opposition memorandum submitted by Otter Creek, they criticize the other movants forsubmitting "boilerplate certifications ." This criticism is misplaced in that the PSLRA and the LocalRules both require plaintiffs and potential lead plaintiffs to submit signed certifications whichprovide specific information and attestations . While Otter Creek may criticize Dr. Semmoto'scertification as being "boilerplate" it was prepared specifically for him, identifies all of his trades inClarent securities during the Class Period and complies with all of the requirements of the PSLRAand Local Rule 3-7(b) . As discussed supra, Otter Creek's certification submitted with its motion,failed to meet the statutory requirements of the PSLRA and has also been corrected and amendedno less than three times since it was originally filed . Despite these corrections it appears that OtterCreek's corrected certification still contains factual inaccuracies . In addition, Dr. Semmoto hassubmitted more than the "boilerplate" information in his certification, in the form of a declarationsubmitted with his Opposition Memorandum which provides substantial information about hisbackground, his education, his adequacy and typicality, as relevant to the Action . See Avery Decl .Exhibit 1 .



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a declaration attesting to his leadership and business acumen , and providing additional information

about his typicality. Dr. Semmoto has fulfi lled all of the procedural requirements of the PSLRA by

fi ling a complaint and certification form and by fi ling a timely motion to be appointed lead plaintiff

in this action . Semmoto has the qualifications to ensure that the Class will be well represented in

this litigation , both by himself and by his choice of counsel for the Class .

None of the opposition memoranda filed raise any question about Semmoto's adequacy o r

typicality. The declaration filed in support of his Opposition Memorandum, provides information

about his adequacy and typicality. Dr. Semmoto has provided full disclosure about his background

and has provided assurances that his trading in Clarent is disclosed in its entirety . His credentials

to serve are as strong as those of Roger Keith Long, the principal of Otter Creek, and he does not

face any of the potential typicality challenges which Otter Creek may. Semmoto is not subject to any

criticism regarding his compliance with the procedural requirements of the PSLRA and or any

criticism regarding the disclosure of his trading in Clarent securities, which the Lauren/Tomchin

group suffers from .

Otter Creek argues that it has superior qualifications to the other movants as demonstrate d

by the declarations and affidavits it has submitted . Otter Creek Opposition Memorandum at 8 . Otter

Creek's papers also demonstrate the difficulty it has had in submitting a certification which complies

with the PSLRA, discloses all of the necessary trading information and provides correct information

regarding those trades . These difficulties and the general lack of disclosure about Otter Creek's

background must call into question its alleged superiority to serve as sole lead plaintiff .

It is apparent that each of the qualities which Otter Creek touts in support of its allegedl y

superior adequacy can also be said of Dr . Semmoto . Dr. Semmoto has greater educational and

professional qualifications than Mr. Long of Otter Creek, possessing a Ph .D., experience as an

officer of a public company, the founder and CEO of a telecommunications business and experience

as a professor and lecturer at prominent universities . See Semmoto Declaration at ¶ 19 - 20 (Exhibit

2 to the Avery Decl .) . Dr. Semmoto has stated that he understands the responsibilities of being lead

plaintiff and that he has selected counsel who are specialized in and have been successful in this

field . Id., ¶ 10. Dr. Semmoto is willing to provide both deposition and trial testimony, if he i s

SEMMOTO LEAD PLAINTIFF REPLY MEMORANDUM -7-C-O1-3361 CRB


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called upon to do so . Id., ¶ 5 . In addition to the foregoing qualifications which he shares with Otter

Creek, Dr. Semmoto has provided additional information about his adequacy and typicality which

Otter Creek has not provided . Dr. Semmoto has stated that he has disclosed all of the transactions

he has ever made in Clarent common stock or options. Id., ¶ 3 . Dr. Semmoto has stated that he

knows of no reason why his claims would be considered atypical or why his counsel would be

considered inadequate . Id., ¶¶ 8, 9 . Dr. Semmoto has extensive experience in business and

teaching, and has extensive experience in the field of telecommunications, which he believes equip

him to adequately represent the Class . Id., ¶¶ 9, 11, 20. Conversely, Otter Creek has not resolved

all of the outstanding questions concerning its typicality and does not provided any specific

leadership credentials . Dr. Semmoto would be an excellent class representative, one who fully

understands his responsibilities and is entirely capable of discharging his duties to the Class .

Otter Creek points out in its own opposition papers that the financial component of the "mos t

adequate plaintiff' determination should not obviate the inquiry into a movants adequacy . See

Wenderhold v. Cylink Corp., 188 F .R.D. 577, 585 (N.D . Cal . 1999) ; Switzenbauni v . Orbital

Sciences Corp ., 187 F.R.D. 246, 250 (E .D. Va. 1999) . Clearly, this is a critical component of Dr .

Semmoto's argument. Bearing in mind that Dr. Semmoto's adequacy is superior to that of the other

movants, his financial interests should be viewed in light of these considerations . While

acknowledging the apparent magnitude of Otter Creek's financial interest in the case, the Court

should protect the Class by appointing Dr. Semmoto as a co-lead plaintiff or alternatively, by

allowing discovery of Otter Creek for the purpose of gaining an assurance that any potential

typicality challenge by defendants would fail, thereby ensuring the best representation for the Class .

While Otter Creek is critical of the other movants for failing to establish their ability t o

control the litigation, it is not clear that Otter Creek, or any of the other movants, have demonstrated

a greater ability to manage the litigation. Dr. Semmoto is a distinguished business leader, an

entrepreneur and a professor . He has served as an officer of a publicly traded company . It is

apparent that his financial interest in this case, a loss of nearly half a million dollars, is significant

enough to dismiss the argument that he is merely a fixture of his attorneys . Dr. Semmoto is no more


Case 3:01-cv-03361-CRB Document 61 Filed 11/30/200 1

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likely to be a "figurehead" plaintiff than is Otter Creek . It is not clear what other indicia of control

a movant might submit to the Court .

In its opposition memorandum Otter Creek makes a significant effort to establish its

adequacy by relying on a fee arrangement it has reached with its counsel. It would seem that Otter

Creek is using the fee agreement and the outlined "maximum" fee its counsel would seek as th e

touchstone for lead plaintiff adequacy under the PSLRA .

Dr. Semmoto stands on his record and his experience and does not need a talisman o f

adequacy in the form of the fee agreement suggested by Otter Creek's counsel to demonstrate his

qualifications to serve as a lead plaintiff in this Action . Nevertheless, Dr . Semmoto understands that

Wolf Popper would agree to a fee arrangement in this Action resulting in counsel fees representing

less than twenty-five percent of the recovery in this action, just as Otter Creek has entered into with

its counsel .

D . CONCLUSION

For all of the foregoing reasons, Dr . Sachio Semmoto respectfully requests that the Court

deny the motions of the other movants . Semmoto requests that Court appoint him lead plaintiff or

co-lead plaintiff in conjunction with Otter Creek . Sachio Semmoto further requests that the Cour t

I approve his choice of Wolf Popper LLP as lead counsel for the Class .

Dated : November 29, 2001 Respectfully submitted ,

WOLF POPPER LLPMARIAN P. ROSNERPATRICIA I. AVERY (Admitted Pro Hac Vice)JAMES A. HARROD

By: Isl Patricia I. Avery845 Third AvenueNew York, New York 10022Telephone : 212/759-4600212/486-2093 (fax)Attorneys for Dr. Sachio Semmoto



CERTIFICATE OF SERVIC E

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The undersigned certifies that : (i) a copy of the foregoing was served upon the counsel of

record in the Consolidated Action identified below, by United States mail, first class postage prepaid

this 29th day of November 2001 ; (ii) that there is regular communication by mail between the place

of mailing and the places so addressed; and, (iii) pursuant to Civil L.R. 23-2, that on this date I

served a copy of this document on the Securities Class Action Clearinghouse by electronic mail

through the following electronic mail address provided bythe Securities Class Action Clearinghouse :

jcarlos@stanford .edu.

Reed R. Kathrein, Esq . Kevin J . Yourman, Esq .Jeffrey Lawrence, Esq . Jennifer R . Williams, Esq .Willow Radcliff, Esq . Weiss & YourmanMilberg Weiss Bershad Hynes & Lerach LLP 10940 Wilshire Blvd., 24' Floor100 Pine Street, Suite 2600 Los Angeles, CA 9002 4San Francisco, CA 9411 1

William S . Lerach, Esq.Darren J . Robbins, Esq .Milberg Weiss Bershad Hynes & Lerach LLP600 West Broadway , Suite 1800San Diego , CA 9210 1

Marc A. Topaz, Esq .Schiffrin & Barroway, LLPThree Bala Plaza East, Suite 400Bala Cynwyd, PA 1900 4

Paul J . Geller, Esq .Cauley, Geller, Bowman & Coates, LLPOne Boca Place, Suite 421 A225 Glades RoadBoca Raton, Florida 3343 1

Mel E. Lifshitz, Esq .Bernstein Liebhard & Lifshitz, LLP10 East 40*h StreetNew York, New York 1001 6

James C. Maroulis, Esq.Cooley Godward LLPFive Palo Alto Square3000 El Camino RealPalo Alto, CA 94306

Joseph H . Weiss, Esq .James E. Tullman, Esq .Weiss & Yourman551 Fifth Avenue, Suite 1600New York, New York 10176

Michael Braun, Esq .Stull, Stull & Brody10940 Wilshire Blvd ., Suite 2300Los Angeles, CA 90024

Jules Brody, Esq.Stull, Stull & Brody6 East 45"' StreetNew York, New York 1001 7

Joseph J . Tabacco Jr ., Esq .Jennifer S . Abrams, Esq.Berman Devalerio Pease Tabacco

Burt & Pucillo425 California Street, Suite 2025San Francisco , CA 94104

Jeffrey C. Block, Esq .Michael G . Lange, Esq .Berman , Devalerio Pease Tabacco

Burt & PucilloOne Liberty SquareBoston , NA 0210 9

SEMMOTO LEAD PLAINTIFF REPLY MEMORANDUM -10-C-O1-3361 CRB


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C . Oliver Burt III, Esq .Michael J . PucilloBerman Devalerio Pease Tabacco

Burt & PucilloNo rthbridge Center, Suite 1701515 North Flagler Driv eWest Palm Beach, Florida 3340 1

Laurence J . Rosen . Esq .The Rosen Law Firm, P .A.232 Madison Avenue, Suite 906New York, New York 1001 6

Francis M . Gregorek, Eq .Betsy C . Manifold, Esq.Francis A. Bottino Jr., Esq .Wolf Haldenstein Adler Freeman

and Herz LLPSymphony Tower s750 B . Street, Suite 2770San Diego , CA 9210 1

Fred T. Isquith, Esq .Gregory M. Nespole, Esq .Gustavo Bruckner, Esq .Wolf Haldenstein Adler

Freeman and Herz LLP270 Madison AvenueNew York, New York 1001 6

Solomon B . Cera, Esq.Gwendolyn R . Giblin, Esq.Joseph M. Baron, Esq .Gold Bennett Cera & Sidener LLP595 Market Street, Suite 2300San Francisco, CA 94105-283 5

Jonathan M. Plasse, Esq.Emily C. Komlossy, Esq.Goodkind Labaton Rudoff & Sucharow100 Park AvenueNew York, NY 10017(212) 907-0070

Kurt Olsen, Esq .The Olsen Law Firm2121 K Street N .W., Suite 800Washington, DC 2003 7

David R . Scott, Esq .James E . Miller, Esq .Scott & Scott, LLC108 Norwich AvenueColchester, CT 06415(860) 537-381 8

Todd S . Collins, Esq.Jacob A. Goldberg, Esq .Berger & Montague, P .C .1622 Locust StreetPhiladelphia, PA 19103

Bruce G. Murphy, Esq .Law Offices of Bruce G . Murphy265 Llywyds LaneVero Beach, Florida 32693(561) 231-4202

Marc H . Edelson, Esq .Hofman & Edelson45 West Court StreetDoylestown, PA 18901(215) 230-8043

Jerome B. Simon, Esq .Maslon Edelman Borman & Brand LLP3300 Wells Fargo Center90 South Seventh StreetMinneapolis, Minnesota 55402-4140

Martin H . Dodd, Esq.Dodd, Futterman & Dupree LLP351 California Street, Suite 1100San Francisco, California 94104-2418(415) 399-3840

I declare under the penalty of perjury that the foregoing is true and correct .

Is! James HarrodJames A. Harrod

SEMMOTO LEAD PLAINTIFF REPLY MEMORANDUMC-O1-3361 CRB

EXHIBIT B

-Case 3:05-cv-01i51-SRG-TJB Document 33 Filed 0410812005 Page 2 of 50

MERCK!

I

I UNITED STATES DISTRICT COURTDISTRICT OF NEW JERSEY

Z CIVIL ACTION NO . 04-CV-5866 (SRC)

3ALAN G . HEVESI, COMPTROLLER OF

4 111E STATE OF NEW YORK, ASALJMXNISTRATIVE HEAD OF THE NEW

5 YORK STATE AND LOCA#. RETIREMENTSYSTEMS AND AS TRUSTEE OF THE

6 HEN YORK STATE COMMRETIREMENT FUNS in ividually

7 and an behalf a+ a7 otherssii1.Iarly situated ,

gPlaintiff,

9vs .

10MERCK & CO., INC., KENNETH C .

1i. FRAZIER, RAYMOND V . GILMARTIN,RICHARD C. HENRIQUES, PETER S .

12 KIM, ALISE S . REICUN, EDWARD M .SCOLNICK, MARY H . MCDONALD and

13 3U0Y C. LEWENY .

14 Defendants,--------------------------------

15 march 21, 2005Trenton, New Jersey

16

17 B E F 0 R E: HONORABLE STANLEY R. CHESLER, USD]

18

14 Pursuant to Section 753 Title 28 united states Code, thefollowing transcript is. certified to be an accurate record

20 as taken stenographically in the above-entitled proceedings .

21JACQUELINE KASHME R

22 - Official court Reporter

23JACQUELINE KASFIMER, C .S .R ., C.R .R.

24 OFFICIAL COURT REPORTE RP . 0. box 12

.25 Pittstown N] 08857'(609)- 6 6-2.595

a

Page I2

Case 3:05-cv-01'5'1-SRC-TJB Document 3S Filed 04108/2005 Page 50 of 5 0

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MERCKI.that authority and j urisdiction . The question I s whether or

not under the circumstances of this case, it should exercise

that authority and discretion .

The lead counsel provisi ons of the PSLRA were

created to deal with two recurring problems in class action

litigation . one was the situation in which class

representative plaintiffs , l ead plaintiffs , were selected

and did not have any substantial economic interest in the

outcome of the lawsuit , thereby by default placing the

entire conduct of the lawsuit in the hands of counsel .

The provisions of-the PSLRA which presumptively

direct the court to appoint as l ead plaintiff the plaintiff,

which suffered the greatest economic-injury were designed to

deal with that issue .

There was a second issue, however, which the PsLRA

was designed to deal with and that was, quite frankly, th e

a

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I mad scramble to the courthouse, the chaotic situation i n

2 which competing lawyers and plaintiffs descended sometime s

3 in hordes on the courthouses throughout the country and then

4 -engaged in what could at best be described as a% unseeml y

5 scramble to be appointed to the lead plaintiff and lead

6 counsel position .

7 The PSLA was designed to cure that problem by

8 creating a process in which the first . plaintiff to the

9 courthouse and the first lawyer to the courthouse did not

10 thereby stake a claim on the entire lawsuit, and created

11 provisions under which before a lead plaintiff could bePage 49

Case 3:05-c

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v-01151 -SRC-TJB Document 33 Filed 04/08/2005 f'age 2 of 11

MERCKI

appointed, notice had to be published and an opportunity for

other potential plaintiffs to make an application to that

position, including plaintiffs who had a more substantial

economic interest in the lawsuit if they were interested .

The court firmly believes that while it has the

power to revisit the appointment of lead plaintiff at any

point during the pendency of a lawsuit, the mere fact that a

plaintiff with greater losses than the originally appointed

lead plaintiff subsequently develops an interest in a

lawsuit is an Insufficient basis to disturb the original

appointment of the leadplaintiff . it would destroy the

process which the P5LKA was designed to initiate . Yt would,

in fact, create the potential for continued unending

struggles between plaintiffs and their counsels to secure a

53

1 -piece of a litigation once it became clear that it had more

2 possible merit than was originally perceived .

3 in short, as the court indicated in in Re :

4 worldcop, Inc . Securities Litigation, 294 F . supp 2d ► 392,

5 southern District of new York, 2003, "The time for th e

6 selection of lead plaintiff is over . .while the PSLKA

7 certainly envisions appointment of co-lead plaintiffs, there

8 was no competitor or group of competitors for the positio n

9 of lead plaintiff that presented any serious challenge on

10 the merits to the application made in that case by the

11. IVsCRF when measured by the standards that applied to the

12 selection of lead plaintiff . "

Page 50

Case 3:05-cv-01151-SRC TJB Document 33 Fled 04/08/2005 Page 3 of 1 1

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in

MERCKIThe court is satisfied that same analysis applies

here. The court is more than satisfied that counsel for the

lead plaintiff is eminently qualified to pursue a litigation

of this significance . The court is further- satisfied that,

indeed, there are no unique defenses which are applicable to

the lead plaintiff which are sufficient to warrant its

disqualification under Rule 23 .

As counsel for the lead plaintiff has indicated in

its moving papers or opposing papers, the issue of a truth

an the market defense ends up being a factual issue which

has to be decided on the basis of the evidence which will

ultimately be adduced either at trial or in motion practice

but, in particular, it is not a defense which is unique to

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1 that particular plaintiff .

2 indeed, it is a defense which would apply to all

3 purchasers who were covered by the pleadings as they were

4 initially drafted . in short, it would apply to all of the

5 purchasers who purchased at that point in time . That's not

6 a unique defense by any stretch .

7 The court is not satisfied that the concept that

-8 there might be an implied admission by the filing of the

9 original complaint is sufficient to create such a

10- substantial unique defense as to warrant disqualification of

11 -the Pringle plaintiffs .

12 The court has further carefully considered th e

13 argument of Park East that there should be a separate niche

14 lead plaintiff. suffice it to say, as the court noted inPage 51

EXHIBIT C

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YOR K

BRIAN T. WEISS, On Behalf of Himself and AllOthers Similarly Situated,

Plaintiff,vs .

FRIEDMAN, BILLINGS, RAMSEY GROUP,INC. et al .,

Defendants .

VAN DER JAGT FAMILY TRUST, On Behalfof Itself and All Others Similarly Situated,

Plaintiff,vs.


Defendants.

JOHN GRAEBNER, On Behalf of Himself andAll Others Similarly Situated,

Plaintiff,vs .


Defendants .

Case No. 1 :05-cv-04617-RJH

CLASS ACTION

ELECTRONICALLY FILE D

Case No. 1 :05-cv-04706-RJH

CLASS ACTION

Case No. 1 :05-cv-04771-RJ H

CLASS ACTION

(See additional captions on subsequent pages)

THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM OF MISSISSIPPI'SNOTICE OF MOTION AND MOTION FOR CONSOLIDATION,

APPOINTMENT OF LEAD PLAINTIFFAND FOR APPROVAL OF SELECTION OF LEAD COUNSEL

Document: 148371 Version : 1 Client /Matter. 3158 : 1699

MICHELLE POSNER, On Behalf of Herself andAll Others Similarly Situated,

Plaintiff,vs .


Defendants .

LEMON BAY PARTNERS, LLP, On Behalf ofItself and All Others Similarly Situated ,

Plaintiff,vs .


Defendants.

SAM MANEWITZ, On Behalf of Himself andAll Others Similarly Situated,

Plaintiff,V5 .


Defendants .

Case No. 1 :05-cv-04795-RJ H

CLASS ACTION

Case No . 1 :05-cv-04818-RJH

CLASS ACTION

Case No . 1 :05-cv-04824-RJ H

CLASS ACTION

Document: 148371 Version : 1 Client/ Matter: 3158 : 1699

STEVEN WEISSMAN, On Behalf of Himselfand All Others Similarly Situated,

Plaintiff,vs .


Defendants .

DANIEL C . . PFISTER, JR. and HONEY LEERICHLESS, On Behalf of Themselves and AllOthers Similarly Situated,

Plaintiff,vs.


Defendants .

MERLE DAVIS, On Behalf of Himself and AllOthers Similarly Situated,

Plaintiff,vs .


Defendants .

Case No. l :05-cv-04851 -TPG

CLASS ACTION

Case No. 1 :05-cv-04877-RJ H

CLASS ACTION

Case No. 1 :05-cv-04889-SA S

CLASS ACTION

Document : 148371 Version: i Client I Matter: 3158 : 1699

STEVEN A. ETTINGER, On Behalf of Himselfand All Others Similarly Situated ,

Plaintiff,vs .


Defendants .

L. NORMAN SHOWERS, On Behalf of Himselfand All Others Similarly Situated,

Case No. 1 :05-cv-05090-PKC

CLASS ACTION

Case No. 1 :05-cv-00542-TSE-TC B

Plaintiff,vs .


Defendants .

CLASS ACTION

PLEASE TAKE NOTICE that pursuant to Fed. R. Civ . P. 42(a) and Section 21D(a)(3)(B)

of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §78u-4(a)(3)(B), as

amended by the Private Securities Litigation Reform Act of 1995 (the 'tPSLRA"), Movant, Public

Employees' Retirement System of Mississippi ("Mississippi PERS"), will move this Court, at the

United States Courthouse, located at 500 Pearl Street, New York, NY 10007-1312, at a date and

time to be determined by the Court, for an order: (a) consolidating the captioned securities class

actions and any subsequently filed related actions ; (b) appointing Mississippi PERS as Lead

Plaintiff in these actions and in any consolidated related action; and (c) approving Movant's

selection of Wolf Popper LLP as lead counsel for the Class .

In support of its motion, Mississippi PERS respectfully submits : (1) the Memorandum of

Document : 148371 Version: 1 Client/ Matter: 3158 : 1699

Law in Support of the Motion of the Mississippi PERS for Consolidation, Appointment of Lea d

Plaintiffand Approval of Selection of Lead Counsel, dated July 11, 2005; and (2) the Declaration

of Michael A . Schwartz in Support of the Motion of Mississippi PERS for Consolidation ,

Appointment of Lead Plaintiff and Approval of Selection of Lead Counsel, dated July 11, 2005 .

Dated : New York, New YorkJuly 11, 2005 Respectfully submitted,

WOLF POPPER LLP

s/ Renee L. Karalian

Marian P . Rosner (MR 0410)Michael A. Schwartz (MS 2352)Renee L. Karalian (RK 6993)845 Third AvenueNew York, New York 10022Tel . : (212) 759-4600Fax : (212) 486-2093

Proposed Lead Counselfor the Class

Document : 148311 Version : I Client /Matter 3158 : 1699 2


I, Renee L. Karalian, certify that I am over the age of 18 years, am not a party to thi s

action, and that on July 11, 2005, I caused copies of the following documents to be served vi a

U.S. Mail, first class postage prepaid, to all the persons on the attached service list :

(i) Mississippi PERS' Notice of Motion and Motion for Consolidation, Appointmentof Lead Plaintiff and for Approval of Selection of Lead Counsel ;

(ii) Memorandum of Law in Support of the Motion of Mississippi PERS forConsolidation, Appointment of Lead Counsel and for Approval of Selection ofLead Counsel ;

(iii) Declaration of Michael A . Schwartz in Support of the Motion of MississippiPERS for Consolidation, Appointment of Lead Plaintiff and for Approval ofSelection of Lead Counsel ; and

(iv) [Proposed] Order Consolidating Actions, Appoin ting Mississippi PERS LeadPlaintiff and Approving Lead Plaintiff's Choice of Counsel .

Dated: New York, New YorkJuly 11, 2005

s/ Renee L. Karalian

Docurnent 148371 Version: 1 Client / Matter: 3158 : 1699

SERVICE LIST

Williams S . Lerach Eric James BelfiDarren J . Robbins Murray, Frank & Sa iler, LLPMilberg, Weiss, Bershad, Hynes & 275 Madison Avenue, Ste. 80 1Lerach , L.L.P. New York, NY 1001 6401 B. Street (212) 682-181 8Suite 160 0San Diego , CA 92101 ATTORNEYS FOR PLAINTIFF MICHELL E(619) 231 -1058 POSNER

-and- Christopher J . GrayLaw Office of Christopher J. Gray, P.C

Samuel Howard Rudman 460 Park Avenue 21st Floo rDavid Avi Rosenfeld New York, NY 10022Lerach, Coughlin , Stoia, Geller, (212) 838-322 1Rudman & Robbins, LL P200 Broadhollow Road, Ste . 406 ATTORNEYS FOR PLAINTIFF LEMON BAYMelville, NY 11747 PARTNERS, LLP(631) 367-7100

Jules Brody-and- Aaron Lee Brody

Tzivia BrodyDavid R. Scott Stull Stu ll & BrodyNeil Rothstein 6 East 45th Street, 5th FloorScott & Scott New York, NY 1001 7108 Norwich Avenue (212) 687-7230Colchester, CT 0641 5(860) 537-3818 ATTORNEYS FOR PLAINTIFFS SAM

MANEWITZ, DANIEL C . . PFISTER, JR. ANDATTORNEYS FOR PLAINTIFF HONEY LEE RICHLES SBRIAN T. WEISS

Shaheen RushdEvan J. Smith Pomerantz Haudek Block Grossman & Gros sBrodsky & Smith , LLC LLP240 Mineola Blvd . 100 Park Avenue, 26th Floo rMineola, NY 11501 New York, NY 1001 7(516) 741-4977 (212) 661-1100

ATTORNEYS FOR PLAINTIFF VAN ATTORNEYS FOR PLAINTIFF STEVENDER JAGT FAMILY TRUST WEISSMAN

Document : 148371 Version: 1 Client 1 Matter. 3158 : 1699 4

Stephen A. WeissEric T. ChaffinSeeger Weiss LLPOne William StreetNew York, NY 10004(212) 584-0700

ATTORNEYS FOR PLAINTIFFMERLE DAVI S

Nancy KaboolianAbbey Gardy LLP212 East 39th StreetNew York, NY 10016(212) 889-3700

ATTORNEYS FOR PLAINTIFFSTEVEN A. ETTINGER

Joshua Seth DevoreCohen M ilstein Hausfeld & TollPLLC1100 New York AvenueSuite 500Washington, DC 20005-3965(202) 408-4600

ATTORNEYS FOR PLAINTIFF L .NORMAN SHOWERS

William Bullock Pittard, IVWill iams & Connolly LLP725 12th St NWWashington, DC 20005(202) 434-500 0

ATTORNEYS FOR DEFENDANTSFRIEDMAN, BILLINGS, RAMSEYGROUP, INC ., EMANUEL J .FRIEDMAN, ERIC F . BILLINGS,KURT R. HARRINGTON ANDROBERT J . KIERNAN

Document 148371 Version: 1 Client] Matter. 3158 : 1699 5

EXHIBIT D

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

In re GENERAL MOTORS CORP. SECURITIES ) Master File No. 05-CV -8088 (RMB)

LITIGATION )THIS DOCUMENT RELATES TO :ALL CASES

THE INSTITUTIONAL INVESTOR GROUP 'S MEMORANDUM IN REPLY TOTO THE DEKA GROUP OF FUNDS' OPPOSITION

CHITWOOD HARLEY HARNES LLP MILBERG WEISS BERSHAD

John F. Harnes (JH-5398) & SCHULMAN LLP

Gregory E . Keller (GK-4562) Melvyn I . Weiss (MW-1392)

Darren T. Kaplan (DK-8190) Steven G . Schulman (SS-2561 )

1 I Grace Avenue Daniel B . Scotti (DS-4139)

Suite 306 Peter E . Seidman (PS-8769)

Great Neck, New York 11021 Deborah M . Sturman (DS-4752)Andrei V. Rado (AR-3724)

--- and --- One Pennsylvania PlazaNew York, NY 10119-016 5

Martin D. Chitwood Tel . : (212) 594-530 0

David J . Worley Fax: (212) 868-122 9

Stuart J. Guber1230 Peachtree Street, N E

2300 Promenade I IAtlanta, GA 30309Tel : (404) 873-390 0Fax: (404) 876-4476

Proposed Lead Counsel

TABLE OF CONTENTS

Page

POINT I

THE INSTITUTIONAL INVESTOR GROUP IS A PROPER PSLRA GROUP . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. This Court Should Apply the Rule of Reason in This Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

B. The Institutional Investor Group Is A Proper Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

POINT I I

LOSS IS THE MOST IMPORTANT, IF NOT THE SOLE RELEVAN TFACTOR IN THE FINANCIAL INTEREST ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0

i

TABLE OF AUTHORITIE S

CasesAndrada v. Atherogenics, Inc ., No. 05 Civ . 00061, 2005 U .S. Dist . LEXIS 6777 , at *9-1 0

(S.D.N.Y. Apr. 18, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Dolan v. Axis Capital Holdings Ltd., No. 04-Civ. 8564, 2005 U .S. Dist . LEXIS 6538, at *15-16 .

(S.D.N.Y. Apr. 13, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Dura Pharmaceuticals, Inc. v. Broudo, 125 S. Ct . 1627 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 , 6,9

Goplen v . 51job, Inc., No. 05-Civ . 769, 2005 U.S. Dist . LEXIS 15059, at *8-9 (S .D.N .Y. July 26,

2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

In re Am . Bus. Fin. Servs ., Inc. Sec. Litig., No. 04-0265, 2004 U.S. Dist . LEXIS 10200 (E .D. Pa .

June 3, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

In re Baan Co. Sec. Litig., 186 F.R.D. 214, 218-35 (D .D.C. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 , 4,6

In re Comdisco Sec. Litig ., 150 F. Supp. 2d 943, 945 (N .D. 111 . 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

In re Elan Corp . Sec. Litig., No. 05 Civ. 2860 (RJH), 2005 U .S . Dist. LEXIS 16388, at * 1 0

(S .D .N.Y. Aug. 8, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3, 4, 5, 6

In re eSpeed, Inc. Sec. Litig., No. 05 Civ. 2091 (SAS), 2005 U.S. Dist . LEXIS 14104 , at *8-9

(S.D.N.Y. July 13, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3, 4, 5

In re Forest Laboratories, Inc . Sec . Litig., No. 05-CV-2827 (RMB) (S .D.N .Y. Sept . 15, 2005) . . . . . .4

In re Impath, Inc. Sec . Litig., No. 03 Civ. 5667, 2004 U .S. Dist . LEXIS 13898 , at *25 (S .D.N.Y .

July 15, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

In re Oxford Health Plans, Inc. Sec. Litig., 182 F .R .D. 42, 49 (S .D.N .Y. 1998) . . . . . . . . . . . . . . . . . . . . . . .3, 7, 8

In re Pfizer, Inc . Sec . Litig., No. 04 Civ. 9866, 2005 U.S . Dist . LEXIS 24891 (S .D.N.Y . Oct . 21,

2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

In Re Sierra Wireless, Inc. Sec . Litig., No. 05-MD-1696 (SHS) (S .D.N.Y. Dec. 2, 2005) . . . . . . . . . . . . . . . .3

In re SINA Corp . Sec. Litig., No. 05 Civ. 2154 (NRB), 2005 U .S . Dist . LEXIS 13176 (S .D.N.Y .

July 1, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

In re Yukos Oil Company Sec. Litig., No. 04-CV-5243 (S.D.N.Y. Nov. 1, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Lax v. First Merchants Acceptance Corp ., No. 97 C 2715, 1997 U .S . Dist . LEXIS 11866, at * 17

(N .D. 111 . Aug. 6, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8, 9, 1 0

Linn v . Allied Ir. Banks, PLC, No. 02 Civ . 1738, 2004 U . S . Dist. LEXIS 24655, at *12 (S .D.N.Y.

Dec. 7, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Pirelli Armstrong Tire Corp . Retiree Med. Benefits Trust v. LaBranch & Co., 229 F.R.D. 395 ,

417 (S.D.N.Y . 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Sofran v. LaBranche & Co., 220 F.R.D. 398 (S .D.N.Y. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Wagner v. Barrick Gold Corp ., No. 03-CV-4302 (RMB) (S .D .N .Y. Sept . 18, 2003) . . . . . . . . . . . . . . . . . . . . . . .4

Weltz v . Lee, 199 F .R.D. 129, 133 (S .D.N .Y . 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Zwickel v . Taro Pharmaceutical Indust., Inc., No. 04-CV-5969 (RMB) (S .D.N .Y. Aug. 17, 2005) . 4

StatutesPrivate Securities Litigation Reform Act (the "PSLRA") . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

RulesFed. R. Civ . P. 23(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

11

The Institutional Investor Group includes a publicly-accountable state pension system

and three prominent foreign institutional investors that sustained substantial losses in every type

of security at issue in this litigation. It is precisely the type of movant favored by the Private

Securities Litigation Reform Act (the "PSLRA") and, moreover, is the result of a deliberative

process this Court set in motion when it ordered that "Plaintiffs in both cases shall meet and

confer before filing motions to agree upon which plaintiff meets the criteria for lead Plaintiff

under the PLSRA." The Institutional Investor Group was formed after the Court-ordered meet

and confer and after a full discussion among plaintiffs' counsel of each of the prospective

movants' comparative adequacy. In deciding to form the Institutional Investor Group, eac h

member took into account, among other things, the value that the Institutional Investor Group's

diversity and joint resources would contribute to this important and complex litigation, which

asserts that one of the world's largest corporations committed multifaceted fraud over the course

of more than three years . With the Institutional Investor Group and its counsel at the helm, the

Class can rest assured that this litigation will be client-driven and prosecuted with all the skill

and vigor necessary to achieve the optimal result for the Class .

The only competing movant, the Deka Group of Funds, admits that the Institutional

Investor Group, collectively, has the largest loss . ' It argues instead that the Institutional Investo r

Group is not a proper group ; that, therefore, its members' reported losses cannot be added

together ; and that, with the Institutional Investor Group's losses broken out individually, the

Deka Group of Funds has the largest loss of any individual movant . This argument fails,

because the Deka Group's attack on the cohesiveness of the Institutional Investor Group's

' See page 10 of the Deka Group of Funds' opposition brief, wherein the Deka Group of Fundsconcedes that, "Deka's loss represents 83% of" the Institutional Investor Group's reported loss of

$28 million .

membership is not supported by the facts or the case law. The Deka Group' s argument also rings

hollow in that it is itself an aggregation of two separate legal entities . 2

The majority of courts nationwide and in this District apply a "rule of reason" to

determine whether previously unaffiliated investors may aggregate their losses under th e

PSLRA' s "largest financial interest " analysis, and, concomitantly , whether such investors may ,

as a group , serve as Lead Plaintiff. What is most important to note is that the formation of ou r

group resulted from the initiatives of the Attorney General of the State of Mississippi and th e

executive directorate of three prominent European fi nancial institutions , each of which is well-

known to the other . This group was formed in light of this Court's directive that whoever might

be a potential movant engage in collective discussions toward determining the best lead plaintiff

candidate . Contrary to the assertions of the Deka Group of Funds, the record shows that the

Institutional Investor Group is not an amalgam of investors cobbled together primarily to further

the interest of the lawyers .3 Applying the rule of reason, as have the majority of courts in thi s

District, the Institutional Investor Group meets all of the criteria the majority of courts require o f

PSLRA Groups .

POINT I

THE INSTITUTIONAL INVESTOR GROUP IS A PROPER PSLRA GROU P

Z That the members of the Deka Group of Funds are distinct entities is evidenced by the fact that

they submitted separate PSLRA certifications, signed by different individuals, containingseparate purported authorizations and reporting independent losses . See certifications annexed asExhibit B to the declaration of Eric Belfi submitted with the Deka Group of Funds opening

papers .

See Joint Declaration Of The Public Employees Retirement System Of The State Of

Mississippi , Activest Investmentgesellschaft Mbh, Erste-Sparinvest Kap italangege sell schaftM.B .H., and Fortis Investment Management N.V./S.A . submitted herewith (the "Declaration" )

2

A. This Court Should Apply The Rule of Reason In This Cas e

The PSLRA expressly provides for the court to determine largest financial interest on a

group-basis by creating a statutory presumption that the most adequate plaintiff is the "person or

group of persons that . . . has the largest financial interest in the relief sought by the class ." 15

U .S .C. § 78u-4(a)(3)(B)(iii) (emphasis added ) . As Judge Scheindlin recently held, "the majority

view [within the Southern District of New York] holds that unrelated investors may aggregate

under ce rtain circumstances ," applying "a rule of reason ." In re eSpeed, Inc . Sec. Litig., No. 05

Civ. 2091 (SAS), 2005 U .S . Dist . LEXIS 14104, at *8-9 (S .D.N.Y . July 13, 2005) . Most

recently, Judge Stein appointed a group of previously unrelated investors , holding that, "when

we're talking about a group of five, that' s quite acceptable ."4 See also In re Elan Corp . Sec .

Litig., No. 05 Civ . 2860 (RJH), 2005 U . S. Dist . LEXIS 16388 , at *10 (S .D .N.Y. Aug. 8, 2005)

(appointing a six member group ) (Holwell, J .) ; In re Oxford Health Plans, Inc . Sec. Litig., 182

F.R .D. 42, 49 (S .D.N.Y . 1998) (Brieant, J.) (lead plaintiff selection "must be made on a case-by-

case basis , taking account of the unique circumstances of each case ") ; In re SINA Corp . Sec.

Litig., No. 05 Civ . 2154 (NRB), 2005 U . S . Dist . LEXIS 13176 (S .D.N.Y. July 1, 2005)

(appointing three institutional investors) (Buchwald , J .) ; Sofran v. LaBranche & Co., 220 F.R.D .

398 (S .D.N .Y. 2004) (Sweet , J.) (same ) ; In re Impath, Inc. Sec. Litig., No. 03 Civ . 5667, 2004

U.S. Dist . LEXIS 13898, at *25 (S .D .N.Y. July 15, 2004) ( appointing a group) (Batts, J .) ; Pirelli

Armstrong Tire Corp. Retiree Med. Benefits Trust v. LaBranch & Co., 229 F.R.D. 395, 417

(S.D .N.Y. 2004) (Sweet, J .) (same ) ; In re Yukos Oil Company Sec . Litig., No. 04-CV-5243

(S.D .N.Y. Nov. 1, 2004) (Pauley, J.) (same ) (Order) (attached as Exhibit 2) . See generally In re

4 See Transcript of Argument at 30 :8-24 in In Re Sierra Wireless, Inc . Sec. Litig., No. 05-MD-

1696 (SHS) (S .D.N .Y. Dec. 2, 2005) ("Sierra Wireless Transcript") ( Exhibit 1) .

3

Baan Co. Sec. Litig., 186 F .R.D. 214, 218-35 (D .D.C. 1999) (SEC amicus brief provide s

definitive guidance that groups of no more than five fall within the PSLRA "group" meaning) .

Indeed, this Court has appointed investor groups as lead plaintiff in several cases : See

Wagner v. Barrick Gold Corp ., No. 03-CV-4302 (RMB) (S .D.N.Y. Sept . 18, 2003) (Order )

(Exhibit 3) ; Zwickel v . Taro Pharmaceutical Indust ., Inc., No. 04-CV-5969 (RMB) (S .D .N.Y .

Aug. 17, 2005) (Order) (Exhibit 4) ; In re Forest Laboratories, Inc. Sec . Litig., No. 05-CV-282 7

(RMB) (S.D.N.Y. Sept . 15, 2005) (Order) (Exhibit 5) . 5

The Deka Group of Funds contends that eSpeed and Elan, cited supra, held that unrelate d

persons cannot aggregate their losses . See Deka Opposition at 4-5. This is untrue . Neither case

holds that unrelated groups cannot serve and , in both , the cou rts applied the rule of reason and

appointed groups as Lead Plaintiff. In eSpeed, Judge Scheindlin stated that in light of the strong

legislative history favoring the appointment of institutional investors , a group of individuals

should not displace a single institutional investor even if the group has a larger loss, but "where

aggregation would not displace an institutional investor as presumptive lead plaintiff based on

the amount of losses sustained , a small group of unrelated investors may serve as lead plaintiff."

In re eSpeed, Inc. Sec. Litig ., 2005 U . S. Dist. LEXIS 14104 , at * 12 (emphasis added ) . Applied

' We note that in In re Pfizer, Inc. Sec. Litig., No. 04 Civ . 9866, 2005 U .S. Dist . LEXIS 24891

(S.D .N.Y. Oct . 21, 2005), one of the three principal cases relied upon by the Deka Group ofFunds, Judge Owen did recently decline to consider an unrelated group . Judge Owen's decisiondoes not address the size and coherence of a proposed group as bearing on its eligibility under

the PSLRA and was predicated on the circumstance, not present here, that "[n]othing before theCourt indicates that this aggregation is anything other than an attempt to create the highestpossible `financial interest' figure under the PSLRA ." Id. at *6 . The Pfizer decision, however,represents, at most, a minority position against groups and does not directly analyze the

statutory language at issue here . That decision is presently the subject of a petition for a writ ofmandamus filed December 7, 2005 with the Second Circuit Court of Appeals . Ultimately, JudgeOwen's decision, based on the parties and movants that he had before him, must be viewed as

specific to the facts of that case .

4

here, the eSpeed holding supports the appointment of the Institutional Investor Group as Lead

Plaintiff because the Institutional Investor Group is itself composed solely of institutional

investors . The group, moreover, includes a domestic state pension fund, which is exactly the

type of investor that Congress specifically sought to empower when it enacted the PSLRA . See

Institutional Investor Group Opp. Mem. at 7-10. Consequently, appointing the Institutional

Investor Group, which includes substantial representation from both the public and private

financial sectors, would advance rather than thwart the purposes of the PSLRA .

In Elan, the court applied a rule of reason and held that a group of six previousl y

unrelated investors was not too large to effectively oversee the action . See Elan, 2005 U.S. Dist .

LEXIS 16388, at * 13 . The court also held that there was no evidence that the group was formed

in bad faith, in part because three of the group's members had the largest financial interest of any

competing movants, without aggregation . This fact, of course, is not the only possible evidence

that a group was not formed in bad faith . See, e.g., Declaration at $T 6-10 . Moreover, the Deka

Group of Funds has provided no evidence that the Institutional Investor Group, formed pursuant

to this Court' s general guidance, was formed in "bad faith," and the burden is clearly on it to

provide such proof:

The Pension Funds allege that the Engler Group was created by counsel, although

they have produced no evidence to support this allegation other than theabsence ofan explanation from the Engler Group of why it has moved as agroup

In re Am. Bus . Fin . Servs., Inc. Sec. Litig., No. 04-0265, 2004 U .S . Dist . LEXIS 10200 (E .D. Pa .

June 3, 2004) (emphasis added) . The Deka Group of Funds has not, and cannot, offer any

evidence for their attacks on the Institutional Investor group because, in fact, the record

establishes that formation of the Institutional Investor Group was the end result of a Court-

ordered deliberative process . As shown below, this group is logical on its face and, other than --

hypocritically -- attacking the concept of a group in general, Deka makes no specific claim abou t

any defect in the group offered here . 6

B. The Institutional Investor Group Is A Proper Grou p

The Institutional Investor Group is a proper group and should be appointed . First, as i n

Elan, the four - member group is not too large . See Elan, 2005 U . S . Dist . LEXIS 16388, at * 13 ;

See also Weltz v. Lee, 199 F .R .D. 129, 133 (S .D.N .Y. 2001) (Batts , J .) ; In re Baan Co . Sec .

Litig., 186 F.R.D. at 218-35 . Second, the group was formed in good faith . The movants met an d

conferred, through their respective counsel, in sessions spanning three days, pursuant to Court

order . See Declaration at ¶1[ 6-8 . Factoring heavily into the decision to join forces with the

Foreign Institutional Investors was the fact that Mississippi PERS had nearly $12 million in

stock losses -- larger than all other movants -- and that the foreign fund members of the

Institutional Investor Group had $15 million in losses, $10 million of which was incurred in debt

securities traded both domestically and abroad . See id at 19. Although Mississippi PERS ha d

substantial stock losses, it had less than $1 million in bond losses, which it recognized som e

might argue could potentially weaken its ability to represent all members of the class . See id.

Mississippi PERS, in consultation with the Attorney General 's Office, concluded that joinin g

with the three other members of the Institutional Investor Group would provide the Class wit h

e As a result of information obtained during the meet and confer exchanges, it was counsel forthe Deka Group of Funds , not counsel for the Institutional Investor Group , that combined fundsto try to beat the competing movants' numbers . During the meet and confer discussions, counselfor the Deka Group of Funds never claimed that the $7 . 2 million in losses from the nine Dekafunds that sold all of their GM securities (all of which was common stock) before the March 16,2005 partial corrective disclosure should be counted . It was not until just hours before their leadplaintiff motion was filed, and after the Institutional Investor Group had been formed , that theDeka Group of Funds first added the losses from these nine funds to their loss totals . As noted inthe Opposition Brief at page 3, note 2, these nine funds' losses are entirely subject to a losscausation defense under Dura Pharmaceutical . Without these losses , the Deka Group of Funds'stock losses are only $5 ,909,435 . Id. If this isn 't lawyer driven aggregation , what is?

6

more diverse and thus better representation for this case . See id. Similarly , the three foreign

members of the Institutional Investor Group believed , based on the then-available data, that they

collectively had the largest loss but decided that joining with Mississippi PERS , which had

millions in stock losses and the commitment of the Office of the Attorney General of the State of

Mississippi , would be in the best interest of the Class . See id at jJ 9-10. Thus, the decision to

move as a group was the product of careful strategic analysis regarding the bene fits of joint

prosecution to the litigation .

The class will benefit from a leadership that includes both domestic and foreign investors

who sustained losses in both domestic and foreign securities . See In re Oxford Health Plans,

Inc. Sec. Litig., 182 F .R.D . at 49 ("[a]llowing for diverse representation , including in this case a

state pension fund, significant individual investors, and a large institutional investor , ensures that

the interests of all class members will be adequately represented in the prosecution of the action

and in the negotiation and approval of a fair settlement, and that the settlement process will not

be distorted by the differing aims of differently situated claimants") . This promises to be a hard-

fought litigation that can span several years . Appointing a single investor could prejudice the

class . See Dolan v. Axis Capital Holdings Ltd., No. 04-Civ . 8564, 2005 U.S. Dist. LEXIS 6538,

at *15-16 . (S.D.N.Y. Apr. 13, 2005) (Holwell, J .) ("[A] co-lead structure will provide flexibility

and stability to the class, especially if either party drops out of the action or compromises the

class in some other fashion . . .") (emphasis added) .

The concerns leading some courts to reject groups clearly are not present here . The

contention that proposed Lead Counsel could litigate this case as they wished, without th e

7

direction and input of their clients, which are three of Europe's biggest financial institutions and

the Attorney General for the State of Mississippi, is patently absurd . ?

POINT I I

LOSS IS THE MOST IMPORTANT, IF NOT TH ESOLE RELEVANT FACTOR IN THE FINANCIAL INTEREST ANALYSI S

The Deka Group of Funds argues that it has the largest financial interest because of it s

purpo rtedly larger showing in three of the four Lax factors .g See Lax v. First Merchants

Acceptance Corp., No . 97 C 2715, 1997 U . S. Dist. LEXIS 11866, at * 17 (N.D. 111 . Aug. 6 ,

1997) . However, it cannot contend that this Court must apply a Lax factors analysis nor does it

even suggest why the Lax factors may be relevant here . The Deka Group of Funds concedes,

moreover, that the Institutional Investor Group wins the fourth and most important factor, which

subsumes everything else : loss. Indeed, the Deka Group of Funds recognizes the paramoun t

importance of this fourth factor because approximate loss was the only measure of financia l

interest it presented to the Court in its opening papers .

The paramount importance of the fourth factor (and the lesser relevance of the first three )

has increased with the U .S. Supreme Court's decision in Dura Pharmaceuticals, Inc. v. Broudo,

' Contrary to the Deka Group of Funds's contention, there is no legitimate risk that the group

and Co-Lead Counsel structure would be inefficient or would increase the expenses to the class .

The Institutional Investor Group is composed of only four members and proposes as Co-LeadCounsel two firms that have effectively and efficiently led major litigations together . See, e.g., In

re Oxford Health Plans, Inc . Sec. Litig., 182 F.R.D. at 51 ; See Institutional Investor Group Opp .

Mem. at 12 . The Institutional Investor Group already has plans in place to monitor the litigation

effort and expenditures . In addition, this Court also has discretion over the fee award such that itwould not benefit counsel to duplicate effort or expenses . See generally Fed. R. Civ. P. 23(h) . 15

U.S.C. § 78u-4 .

s The Lax Factors are : "( 1) the number of shares purchased ; (2) the number of net sharespurchased ; (3) the total net funds expended by the plaintiffs during the class period ; and (4)approximate losses suffered by the plaintiffs ." Lax, 1997 U .S . Dist . LEXIS 11866, at * 17 .

8

125 S. Ct . 1627 (2005) ("Dura "), which focuses heavily on the economic losses caused by

defendant's fraud . Logically, a movant that bought and sold millions of shares during the class

period (which would be referenced in the first three Lax factors) but sustained only a nominal

loss does not have a larger financial interest than an entity that lost more money on fewer shares

or a lesser expenditure of funds .

The court in Lax did not explain why the three factors other than loss are relevant, and

such relevance is not readily apparent in most cases .9 Indeed, it appears that the court in Lax

simply adopted, without discussion or citation to authority, the factors suggested by one of th e

movants . See Lax at * 17 (citing movant's memorandum as authority for the four factors) .

Moreover, the court there selected the movant with the largest financial interest based on loss ,

the fourth factor ; its discussion of the other three factors was not outcome-determinative . See id.

at * 19 ("These figures indicate that the Jacobs/Lax Group has the largest financial interest in

this litigation, owing to the fact that the plaintiffs that make up the group have suffered th e

largest alleged losses .") (emphasis added) . Almost universally, except in the case of a "ne t

seller," the largest financial interest is equated with the approximate loss . See, e.g ., Goplen v.

51job, Inc., No. 05-Civ. 769, 2005 U . S. Dist . LEXIS 15059, at *8-9 (S .D.N.Y. July 26, 2005 )

(Haight, J.) ; Linn v . Allied Ir. Banks, PLC, No . 02 Civ . 1738, 2004 U .S. Dist . LEXIS 24655, a t

' The three factors have been held to be relevant when they show some disabling factor . Forexample, if the movant sold more shares than it purchased during the class period (having had

more shares due to pre-class period purchases) and/or received more cash in class period salesthan it expended on class period purchases, some courts believe, may yield an illusory "loss" .

See, e.g., Andrada v. Atherogenics, Inc ., No. 05 Civ . 00061, 2005 U .S. Dist . LEXIS 6777, at *9-

10 (S .D.N.Y. Apr . 18, 2005) (Holwell, J .) ; In re Comdisco Sec . Litig ., 150 F . Supp. 2d 943, 945(N.D . 111 . 2001). Under such circumstance, the movant could be deemed to be a "net seller" thatdid not actually lose money from its class period transactions, despite presenting a FIFO loss . Id.These are not the facts before this Court, however, and the other three factors are therefore

irrelevant .

* 12 (S.D.N.Y . Dec. 7, 2004 ) (Batts, J.) ("Feder clearly has the largest financial interest in the

relief sought by the class- compensatory damages for investor losses caused by steep declines in

the price ofAIB securities- because he sustained $ 19,843 .73 in losses . . .") (emphasis added) .

The Institutional Investor Group concededly has the largest loss and the largest financial interest

in the litigation .10

CONCLUSION

For the foregoing reasons, the Institutional Investor Group respectfully requests it s

appointment as Lead Plaintiff and approval of its selection of Milberg Weiss and Chitwoo d

Harley as Lead Counsel in this important action .

DATED: December 13, 200 5

CHITWOOD HARLEY HARNES LLP MILBERG WEISS BERSHAD& SCHULMAN LL P

By : Is/John F . Harrie sJohn F. Harries (JH-5398)Gregory E . Keller (GK-4562)Darren T . Kaplan (DK-8 190)

11 Grace AvenueSuite 30 6Great Neck, New York 1102 1

--- and ---

By : Isl Steven G. Schulman w/expresspermissionMelvyn 1 . Weiss (MW-1392)Steven G . Schulman (SS-2561)Daniel B. Scotti (DS-4139)

Peter E. Seidman (PS-8769)Deborah M. Sturman (DS-4752)Andrei V. Rado (AR-3724)

One Pennsylvania Plaz a

1° Moreover, the Deka Group of Funds has not provided the Court with sufficient analysis to

make a Lax four-factor determination, even if one were appropriate . For example, the second

and third prongs of the Lax factors (net shares purchased and net funds expended) aremeaningless here because this case involves multiple disclosures . In a single disclosure case,looking at net shares purchased enables a court to understand how many of the shares purchasedduring the class period were also sold when the shares were inflated, and could be subject to a

Dura loss causation defense. Where there are multiple disclosures, shares sold before the end ofthe Class Period but after a partial disclosure of the truth are categorically not subject to a Duradefense . In addition, the net expenditures they report do not include the value of shares retained

after the class period which, in reality, were worth something . See 15 U.S.C . 78u-4(e) (any

damages recovered by plaintiff be reduced by the value of his or her held shares at the end of theclass period) .

10

Martin D. Chitwood

David J . WorleyStuart J . Guber1230 Peachtree Street, NE2300 Promenade lI

Atlanta, GA 30309Tel: (404) 873-3900Fax: (404) 876-447 6

Proposed Lead Counse l

THE LANGSTON LAW FIRM, P.A.Joseph C . Langston100 South Main StreetP. O. Box 787Boonevi lle , MS 38829Tel : 662-728-3138

Fax : 662-728-1992

Additional Counsel for Plaintiff PublicEmployees Retirement System of Mississippi

New York, NY 10119-0165Tel . : (212) 594-530 0Fax: (212) 868-1229Proposed Lead CounselLAW OFFICES O F

MICHAEL A . SWICK, PLLCMichael A. SwickOne William Street , Suite 555New York, NY 10004

Tel: (212) 584-0770Fax: (212) 584-079 9

Of Counse l

11

EXHIBIT E

Case 1 :05-cv-12194-JLT Document 24 Filed 12/05/2005 Page 1 of 1 3

UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETT S

SRINIVASAN SHANKAR, On Behalf ofHimself and All Others Similarly Situated,

No. 0:05 -cv-11934 (JLT )

CLASS ACTIO N

Plaintiff,

vs.

BOSTON SCIENTIFIC CORPORATION,JAMES R. TOBIN, PAUL A . LAVIOLETTE,FREDERICUS A. COLEN, LAWRENCE C .BEST and STEPHEN F . MORECI ,

Defendants .

JACK YOPP, Individually and On Behalf ofAll Others Similarly Situated, No. 0:05-cv -11954 (JLT)

Plaintiff,

vs .

BOSTON SCIENTIFIC CORPORATION,JAMES R. TOBIN, PAUL A . LAVIOLETTE,FREDERICUS A. COLEN, LAWRENCE C .BEST and STEPHEN F . MORECI ,

Defendants .

[additional captions below]

CLASS ACTIO N

MEMORANDUM OF LAW OF MISSISSIPPI PUBLIC EMPLOYEESRETIREMENT SYSTEM RESPONDING TO COMPETING LEAD PLAINTIFFMOTIONS FOR APPOINTMENT AND CONSOLIDATION, AND FURTHER

SUPPORTING ITS APPOINTMENT AS LEAD PLAINTIFF


ROBERT L. GARBER, On Behalf of Himself

and All Others Similarly Situated ,

Plaintiff,

vs .

BOSTON SCIENTIFIC CORPORATION,JAMES R. TOBIN, PAUL A . LAVIOLETTE,FREDERICUS A . COLEN, LAWRENCE C .BEST and STEPHEN F . MORECI ,

Defendants .

BETTY C. MEYER, Individually and OnBehalf of All Others Similarly Situated,

No. 0:05-cv-12157 (JLT )

CLASS ACTION

No. 0:05-cv-12194 (JLT)

CLASS ACTIONPlaintiff,

vs .

BOSTON SCIENTIFIC CORPORATION,JAMES R . TOBIN, PAUL A . LAVIOLETTE,FREDERICUS A . COLEN, LAWRENCE C .BEST and STEPHEN F . MORECI ,

Defendants .

JOHN RYAN, On Behalf of Himself and AllOthers Similarly Situated, No. 0:05-cv-12203 (JLT)

Plaintiff,

vs .

BOSTON SCIENTIFIC CORPORATION,JAMES R. TOBIN, PAUL A . LAVIOLETTE,FREDERICUS A . COLEN, LAWRENCE C .BEST and STEPHEN F . MORECI ,

Defendants .

CLASS ACTION

2


Proposed Lead Plaintiff Mississippi Public Employees Retirement System

(hereinafter "PERS" or "Movant") respectfully submits this memorandum of law in

response to the competing lead plaintiff motions, and in further support of its motion to

be appointed Lead Plaintiff on behalf of a class of Boston Scientific Company ("Boston

Scientific") securities holders . PERS, a single, cohesive unit, has sustained the largest

loss, and is the presumptive "most adequate plaintiff' under the standards set by the

Private Securities Litigation Reform Act ("PSLRA") .

Mississippi PERS is a single, cohesive entity, and is the sixty-third largest pensio n

fund in the country . As the retirement system for nearly all non-federal public employees

in the State of Mississippi, PERS's mandate is to manage the retirement benefits for

employees of the state, public school districts, municipalities, counties, community

colleges, state universities and other public entities such as libraries and water districts .

PERS provides benefits to over 60,000 retirees and future benefits to more than 250,000

current and former public employees .

PERS is supervised by Mississippi's Attorney General Jim Hood, Deput y

Attorney General Geoffrey Morgan, PERS Liaison and Office of Attorney General

Special Assistant Margo Bowers, and PERS Chief Financial Officer Lorrie Tingle . PERS

is committed not only to recouping the losses of its hard-working state employees, but

also to representing the class zealously, ensuring that individual and institutional

investors alike are compensated for Boston Scientific's Exchange Act and Rule lOb-5

violations .

Mississippi PERS also seeks approval of its selection of Zimmerman Reed, PLLP

as lead counsel and Hagens Berman Sobol Shapiro LLP as liaison counsel . Proposed

counsel have substantial experience in prosecuting class actions in general, and securitie s

3


matters in particular . Of all the movants, Mississippi PERS has sustained the largest loss ,

and is the presumptive "most adequate plaintiff' under the standards set by the Private

Securities Litigation Reform Act ("PSLRA") . 15 U.S .C. § 78u-4(a)(3)(B)(iii )(1)(bb) .

ARGUMENT

The PSLRA's lead plaintiff provisions are not complicated . This Court is not

required to conduct as intensive an analysis as that required by a motion for clas s

certification. See Howard Gunty Profit Sharing Plan v. Carematrix Corp., 354 F . Supp .

2d 18, 23 (D . Mass . 2000 ) ; Ravens v . Iftikar, 174 F.R . D. 651, 663 (C.D. Cal. 1997) .

Rather, the Court need only identify the moving class member who is the "most adequat e

plaintiff' under the standards set in the PSLRA. 15 U.S.C. § 78u-4(a)(3)(B)(i) . To

facilitate an early decision- as soon as practicable after consolidation of the relate d

cases-and not unduly delay the action ' s prosecution , the PSLRA establishes a

presumption that the "most adequate plaintiff' is the class member movant with th e

single largest stake in the action's outcome, who would otherwise satisfy Rule 23' s

adequacy and typicality requirements . 15 U .S.C . § 78u-4 (a)(3)(B)(iii) . Mississipp i

PERS is the movant with the largest financial interest in this action . It also easily meets

the relevant Rule 23 requirements, and should be appointed Lead Plaintiff .

A. Mississippi PERS is Presumed to be the Most Adequate Plaintiff.

Of all the entities that have applied for Lead Plaintiff status in this action ,

Mississippi PERS experienced the most substantial loss . During the Class Period, PERS

purchased a total of 874, 305 shares of Boston Scientific stock , suffering an estimated los s

of $5,510,736 .03 at the time of its fi ling for Lead Plaintiff. See Exs . 1 and 2 attached to

the Declaration of David S. Nalven (hereinafter "December 5, 2005 Nalve n

4


Declaration") .' This loss makes PERS the movant with the greatest losses and hence

largest financial interest . As such, PERS is presumed to be the most adequate plaintiff.

B. PERS Also Satisfies the Relevant Rule 23 Requirements .

As fully discussed in its opening memorandum, PERS readily meets the adequacy

and typicality prongs of Fed . R. Civ. P . 23. PERS is typical because it stands in the shoes

of all other Class members and makes the same allegations : namely, PERS asserts that it

was 1) damaged by transacting in Boston Scientific securities during the Class Period,

which were artificially inflated by Defendants' materially false and misleading

statements, and 2) Defendants violated Section 10(b) and 20(a) of the Exchange Act, and

Rule IOb-5 . PERS is also adequate because its interests do not conflict with the interests

of other class members and because its selected Lead Counsel, Zimmerman Reed, has

substantial experience in class action cases, and has successfully represented plaintiffs in

securities actions .2 PERS's proposed liaison counsel, Hagens Berman, has substantial

experience in PSLRA and class action cases, and has previously been appointed lead

counsel in PSLRA cases, as well as plaintiffs' counsel in many substantial class actions

prosecuted in this district . See Exs. E and F to the November 21, 2005 Declaration of

David S . Nalven (Court No . 05-12194 ; No. 19) .

PERS has clearly and properly demonstrated that it has the largest financial stake

in this action, and otherwise satisfies the relevant requirements of Rule 23 . Accordingly,

it should be appointed Lead Plaintiff.

1 The over $5 .5 . million dollar loss was calculated using the FIFO (first-in, first-out) methodologyemployed by nearly all other movants .Z Zimmerman Reed also brings unique expertise concerning the medical drug and device industry, derivedfrom its service as Lead Plaintiffs' Counsel in the In re Bavcol Litigation, MDL No . 1431, liaison counsel

in In re St . Jude Silzone Valve Litigation, and co-lead counsel in In re Breast Implants Litigation for theDistrict of Minnesota . Zimmerman Reed also successfully litigated claims on behalf of persons implantedwith defective pacemaker leads in cases against Telectronics Pacing Systems, Inc .

5


C. Other Movants' Motions Raise Questions.

No single movant experienced a loss as great as PERS . Using the (FIFO)

accounting methodology, PERS's losses were over $5 .5. million, which makes it not onl y

the individual movant with the greatest losses but also the movant, whether individual o r

aggregated, with the largest financial stake . See Ex. 1 to the December 5, 2005 Nalven

Declaration . Taking each movant's losses individually, none exceed those asserted by

PERS . See Ex. 2 to the December 5, 2005 Nalven Declaration . Indeed, the tota l

combined respective asserted losses of the Police and Fireman's Retirement System of

the City of Detroit , Warehouse Employees Local 169, and the three groups of aggregated

unrelated plaintiffs calling themselves the "Boston Scientific Institutional Investors," the

"Boston Scientific Plaintiffs Group," and the "Pension Fund Group," barely exceed thos e

of PERS.

Additionally, this Court should not approve the motions of the groups o f

aggregated , but unrelated, plaintiffs, when a single plaintiff with the largest financia l

stake , even without aggregation , can control the litigation . The PSLRA was enacted to

ensure that lead plaintiffs, and not their attorneys, would control the litigation . In re

Lernout & Hauspie Sec. Litig., 138 F. Supp.2d 39, 44-45 (D . Mass . 2001). To fulfill this

Congressional mandate, a court should not "blindly aggregate the losses of unrelate d

plaintiffs to confer lead plaintiff status on a group without considering whether th e

grouping is sufficiently coherent to control the litigation ." Id. at 44 . As explained by one

court in this District, "[a] lead plaintiff . . . cannot be `a mere assemblage of unrelate d

persons who share nothing in common other than the twin fortuities that 1) they suffere d

losses and 2) they entered into a retainer agreement with the same atto rney or attorneys ." '

Howard Gunty, 354 F. Supp. 2d at 24 ( citing In re Telxon Corp. Sec. Litig., 67 F. Supp .

6

Case 1 : 05-cv-12194-JLT Document 24 Filed 12/05/2005 Page 7 of 1 3

2d 803, 813 (N .D. Oh. 1999)). When groups of plaintiffs with no prior relationship seek

lead plaintiff status, the burden is on each group to "explain and justify its composition ."

In re Microstrategy Inc . Sec. Litig ., 110 F . Supp. 2d 427, 434-35 (E .D. Va. 2000) (quoted

by In re Lernout, 138 F. Supp. 2d at 45) . Courts in this District have employed a multi-

factor test to determine whether the lead plaintiffs are sufficiently coherent, considering

"descriptions of the [group's] member, including any preexisting relationships amon g

them; an explanation of how its members would function collectively ; and a descriptio n

of the mechanism that its members and the proposed lead counsel have established t o

communicate with one another about the litigation." Id.

In this case, three groups of unrelated plaintiffs have separately sought lea d

plaintiff status. See Pension Fund Group Mem . (Case No . 05-11934, No . 16), Boston

Scientific Plaintiffs Group Mem. (Case No. 05-11934, No. 20), and Boston Scientifi c

Institutional Investor Group Mem . (Case No. 05-11934, No. 13). None of these groups

have presented any information that would assure this Court that they are sufficientl y

cohesive, and none have proffered any information to satisfy the multi-factor test . Thi s

lack of information raises conce rns pertaining to each of these groups' ability to functio n

cohesively and make collective decisions in this litigation .

In the end, however, application of the multi-factor test is unnecessary. This

Court is not required to appoint a lead plaintiff consisting of a group of unrelated

plaintiffs (even if institutional investors) when a single institutional plaintiff such a s

PERS, with the greatest losses, can adequately control the litigation .

7


CONCLUSION

For the foregoing reasons, PERS respectfully requests that this Court : 1) appoin t

it as Lead Plaintiff pursuant to Section 21D(a)(3 )(B) of the Exchange Act; 2) approve it s

selection of Zimmerman Reed PLLP as Lead Counsel and Hagens Berman Sobol Shapir o

LLP as Liaison Counsel for the class ; and 3) consolidate the Related Actions .

DATED : December 5, 2005 Respectfully submitted ,

HAGENS BERMAN SOBOL SHAPIRO LLP

Is/ David S. NalvenThomas M. SobolDavid S . NalvenOne Main Street, Fourth FloorCambridge, MA 0214 2Tel: 617 .482.3700Fax: 617 .482 .3003

Proposed Liaison Counsel for Plaintiffs

ZIMMERMAN REED, P .L.L.P .

Carolyn G. Anderson, Minn. #275712Robert C . Moilanen , Minn , #74263

651 Nicollet Mall, Suite 501Minneapolis , MN 55402

Tel: 612.341 .0400Fax: 612.341 .0844

Proposed Lead Counselfor Plaintiffs

8



IN RE BOSTON SCIENTIFIC CORPORATION SECURITIES LITIGATIO N

No . 0:05-cv-1 1934 (JLT)No. 0 :05 -cv-11954 (JLT)No. 0:05-cv-12157 (JLT)No. 0:05-cv-12194 (JLT)No . 0:05-cv-12203 (JLT )

I, David S . Nalven, hereby certify that I am one of the attorneys for proposedclass member Mississippi Public Employee Retirement System and that, on December 5,

2005, 1 caused copies of pleading hereinabove to be served upon all counsel of record by

first class mail postage prepaid .

Is/ David S. Nalven

Dated: December 5, 2005

Case 1 :05-cv-12194-JLT Document 24 Filed 1 210 512 0 0 5 Page 10 of 1 3

SERVICE LISTIN RE BOSTON SCIENTIFIC CORPORATION SECURITIES LITIGATIO N

No. 0 :05-cv -11934 (JLT)No. 0:05-cv-11954 (JLT)No. 0 :05-cv-12157 (JLT)No . 0:05-cv-12194 (JLT)No. 0:05-cv-12203 (JLT)

David Pastor, Esq .,

Gilman and Pastor, LLP,60 State Street , 371h FloorBoston, Massachuse tts 02109

David R . Scott, Esq .Neil Rothstein, Esq .Scott & Scott, LLC108 Norwich Avenue

P .O. Box 192

Colchester, Connecticut 0641 5

Arthur L . Shingler III, Esq .

Scott & Scott, LLC

401 B Street, Suite 30 7San Diego, California 9210 1

Eric Belfi, Esq .Bradley Dyer, Esq .Murray, Frank & Sailer LLP275 Madison Avenue, Suite 801

New York, New York 1001 6

Lionel Z. Glancy, Esq .Michael Goldberg, Esq .Glancy Binkow & Goldberg, LLP1801 Avenue of the Stars, Suite 311Los Angeles, California 9006 7

Bruce G. Murphy, Esq .Law Office of Bruce G. Murphy265 Llwyds LaneVero Beach, Florida 32963

10


Curtis V . Trinko, Esq.Jeffrey B . Silverstein, Esq .

Law Offices of Curtis V . Trinko, LLP16 West 46`" Street, Seventh FloorNew York, NY 10036(212) 490-955 0

Alfred G. Yates, Jr ., Esq.Gerald L. Rutledge, Esq .Law Office of Alfred G . Yates, Jr., PC519 Allegheny Building429 Forbes AvenuePittsburgh, PA 15219-1649(412) 391-516 4

Stanley M. Grossman, Esq .

Marc I . Gross, Esq .Pomerantz Haudek Block Grossma n& Gross LL P100 Park Avenue, 26`h Floor

New York, NY 10017(212) 661-110 0

Patrick V. Dahlstrom, Esq .Pomerantz Haudek Block Grossman& Gross LLPOne North LaSalle Street, Suite 2225Chicago, IL 60602(312) 377-118 1

Richard J . Vita, Esq.Law Office of Richard J . Vita77 Franklin Street, 3d FloorBoston , MA 0211 0(617) 426-656 6

Evan J. Smith, Esq .Brodsky & Smith, LLC

Two Bala Plaza, Suite 602Bala Cynwyd, PA 19004(610) 667-6200

11


Carolyn G. Anderson, Esq .Robert C . Moilanen, Esq .Zimmerman Reed, P.L.L .P .651 Nicollet Mall, Suite 501Minneapolis , MN 55402

Nancy Freeman Gans, Esq .

Moulton & Gans, P .C .33 Broad Street, Suite 1100Boston, MA 02109-4216(617) 369-797 9

Steven G . SchulmanAnita B . KaritalopoulosAndrei V. RudoMilberg Weiss Bershad & Shulman LLP

One Pennsylvania PlazaNew York, NY 10119(212) 594-5300

Stephen V. Saia, Esq .Law Offices of Stephen V . Saia70 Old Cart Path LanePembroke, MA 02579

(781) 826-840 1

Peter A. Lennon, Esq .Eric L. Young, Esq .

Kenney Lennon & Egan P .C.3031C Walton Road, Suite 202Plymouth Meeting, PA 19462

(610) 940-909 9

Andrew C . Griesinger, Esq .Griesinger , Tighe & Maffei LLP

176 Federal StreetBoston , MA 02110-2214(617) 542-9900

Peter S . Linden, Esq.Ira M. Press, Esq .Kirby McInerney & Squire, LLP

830 Third Avenue, 10` FloorNew York, NY 1002 2(212) 371-6600

12


James Allen , Sr., Esq .Allen Brothers , P .L.L.C .400 Monroe , Suite 220Detroit, MI 48226(313) 962-7777

Thomas G . Shapiro, Esq .Theodore M. Hess-Mahan, Esq .Shapiro Haber & Urmy LLP

53 State StreetBoston, MA 02109(617) 439-393 9

Samuel H . Rudman, Esq .Robert M . Ruthman, Esq .Evan J . Kaufman, Esq .Lerach Coughlin Stoia Geller Rudman & Robbins LLP200 Broadhollow Road , Suite 40 6Melville, NY 11747(631) 367-7100

Darren J . Robbins, Esq .

Tricia L. McCormick, Esq .Lerach Coughlin Stoia Geller Rudman & Robbins LLP655 West Broadway, Suite 190 0

San Diego, CA 92101(619) 231-1058

13

EXHIBIT F

Case 1 :05-cv-01658-SBB-TAB Document 25 Filed 01/0312006 Page 2 of 3

KAPIAWFOX

CERTIFICATION of NAM" P'LA.IIii M~1E3RSUANt'~ #Lz .D L s scURfl I'ES I;~V5

1, ill Havct, Attorney Gerieffal, State of Mississippi on behalfof t]»311i1iasissippi Public Employeeske*emot Systean hereby cesli y and swear as follows:

1 . 1 herebyauthorize the filing of a motion to appoint MPERS as lead plaintif.

2. MPERS is willing to serve as a representative patty on behalf of a class , or to be a member of a group

representing a class, Inchiding providing testimony at deposition and ti ial, if necessary;

3 . The attached chart describes MPBRS' transactions in the securitlea of Guidant Ca1pora*iun dwWg th e

A is period beginning December 15,2M through November 4,2005;

4. MARS did not p rabd ashkes of Cuidafit Corpdration at the diroetioh of its counsel or in order t'd

participate in ally private action Ondbr the federal seeuiitiea laves; and

5 . NIPERS will not aconpt any payment for serving as a rep esa live party on behalf of a chat beyond its

pro rats share of any recovery, except as ordered or approved by the Court.

6. MPERS i9 =eitly smving as Lead Plaintiff in the following actions filed under federal recur es

laws :

In no Delphi Corporation Securities Lidgatiun,14o, 2:05,CV-7©90111PH-VMM (E.D.M1)

Meyer v. Converim Holding AG, No. i :44CV-0T$97-MBM (SD.N.Y.)

Ley v. Visteon Corporation, at al ., No. 2 :05-CV 70737 RHC-YMM (E:D.Mt)

7 . MPERS has sought . to carve as a class representative in the flowing actions in the past three years, but

either wi#hdrew its suction for lead plaintig was not appointed as lead plaintiff or the eoW has not

appointed a lead plain;

In re Cardinal Health, Inc. Securities Litigalon ;

In re American International Group, Inc. Securities Litig on;

In re RealtSouth, inc. S'tockhoider Litigation;

In re BearingPoint SeauidqLitigation ;

In General Motors Corporation Securities Litlgatinn;

Weiss v . Friedman, Bil [big% Ramsey Group, Inc ., at al.; and

MeyerY . Boston 5cianfiic Corp., et e L

To the best of my Imowledge, I declare =der penalty of perjury that the fowipitig is true and correc t

Dart: December g 2005

ksgWaal, State ofMtssissippi on behalf of tel is Employees Retirement System

I

Case 1 :05-cv-01658-SEB-TAB Document 25 Filed 01/03/2006 Page 3 of 3

1IQSI.S PUBLIC EMPLOYEES MIREIVIENT SYSTEMGuidant Corpor*Uon ft s ]from 12/15004 throngb 11)412005

S'C1JRiTY NAMZ.

'

CU8]PTRANSACTION

TYPE TRADE DATEAMOUNT OF

SHA R SPBXC1 PU

SHARE'l3U1DAWCORP 401698105 BUY 0 1 h7105 49,900 . $12 .0040GUIDANT CORD 401698105 BUY 01128/05 900 $711656 .GUIDANTCOAP 401698105 BUY 03116!05 " 9,100 $74.4600GU]DANT CO1tP 401698105 BUY 05124105 2 8O0 873.8376 .GUIDANT CORP 401698105 BUY 06/10/05 300 873,3753QU ANT C 401698105 BUY 06130105 4,100 S70.92Q7GUIDANT ORP . 401698106 BUY 06f~m .8,100 . $65 65034UmANT CORP . . 401698105 BUY 0712$105 4,8W $68.5764GU RANT CORD 401698105 BUY 09/06105 5 ] 00 $70.4778QUIDANT CORP 401698105 BUY 09116/05 7,1i]0 868 .4810atJII7AN'' CCYRP 401698145 BUY 10/18/05 6,200 $64 .7880GUIDANT CORD 401698105 BUY 11103105 9,500, 157.1330 ,

GU] RANT CORP 401698105 SELL . 01124105 . 800 $71 .1000OUMAN1` CORP 401698105 SELL 07121105 - 6 869.6300GUIDANT CORP 401698105 ' SELL 02J17/05 . 5,700 .$73 .0294O ANTCORP 401698105 SELL 03J08/0S 9,200 .'., . 874 .760 0OUIDANT CORD 401698105 SELL 03/24/05 6,200 874.6647GUIDANTCORP 401698105 SELF, . .04/12105 5000 " 874.5634

EXHIBIT G

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK--------------------------------------------------- -xBRUCE GOPLEN, individually and onbehalf of all others similarly situated ,

Plaintiff,

-against-

51JOB, INC ., DONALD LUCAS, RICKYAN, and KATHLEEN CHIEN ,

Defendants ,

ROBERT KEMP IRA, individually and onbehalf of all others similarly situated ,

Plaintiff,-against-

51 JOB , INC., RICK YAN, KATHLEENCHIEN, and DONALD L. LUCAS,

Defendants .------------------------------------------------------

TOM FOUGERE, individually and onbehalf of all others similarly situated ,

Plaintiff,

-against-

51 JOB, INC ., RICK YAN CHIEN, andKATHLEEN CHIEN

Defendants .------------------------------------------------------

MEMORANDUM

AND ORDER

05 Civ . 769 (CSH)

05 Civ . 974 (CSH)

05 Civ. 1029 (CSH )

I

CHARLES JOHNSTON, individually andon behalf of all others similarly situated ,

Plaintiff,

-against-

51JOB , INC., DONALD LUCAS, RICKYAN, and KATHLEEN CHIEN ,

Defendants .

BARBARA C . RABHAN, AS TRUSTEEOF THE BARBARA CHARDKOFFRABHAN TRUST FIBIO TRUST UNDER :AGREEMENT DATED SEPTEMBER 23,1999, individually and on behalf of al lothers similarly situated,

Plaintiff,

-against-

51JOB , INC., RICK YAN, KATHLEENCHIEN, and DONALD L . LUCAS

Defendants .------------ ----------- ------------------------------ x

DANIEL JENSEN and RACHAEYARUAYSAMRAN, on behalf of themselvesand all others similarly situated ,

Plaintiffs,

-against-

51JOB, INC ., DONALD LUCAS, RICKYAN, and KATHLEEN CHIEN ,

Defendants . .

05 Civ, 1557 (CSH )

05 Civ . 1895 (CSH)

05-CV-2260 (CSH)

2

-------------------------------------- --------------- x

RICHARD P. MARINO, individually an don behalf of all others similarly situated,

Plaintiff,

-against- 05 Civ . 2751 (CSH)

51JOB, IN C., RICK YAN, andKATHLEEN CHIEN,

Defendants ..- .---------------

Haight, Senior United States District Judge :

The seven captioned putative class actions allege securities fraud in respect of American

Depository Shares in defendant 5l job, a Shanghai-based provider of human resources in China,

purchased by investors in this country .' The complaints are substantively identical, almost as if

the several law firms involved shared the same word processor . Each complaint alleges that the

plaintiff Class consists of purchasers of the securities of 51 job between November 4, 2004 and

January 14, 2005 .

Two motions are presently pending : (1) to consolidate these actions, and (2) to appoin t

lead plaintiff and to approve a selection of lead counsel . These procedural issues are governed by

the Private Securities Litigation Reform Act of 1995 ("PSLRA" or "the Act"), 15 U.S .C. § 78u-

4, and by Rules 23 and 42, Fed . R. Civ, P . This opinion resolves both motions .

1. Motion to Consolidate

1 The three individual defendants are officers of 51job _

3

What I have said makes it plain that these seven cases should be consolidated pursuant t o

Rule 42(a) because they involve common questions of both fact and law . No discussion is

required. The motion for consolidation will accordingly be granted and an appropriate order

entered .

II. Motion for Appointment of Lead Plaintiff andSelection of Lead Counsel

Two groups of investors vie with each other for these procedural plums . These are the

so-called "Webster Group," consisting of eight investors in 5 I job securities, and the so-called

"Mayeri Group" consisting of seven investors . Each Group moves to be appointed lead plaintiff.

The Webster Group moves for the selection of the firm of Milberg Weiss Bershad & Schulman

LLP ("Milberg Weiss") as lead counsel . The Mayeri Group moves for the selection of the firm

of Stull, Stull & Brody . '

When such competitive circumstances arise, the PSLRA mandates that the Court first

decide whether the actions should be consolidated . 15 U.S.C. § 78u-4(a)(3)(B)(ii) . In Part I I

held that an order of consolidation will be made .

The motions of the Webster Group and the Mayeri Group were timely filed under th e

PSLRA. The Act provides 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 (hereinafter in this paragraph referred to as the `most

adequate plaintiff)." Subsection (a)(3)(B)(I) . The Act further provides that once the Court ha s

x A third group of investors, self-designated "the Zhou Group, " had moved for comparableorders, but subsequently withdrew its motion, leaving the Court with the two competing groupsidentified in text .

4

made that determination and appointment, "the most adequate plaintiff shall, subject to the

approval of the court, select and retain counsel to represent the class." Subsection (a)(3)(B)(v) .

The Act establishes a rebuttable presumption that the "most adequate plaintiff" is that plaintiff

who "(aa) has either filed the complaint or made a motion [to be appointed as lead plaintiff] ; (bb)

in the determination of the court, has the largest financial interest in the relief sought by the class ;

and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil

Procedure." 3

Applying these criteria, l conclude that the Webster Group should be appointed the lead

plaintiff and Milberg Weiss lead counsel .

It appears to be undisputed that the of the two remaining competitors, Webster Group has

the larger (if not the largest) financial interest in the relief sought by the class, namely, mone y

damages 5 I job investors suffered as the result of defendants' fraud in connection with purchases

of the company's securities . The Webster Group's initial brief in support of the present motions

stated that Group members "suffered losses of $311,710 .13 in connection with transactions in

5ljob securities during the Class Period." Brief at 1 . The Mayeri Group's brief estimated its

members' losses at $176,641 .03, Brief at 1, and went on to say that they "have not received

notice of any other competing applicant for lead plaintiff that has sustained greater financial

losses in connection with the purchase of 5ljob securities," id . at 6 . The Webster and Mayeri

Groups both filed their motions for appointment on March 22, 2005 . Accepting that at that time

These statutory presumptions can be rebutted only by proof that the presumptively mostadequate plaintiff "(aa) will not fairly and adequately protect the interests of the class ; or (bb) issubject to unique defenses that render such plaintiff incapable of adequately representing the class ."Subsection (3)(B)(iii)(II) . The PSLRA's reference to Rule 23, Fed . R. Civ. P., quoted in textpresumably refers to the typicality and adequacy requirements of Rule 23(a) .

the Mayeri Group had no knowledge of an applicant for lead plaintiff with greater financial

losses, it acquired that awareness from the Webster Group's simultaneous filing ; and the Webster

Group's reply brief filed on April 5 reiterates these respective totals with minor alterations that

are not material . The Mayeri Group has not responded to the Webster Group's calculations of

losses, and I regard them as established on this record . It follows that the Webster Group has the

largest financial interest in the relief sought, and has accordingly satisfied the second of the three

requirements for the PSLRA's presumption that it is the "most adequate plaintiff."

The first and third requirements are satisfied as well. The first is satisfied because the

Webster Group (whose members were enlisted from the universe of 5ljob investors in a manner

that the record doers not reveal but is not relevant to these motions) has made the instant motion

to be appointed lead plaintiff. The third requirement is satisfied because there is no reason to

doubt that the Webster Group and the claims of its members satisfy the typicality and adequacy

requirements of Rule 23(a) . The Mayeri group does not assert, let alone attempt to prove, that a

basis exists for rebutting the statutory presumption in the Webster Group's favor . See footnote 3,

supra .4

4 There is one seeming anomaly in the Webster Group's submissions on these motions. Itsreply brief argues at 5 that "[t]he motion of the seven-member Mayeri Group should be deniedbecause its membership far exceeds the number of movants recommended by the SEC," quoting anSEC amicus brief in an unrelated case that lead plaintiff groups should be comprised of no more than"three to five persons." The Webster Group's main brief at I identifies eight investors as members,which would seem to invite an et to quoque response from the Mayeri Group. The answer may liein the fact that the surname of three Group members is "Webster" and that of two others is"Rabban ." If one regards these apparent family members as single investor entity (much as churchesregard the members of a parishioner family living together as a single "pledging unit'), the SEC-approved total of five "persons" is achieved . I do not pursue this question further because it is notargued as a basis for objection to the Webster Group's appointment as the lead plaintiff under thePSLRSA .

The Webster Group having been appointed lead plaintiff, it is entitled under the Act t o

select counsel to represent the class, subject to the Court's approval . The Webster Group has

selected Milberg Weiss as "lead counsel" (the phrase used in its motion papers ) ' and asks the

Court to approve that selection . There is no reason to withhold that approval . Milberg Weiss is

experienced and competent in the area of representing plaintiff investor classes in secu rities

litigation .

Class certification must be sought without undue delay . The Order implementing this

Opinion will contain an appropriate direction in that regard .

III . Conclusion

For the foregoing reasons, the Court makes the following Order:

1 . The seven captioned cases are consolidated for all purposes . All future filings shall be

made in the first-captioned case as they appear supra.

2_ The motion of the Webster Group for appointment as lead plaintiff and for approval o f

its selection of the firm of Milberg Weiss Bershad & Schulman LLP as lead counsel is granted i n

all respects . Accordingly, the Webster Group is appointed lead plaintiff and its selection o f

Milberg Weiss as lead counsel is approved .

3. The motion of the Mayeri Group is granted as to consolidation of the actions, an d

5 The PSLRA refers to a "lead plaintiff," but does not use the phrase "lead counsel." Noclass has as yet been certified in this case . In that circumstance, and ifthhe case was governed solelyby Rule 23, the Court would be limited to designating "interim counsel to act on behalf of theputative class before determining whether to certify the action as a class action," Rule 23(g)(2)(A)(emphasis added) . However, the PSLRA, by its use of the phrase "purported plaintiff class" in theprovisions quoted in text, signifies the intention of Congress that counsel may be appointed beforethe certification of a class . Accordingly I discern no obstacle to referring to Milberg Weiss as "leadcounsel ."

denied as to its applications for appointment as lead plaintiff and approval of its selection of lea d

counsel .

4 . Lead counsel are directed to move for class certification on appropriate papers and i n

accordance with the provisions of the governing law and rules of procedure, not later than Augus t

31, 2005.

It is SO ORDERED .

Dated: New York, New YorkJuly 26, 2005 .

CHARLES S. HAIGHT. JR.SENIOR UNITED STATES DISTRICT JUDGE

8

Page I

LEXSEE 2003 US DIST. LEXIS 2463 3

In re : UNUMPROVIDENT CORP. SECURITIES LITIGATION

Lead Case No . 1 :03--CV-049 CLASS ACTION, MDL Case No. 1 :03-md-1552

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OFTENNESSE E

2003 U. S. Dist. LEXIS 24633

November 6, 2003, File d

SUBSEQUENT HISTORY: [* 1] Motion denied by Inre Unuin Provident Coip. Sees . Litig., 2003 US. Dist.LEX1S24412 (E. D. Tenn ., Dec. 29, 2003)Related proceeding at Weiller v. New York Life Ins. Co .,2005 N.Y Misc . LEXIS 473 (N.Y Sup . Ct., Mar. 16, 2005)

PRIOR HISTORY: In re UnumProvident Corp, Secs .,Derivitive, & 'ERISA"Litig., 280 F. Stipp. 2d 1377, 2003U.S. Dist. LEXIS 15363 (J.P.M.L ., 2003)

DISPOSITION : Intervenor Plaintiff Glickenhaus &Co.'s motion to be appointed lead Plaintiff granted andIntervenor Plaintiffs Teachers' Retirement System ofLouisiana and Louisiana School Employees' RetirementSystem's joint motion to be named co-lead Plaintiffs de-nied .

COUNSEL : For FRANK W KNISLEY, On Behalf ofHimself and Others Similarly Situated, plaintiff : GeorgeE Barrett, Douglas S Johnston, Jr, Barrett, Johnston &Parsley, Nashville, TN .

For FRANK W KNISLEY, On Behalf of Himself and

Others Similarly Situated , plaintiff. Buckley P Hollister,

Milberg Weiss Bershad Hynes & Lerach, LLP, San Diego,

CA .

For TEACHERS' RETIREMENT SYSTEM OFLOUISIANA, THE, LOUISIANA SCHOOLEMPLOYEES' RETIREMENT SYSTEM, plaintiffs :Paul K Bramlett, Nashville, TN .

For TEACHERS' RETIREMENT SYSTEM OF[*2] LOUISIANA, THE, LOUISIANA SCHOOLEMPLOYEES' RETIREMENT SYSTEM, plaintiffs :Roger J LeBlanc, LeBlanc & Waddell, Baton Rouge, LA .

For TEACHERS' RETIREMENT SYSTEM OFLOUISIANA, THE, LOUISIANA SCHOOL

EMPLOYEES' RETIREMENT SYSTEM, plaintiffs :

Bryan A Wood, Julie A Richmond , Kathleen MDonovan-Maher, Jeffrey C Block, Berman, Devalerio,Pease, Tabacco, Burt & Pucillo, Boston, MA .

For TEACHERS' RETIREMENT SYSTEM OFLOUISIANA, THE, LOUISIANA SCHOOLEMPLOYEES' RETIREMENT SYSTEM, plaintiffs :Javier Bleichmar, Douglas M McKeige , Eitan Misulovin,

Bern stein , Litowitz, Berger & Grossman, LLP, NewYork, NY.

For GLICKENHAUS AND CO, plaintiff: J WilliamPope, Jr, Ward Crutchfield & Associates, Chattanooga,TN .

For GLICKENHAUS AND CO, plaintiff: RamziAbadou, Andrew J Brown, Edward P Dietrich, Milberg,Weiss, Bershad, Hynes & Lerach, LLP, San Diego, CA .

For UNUM PROVIDENT CORPORATION, ROBERT CGREYING, defendants : John P Konvalinka , Susan KerrLee, Grant, Konvalinka & Harrison, PC, Chattanooga,TN .

For J HAROLD CHANDLER, defendant : WilliamH Horton , Michael A Anderson , Horton , Maddox &Anderson , PLLC, Chattanooga, TN .

JUDGES : CURTIS L. COLLIER, UNITED STATESDISTRICT JUDGE. [*3]

OPINIONBY: CURTIS L . COLLIER

OPINION :

MEMORANDU M

Before the Court are various motions to be namedlead plaintiff in this consolidated action seeking classcertification and alleging securities fraud on the part of

2003 U .S . Dist . LEXIS 24633, * 3

UnumProvident Corp . ("UnumProvident") and certainof its corporate officers and directors ("Defendants") .

Intervenor Plaintiffs Teachers' Retirement Systemof Louisiana ("TRSL") and the Louisiana SchoolEmployees' Retirement System ("LSERS") (collectively,"Louisiana Funds") filed a joint motion to be named co-

lead plaintiffs (Court File No. 10). Intervenor Plaintiff

Glickenhaus & Co . ("Glickenhaus") filed a competingmotion to be named lead plaintiff (Court File No . 18) .

Upon consideration of the competing panes' motions,memoranda of law in support thereof(Court File Nos . 11,

19), various supplements thereto (Court File Nos . 21, 26,

60, 66, 67), and replies and/or statements of opposition(Court File Nos . 22, 39, 48, 51, 58, 69), the Court willGRANT Glickenhaus' motion and DENY the Louisiana

Funds' motion for the reasons set forth herein.

1 . STANDARD OF REVIEW

[*4] The designation of a lead plaintiff in class ac-tion securities litigation is governed by the provisions

of the P ri vate Securi ties Litigation Reform Act of 1995

("PSLRA") . 15 U.S.C. § 78u-4, 5 . The PSLRA provides

court s " shall appoint as lead plaintiff the member or mem-bers of the purpo rted plaintiff class that the court deter-mines to be the most capable of adequately representing

the interests of the class members ." 15 U.S.C. § 78u-4

(a)(3)(B)(i) . The PSLRA creates a rebuttable presump-tion the most adequate plaintiff is the person or group of

persons that:

(aa) has either filed the complaint or madea motion in response to a notice under sub-paragraph (A)(i) ; n l(bb) in the determination of the court , has the

largest fi nancial interest in the relief sought

by file class ; an d(cc) otherwise satisfies the requirementsof Rule 23 of the Federal Rules of CivilProcedure. n2

15 U.S.C. § 78u-4(a)(3)(B)(iii)(1) .

[*5]

nl The PSLRA requires a plaintiff filing a newputative class action provide notice to the classwithin 20 days in a "widely circulated nationalbusiness -oriented publication or wire service ." 15

U.S.C. § 78u-4(a)(3)(r1)(i) . Once notice has been

published , "any member of the purpo rted class may

move the court to serve as lead plaintiff for the pur-

ported class . 15 U.S.C. § 78u-4(a)(3)(1)(z)(II) .

Page 2

n2 Rule 23(a) establishes the following prereq-

uisites to a class action : (1) numerosity, (2)common

questions of law or fact, (3) typicality of claims ordefenses, and (4) fair and adequate representationof the class by the representative parties. Fed. R.

Civ. P. 23(a) . Of primary concern in the determina-tion of lead plaintiff are the third and fourth prereq-

uisites. In re Telxon Corp. Secs. Litig., 67 F Supp .

2d 803, 807 n. 10 (N.D. Ohio 1999) .

Once established, the presumption may only be rebut-ted "upon proof by a member of the purported plaintiffclass that the presumptively most adequate plaintiff -(aa) will not fairly and adequately protect the interests of

the class; or (bb) is subject to unique defenses that ren-der such plaintiff incapable of adequately representingthe class ." 15 U. S. C. § 78u-4(a)(3)(B)(iii)(II) . To becomethe presumptive lead plaintiff, a movant need only make

a prima facie showing he satisfies the typicality and ad-

equacy requirements of Rule 23 . [*6] In re Cendant

Corp. Litig., 264 F.3d 201, 263 (3d Cir. 2001) . To re-

but the presumption, however, a competing movant mustsubmit proof the presumptive lead plaintiff does not meetthose requirements . Id. at 263-64 . Thus, "once the pre-

sumption is triggered, the question is notwhether anothermovant might do a better job of protecting the interestsof the class than the presumptive lead plaintiff; instead

the question is whether anyone can prove that the pre-sumptive lead plaintiff will not do a'fair[] and adequate[]'

job ." Id. at 268 (quoting Fed. R. Ciu P. 23(a) ) (emphasis

in original). In other words, the inquiry is in no way a

relative one .

The PSLRA also erects a competing presumptionagainst the appointment as lead plaintiff of anyone whohas served as lead plaintiff in five or more secu ri ties

class actions during any three year period . 15 U.S.C. §

78u-4(a)(3)(B)(vi) . Specifically , the "professional plain-

tiff rule" provides :

Except as the court may otherwise permit,consistent with the purposes of this section,a person may be a lead plaintiff, or an officer,director, or fiduciary [*7] of a lead plaintiff,in no more than 5 securities class actionsbrought as plaintiff class actions pursuant tothe Federal Rules of Civil Procedure duringany 3-year period .

Id.

H. RELEVANT FACTS

2003 U .S . Dist. LEXIS 24633, * 7

UnumProvident , a Delaware corporation with its prin-cipal place of business in Chattanooga , Tennessee, is

the parent company of a number of insurance compa-nies operating throughout the United States and abroad .

Through its subsidiaries, the company provides a widerange of group and individual insurance products includ-

ing disabili ty insurance, life insurance , long-term care

insurance , and payroll -deducted voluntary benefits plansoffered by employers to their employees .

On February t2, 2003, Plaintiff Frank W. Knisley

("Knisley" ) filed a securities fraud lawsuit against

UnumProvident; J . Harold Chandler , chairman of

UnumProvident' s board of directors and the company'spresident and chief executive officer; and Robert C .

Greying, chief financial officer and a UnumProvident

di re ctor ( collectively " Defendants") (Court File No . 1,

Case No. 1 :03-CV- 49). Specifically, Knisley alleged

Defendants violated sections 10(b) and 20(a) of the

Secu ri ties ExchangeAct of 1934 [* 8] and Rule 10b-5 pro-

mulgated thereunder (Id. PP 39-48 ) . Knisley also soughtclass status on behalf of all those who had purchasedpublicly traded UnumProvident securities between May

7, 2001, and February 4, 2003 ("Class Period") (Id. P I) .

In accordance with the PSLRA, Knisley published no-tice of the initiation of his class action and, in response,four intervening parties filed motions seeking appoint-

ment as lead plaintiff: Johnson Asset Management (Cou rt

File No . 7), the Louisiana Funds (Court File No . 10),

J .A . Glynn & Co . (Court File No . 13), and Glickenhaus

(Cou rt File No . 18) . Each movant alleged it had sus-tained the greatest loss in connection with purchases of

UnumProvident securities during the class period andwas otherwise suitable and adequate to serve as lead

plaintiff. Specifically , the Louisiana Funds alleged they

had lost $4 , 189,422 .55 ($ 3,097,211 .11 by TRSL and

$1,092,211 .44 by LSERS) (Court File No . 21 P 4) and

Glickenhaus alleged it sustained $ 1,532,698 .10 in losses

(Court File 19, Exh . G) during the Class Peri od . Johnson

Asset Management and J .A . Glynn & Co . both ultimately

withdrew their motions ( Cou rt File Nos . 24, 27) .

TRSL is a public [* 9] pension fund founded in 1936to provide retirement benefits to Louisiana public school

teachers , principles , and food service workers and their

beneficiaries (Court File No. 11). LSERS is a separate

public pension fund organized for the benefit of currentand retired public school employees in Louisiana (Id.) .

Collectively, the Louisiana Funds manage assets of ap-

proximately $ 12 .1 billion (1d.) . Glickenhaus is an insti-

tutional investment firm which manages approximately

$688 million of assets for its clients (Court File No. 22, p.

6) . According to the part ies' declarations and to the best of

the Cou rt' s knowledge, the Louisiana Funds have se rved

Page 3

as lead plaintiff in thirteen securities fraud class actionsin the past three years (ten by TRSL and three by LSERS)and Glickenhaus has served as lead plaintiff in four suchcases (Court File Nos . 12, Exh . B; 20, Exh. A) .

On May 21, 2003, the Knisley case was consolidatedwith four other putative class action securities fraud law-suits filed in this Court (Court File No . 50) . n3 Defendants

additionally filed a Motion for Transfer and Coordinationor Consolidation with the Judicial Panel on MultidistrictLitigation ("MDL Panel") seeking [*10] to consolidatea number of actions pending against UnumProvident andits officers and directors in this jurisdiction and others . n4

Defendants provided Plaintiffs with notice of this motionon May 16, 2003 (Court File No . 49) . On September 2,

2003, the MDL Panel granted Defendants' motion andconsolidated Plaintiffs' cases with twelve other lawsuitsfiled in various district courts around the country and

transferred those actions to this Court for coordinated pre-trial proceedings . See In re UnumProvident Corp . Secs.,

Derivitive, & 'ERISA" Litig., 280 F. Supp . 2d 1377,2003 WL 22076554 (Jud. Pan . Mult. Lit. Sept. 2, 2003) .

On October 6, 2003, five additional cases were trans-ferred to this Court as "tag-along" cases . See "Conditional

Transfer Order (CTO-1)," In re UnumProvident Copp .

See ., Derivative, & "ERISA " Litig., MDL No . 1552 (Jud .

Pan . Mult. Lit . Oct . 6, 2003) .

n3 The consolidated cases we re : Knisley v.UnumProvident Corp., et al., No . 1 :03-CV-49 ;

Rasner v. UnumProvident Corp., et al., No. 1 :03-

CV-54 ; Elias v. UnurnProvident Corp ., et al., No.

1 :03-CV-81 ; Stolz v. UnumProvident Corp., et al.,

No. 1 :03-CV-84 ; and Miller v. UnumProvident

Corp., et al., No . 1 :03-CV-119 . The consolidated

action was renamed In re UnurProvident Corp.

Securities Litigation (Court File No . 50).

[*11]

n4 The various actions submitted to the MDLPanel for pretrial consolidation included securities

fraud class actions , shareholder derivative suits forviolations of state law fiduciary duties, and ac-tions for breaches of fiduciary duties under theEmployee Retirement Security Income Act of 1974("ERISA"), 29 U.S.C. §,1001-1461 .

III. DISCUSSION

The arguments presented by the Louisiana Funds andGlickenhaus in support of their competing motions touch

2003 U .S . Dist . LEXIS 24633, *1 1

upon a number issues of law under the PSLRA . TheLouisiana Funds contend they should be appointed co-lead plaintiffs because they have the largest financial inter-est and because, as an investment manager, Glickenhaushas suffered no loss and, therefore, lacks standing to serveas lead plaintiff and, in any event, has not made a sufficientshowing of adequacy under Rule 23 (see Court File No .26) . Glickenhaus does not dispute the Louisiana Fundshave a larger financial interest, but argues the profes-sional plaintiff rule bars the Louisiana Funds from serv-ing as lead plaintiff, defects in the Louisiana Funds' [* 121pleadings should disqualify them from consideration, andthrough their filings in this case the Louisiana Funds havealready demonstrated their own inadequacy and inabilityto effectively monitor their attorneys (see Court File Nos .

22, 58) .

Since it is undisputed the Louisiana Funds havethe greater financial interest, the Court will proceedfrom the assumption the Louisiana Funds are entitledto the presumption afforded under 15 U.S.C. § 78u-4(a)(3)(B)(1ii)(1) . Thus, the first question is whether theLouisiana Funds are qualified to be considered for thepresumption . If they are, the Court must then considerwhether Glickenhaus has proven the Louisiana Fundsdo not meet the typicality and adequacy requirementsofRule 23 . If, on the other hand, the Court concludes theLouisiana Funds should not be lead plaintiff, the Courtmust then determine whether Glickenhaus is eligible toserve as lead plaintiff and, if so, whether the LouisianaFunds have offered proof to rebut the presumption .

A. The Professional Plaintiff Rule & Institutional

Investors

Glickenhaus argues the professional plaintiff rule, 15U.S.C. § 78u-4(a)(3)(B)(vi) [*13] , bars the LouisianaFunds from being considered for lead plaintiff in thiscase as TRSL and LSERS have collectively served aslead plaintiff in thirteen securities class actions in thelast five years. In response, the Louisiana Funds contendthe professional plaintiff rule should not be interpreted toapply to institutional investors such as themselves .

The PSLRA expressly prohibits a person from beinga lead plaintiff, or an officer, director, or fiduciary of alead plaintiff, in more than five (5) securities class ac-tions during any three year period, "except as the courtmay otherwise permit consistent with the purposes of this

section ." 15 U.S.C. § 78u-4(a)(3)(B)(vi) . On its face, thestatute appears to bar a group such as the Louisiana Funds,who have served as lead plaintiff in thirteen such cases inthe past three years, n5 from being appointed lead plain-tiff in this case . Glickenhaus argues precisely this, citingto principles of statutory interpretation and contendingthe Court's analysis should be confined to the clear and

Page 4

unambiguous words in the text . n6 Glickenhaus goes onto argue because the text of the statute includes wordsthat apply exclusively [*14] to institutions (i.e., officer,director, or fiduciary), it should be read to expressly con-template the imposition of the professional plaintiff ruleto institutional investors (Court File No . 22, p . 3) .

n5 The Court notes LSERS, one of the two pub-lic pension funds comprising the group referred toas the Louisiana Funds, has only served as leadplaintiff in three securities class actions in the pastfive years . However, the Court will not consider theeligibility of LSERS as an individual entity becauseits claimed financial interest (roughly $1 .1 million)is smaller than that claimed by Glickenhaus (morethan $1 .5 million), thus preventing LSERS from ob-taining the benefit of the presumption in any event .

n6 In support of its position, Glickenhaus citesto the writings of both Justice Scalia and LawrenceTribe as well as the opinion of this Court in In reStockburger, 192 B.R . 908, 910 (E.D. Tenn. 1996)(Collier, J .) (courts must presume that a legisla-ture says in a statute what it means and means in astatute what it says there) (quoting ConnecticutNat'l Bank v. Germain, 503 U.S. 249, 253-54, 112S. Ct. 1146, 1149, 117 L . Ed. 2d 391 (1992)) (seeCourt File No . 22, pp . 1-4) .

*15

The Louisiana Funds argue the legislative historyof the PSLRA clearly establishes Congress' intent thatcourts allow institutional investors to exceed the five-in-three limit . The Louisiana Funds contend the profes-sional plaintiff rule was primari ly designed to preventindividuals with nominal losses from repeatedly filingmassive securities class actions where the plaintiff ' s attor-neys, rather than the individual plaintiff, were the primarydriving force behind and beneficia ries of the lawsuits .

Consistent with this purpose, the Louisiana Funds argue,Congress "intended for institutional investors to exceed

the so-called five-in -three rule" (Court File No . 26, p . 9) .

Therefore. the Louisiana Funds contend the Court shouldexercise the discretion accorded it by the PSLRA consis-tent with the purposes underlying that statute (Court FileNo . 26 , p . 10 (quoting Hall v. Hall, 738 F.2d 718, 720(6th Cir. 1984)) and exempt them from the five-in-threebar.

To be sure, the statute itself provides no explicit blan-ket exception from the professional plaintiff rule for in-stitutional investors. Rather, courts are merely allowedto exercise their discretion to make exceptions [* 16] incertain instances when consistent with the underlying pur-

2003 U . S . Dist . LEX1S 24633, * 1 6

poses of the PSLRA .

Without intending to place undue weight on the leg-islative history, it is instructive to engage in a short re-view of that history. The legislative history of the PSLRAdoes demonstrate a strong congressional preference in-stitutional investors se rve as lead plaintiffs in securitiesclass actions . See H .R . Conf. Rep. No. 104 -369, at 34(1995), reprinted in 1995 U .S .C.C .A .N. 730, 733 (statingthe Conference Committee "seeks to increase the likeli-

hood that institutional investors will se rve as lead plain-tiffs," believing this "will ultimately benefit shareholders

and assist court s by improving the quality of representa-tion in secu rities class actions") ; S. Rep . No. 104-98, at 11(1995), reprinted in 1995 U .S .C .C .A .N. 679 , 690 (stat-ing "the Committee [on Banking, Housing, and UrbanAffairs] intends to increase the likelihood that institu-tional investors will se rve as lead plaintiffs ") . The House

Conference Report goes on to state :

The Conference Report seeks to restrictprofessional plaintiffs from serving as leadplaintiffs by limiting a person from servingin that capacity more than [* 17] five timesin three years . Institutional investors seekingto serve as lead plaintiff may need to ex-

ceed this limitation and do not represent thetype of professional plaintiff this legislationseeks to restrict. As a result, the ConferenceCommittee grants courts discretion to avoidthe unintended consequence of disqualify-ing institutional investors from serving morethan five times in three years.

Id. at 35. The reasoning behind Congress ' prefe re nce forinstitutional investors was based on an understanding ofinstitutional investors and other large shareholders as bet-ter able to advance the interests of the class as a wholeand effectively monitor the plaintiffs' a ttorneys. See, e.g.,S . Rep . No. 104-98, at 6 (stating PSLRA "is intended to

empower investors so that they, not their lawyers, control

securities litigation") .

Generally, court s have declined to carve out a blanketexception to the professional plaintiff rule for institutionalinvestors . See Aronson v. McKesson HBOC, Inc., 79 F

Supp . 2d 1146, 1156 (N.D. Cal . 1999) (holding PSLRAcreates a rebuttable presumption the same plaintiff shouldnot direct more than five securities class [ * 18] actions inthree years which institutional investor may overcomeupon a showing of certain circumstances) ; In re TelxonCorp . Secs . Litig., 67 K Supp. 2d 803, 821 (N.D. Ohio1999) ("The purported blanket exemption reflected in theConference Repo rt cannot be squared with the more lim-ited grant of discretion contained in the statute itself.");

Page 5

Contra Naiditch v. Applied Micro Circuits Corp ., 2001

U.S. Dist. LEXIS21374, 2001 WL 1659115, at *2-3 (S. D .Cal. Nov 5, 2001) (unpublished decision) ("the prefer-ence for large institutional investors should not be overrid-den by the professional plaintiff restriction ") . Cou rts havesharply disagreed, however, regarding the factors or cir-cumstances necessary to warrant a discretionary exemp-tion . Some cou rts have determined they should exercisethe discretion afforded them by the professional plaintiff

rule only in narrow circumstances . See, e.g., Aronson,79 F. Supp. 2d at 1156-57 (noting special circumstanceswarranting exception may include where institutional in-vestor is the only movant or the other movants "had ac-crued an even longer record of part icipation in securi tieslitigation") ; [*19] Telxon, 67 F Supp. 2d at 822 (not-ing exception would be warranted only where alternativecandidates are either a group of unrelated investors or anindividual investor whose loss is dwarfed by that of the

institutional investor) . Other courts have exercised theirdiscretion more expansively and allowed exceptions forinstitutional investors unless there is an affirmative reasonnot to do so . See, e.g., Piven v. Sykes Enters., 137F Supp .2d 1295, 1304-05 (M.D. Fla. 2000) (holding institutionalinvestor should be exempted from professional plaintiffrestriction unless court finds institution is, in fact, "some

sort of shell corporation created for the purpose of mar-shaling claims to be asserted in a class action securitiesclaim") .

While the statutory text and the case law clearly indi-cate the professional plaintiff rule does not provide a blan-ket exemption for institutional investors, it is equally clearthe rule does not create an absolute bar to litigious personsor entities serving as lead plaintiff in securities class ac-

tions. The Court believes 15 U.S.C § 78u-4(a)(3)(B)(vi)is best interpreted as imposing a [*20] presumptive baragainst lead plaintiff candidates who have served in thatsame capacity in five other cases over the past three years.See Aronson, 79 F Supp . 2d at 1156 ; Telxon, 67 K Supp .2d at 820. Thus, the burden is upon the presumptivelybarred candidate to demonstrate why the bar should not beapplied in a given case. The congressional preference forinstitutional investors underlying the PSLRA is properlyconsidered in determining whether a particular institu-tional investor lead plaintiff candidate has overcome thepresumption imposed by the professional plaintiff rule,but it is not the dispositive factor. Telxon . 67 F Supp. 2dat 822. Accordingly, a lead plaintiff seeking to overcomethe presumption against professional plaintiffs must per-suade the court failure to grant an exception in the caseat bar would be inconsistent with the purposes of thePSLRA .

In addition to the preference for institutional investors,another purpose of the PSLRA was to ensure control over

2003 U .S . Dist . LEXIS 24633, *20

securities class actions is vested in plaintiffs rather thanin their attorneys. See S .Rep.No . 104-98, at 6 ; [*21]Aronson, 79 F Supp. 2d at 1156 ("Congress also desiredto increase client control over plaintiffs counsel") . Theprofessional plaintiff rule instructs courts to exercise theirdiscretion and make exceptions to the five-in-three prohi-bition when consistent with the purposes of the PSLRA asa whole, not just when consistent with the congressionalpreference for institutional investors . See 15 U.S.C. § 78u-4(a)(3)(B)(vi) . While granting the Louisiana Funds an ex-ception to the bar on professional plaintiffs might be con-sistent with Congress' preference institutional investorsbe lead plaintiffs in securities class actions, the Court be-lieves it would be decidedly inconsistent with the otherpurposes underlying the PSLRA . Congress hoped to cureperceived abuses of securities class actions by wrestingcontrol of such actions from professional plaintiffs andoverly-aggressive attorneys and giving it to institutionalinvestors and other large shareholders who would pre-sumably have greater incentive to monitor counsel andinsure the interest of all shareholders were protected . Thelarger the number of cases being directed by a singleinstitutional [*22] investor, the less likely it is these pur-poses are being served . Simultaneous prosecution of ninen7 different securities class actions would stretch the re-sources of even the largest institutional investors . Further,the Court understands in addition to the thirteen casesin which they have actually served as lead plaintiff, theLouisiana Funds have collectively sought to be namedlead plaintiff in twenty-four other cases, including sev-eral motions which the Court presumes are still pending(Court File Nos . 22, Exh. G; 60).

0 According to the Louisiana Funds' certifi-cation, TRSL is currently acting as lead plaintiffin the prosecution of eight securities class actions(Court File No. 12, Exh . B) . If the Court were toappoint the Louisiana Funds co-lead plaintiffs in

this case, that number would rise to nine .

The Court cannot help but conclude the LouisianaFunds' resources are being spread too thin . Further weigh-

ing against granting an exception for the Louisiana Fundsis the fact an alternative lead plaintiff [* 23] candidatewith a significant financial interest of its own is available .

Cf. In re Critical Path, Inc. Sec. Litig., 156 F. Supp . 2d1102, 1112 (ND. Cal. 2001) (granting exception whereinstitutional investor was only acceptable candidate whowas an institutional investor or a large shareholder ) . Underthe circumstances , the Court cannot conclude granting theLouisiana Funds an exception to the professional plaintiffrule would be consistent with the purposes of the PSLRA .Neither the PSLRA nor its legislative history express any

Page 6

congre ssional desire institutional investors be permittedto dominate or monopolize the lead plaintiff role. SeeTelxon . 67 F. Supp. 2d at 821 . Accordingly, the Courtfinds no justification for granting an exception to a partywhich has so significantly exceeded the limitations of the

professional plaintiff rule , at le ast where a viable alter-

native is available which would be just as, if not more,consistent with the purposes underlying the PSLRA . n8

n8 Because the Court finds the professionalplaintiff rule bars de Louisiana Funds from servingas lead plaintiff, the Court offers no opinion regard-ing the propriety of allowing TRSL and LSERS toaggregate their losses and/or resources or the im-pact of the strict time requirements imposed by15 U.S.C. § 78u-4(a)(3)(A)(r) on the ability of the

Court to even consider the Louisiana Funds' motionin the first place (see Court File No. 22, pp . 4-5) .

[*24]

B. Typicality & Adequacy of Gllekenhaus as LeadPlaintiff

After the Louisiana Funds, Glickenhaus has thesecond largest financial interest in the relief soughtby the class (approximately $1 .5 million). Therefore,Glickenhaus will be considered the presumptive leadplaintiff if the Court finds Glickenhaus has made a primafacie showing of the typicality and adequacy required byRule 23(a) . 15 U.S.C. § 78u-4(a)(3)(B)(iii)(1) ; Cendant,

264 E3d at 263-64 . This preliminary inquiry should beconfined to the movant's pleadings and declarations ; ar-

guments by other class members should be consideredonly in the context of assessing whether the presumption

has been rebutted . In re Cavanaugh, 306 F.3d 726, 730(9th Cir. 2002) (noting during the initial, prima facie in-quiry courts "must rely on the presumptive lead plaintiffscomplaint and sworn certification ; there is no adversaryprocess to test the substance of those claims) . The thresh-old determination of typicality and adequacy "should bethe product of the court's independent judgment . [*25]Cendant, 264 F. 3d at 263 .

In making the prima facie determinations of typicalityand adequacy, court s are to apply traditional Rule 23 prin-ciples . Id. at 265. A plaintiffs claim is typical " if it arisesfrom the same event or practice or course of conduct thatgives ri se to the claims of other class members, and ifhis or her claims are based on the same legal theo ry," In

re American Medical Sys., 75 F.3d 1069, 1082 (6th Ch :1996) . Glickenhaus and each of the fi ve original plaintiffs

in this consolidated putative class action claim Defendantsviolated § 10 (b) and 20 (a) of the Exchange Act andRule lob-S by disseminating materially misleading state-

2003 U .S . Dist . LEXIS 24633, *2 5

rnents or omissions which caused the class members topurchase publicly traded UnumProvident securities at in-flated prices . All plaintiffs, including Glickenhaus, assertthe same causes of actions based on the same series ofacts and the same legal theories . Any factual distinctionswhich may exist are clearly outweighed by the issues oflaw and fact predominating the claims of all class mem-bers . [*26] In re Telectronics Pacing Sys ., Inc., 168F.R .D. 203, 213 (S.D . Ohio 1996) ("The typicality re-quirement may be satisfied even if there are factual dis-tinctions between the named plaintiffs and those of otherclass members.").

To satisfy the adequacy requirement of Rule 23(a)(4),"there must be an absence of a conflict of interest, and thepresence of common interests and injury" as among theclass representative and the rest of the class . Rutherfordv. City of Cleveland, 137 F3d 905, 909 (6th Cix 1998) .In considering lead plaintiff motions under the PSLRA,other courts have additionally looked to "whether themovant has demonstrated a willingness and ability to se-lect competent class counsel and to negotiate a reasonableretainer agreement with that counsel ." Cendant, 264F3dat 265; In re Quintus Sec. Litig., 201 F.R.D. 475, 485(N.D. Cal. 2001) . On their face, Glickenhaus' pleadingsand declarations present no evidence of any conflict be-tween Glickenhaus' interests and those of the class mem-bers nor do they give any indication Glickenhaus' injurydiffers from that suffered by the rest of the class in any[*27] way other than magnitude . Moreover, Glickenhaushas selected a law firm experienced in securities class ac-tion litigation, Milberg Weiss Bershad Hynes & Lerach,

to serve as lead counsel (Court File No . 19, p . 11) . TheCourt believes Glickenhaus has the ability and incentiveto adequately represent the class and discerns no conflictbetween its claims and those of the class as a whole .

Once the presumptive lead plaintiff has been deter-

mined , the presumption may be rebu tted upon prooffrom any other member of the purpo rted class show-ing the presumptive lead plaintiff "will not fairly andadequately protect the interests of the class " or "is sub-ject to unique defenses that render such plaintiff inca-pable of adequately representing the class ." 15 U.S.C.

78u-- 4(a)(3)(B)(iii)(11) . The Louisiana Funds argueGlickenhaus should be disqualified because it is subjectto a unique defense. Specifically, the Louisiana Funds al-lege Glickenhaus lacks standing because as an investmentmanagement firm it suffered no financial loss; any loss ac-

crued solely to the det riment of its clients (see Court FileNos . 26, 39). The Louisiana Funds contend appointingGlickenhaus lead [*2 8] plaintiff would subject the ac-tion to the risk of non-ce rtifi cation or outright dismissal(Court File No . 26, p. 5) .

Page 7

The Louisiana Funds' concerns are unfounded . Theimplied cause of action under § 10(b) of the ExchangeAct and Rule 10b-5 promulgated thereunder is limited topurchasers and sellers of securities . Blue Chip Stamps v.

Manor Drug Stores, 421 U.S. 723, 731, 95 S. Ct. 1917,

1923, 44 L . Ed. 2d 539 (1975) ; Gaff v. FDIC, 814 F.2d311, 318-19 (6th Cir: 1987) . Thus, the fact Glickenhauswas not the beneficial owner of the UnumProvident se-curities is not determinative of the issue of Glickenhaus'standing to sue under Rule I0b-5. An investment adviserqualifies as a "purchaser" under the federal securities laws,and may sue in its own name, if it has been delegated theauthority to make investment decisions on behalf of itsclients . DairnlerChiyslerAG Sec. Litig., 216 ER.D. 291,299 (D. Del. 2003) ; The Ezra Charitable Trust v. Rent-

Way, Inc., 136 F. Supp. 2d 435, 442 (WD. Pa. 2001) . See

also [*29] Congregation of the Passion, Holy CrossProvince v. Kidder Peabody & Co ., Inc., 800 F2d 177,181-82 (7th Ch: 1986) (affirming grant of summary judg-ment in favor of defendants holding plaintiff-investor wasnot "purchaser" entitled to bring Rule 10b-5 claim, butrather investment adviser to whom investor had delegatedauthority was proper plaintiff) . n9

n9 As contrary authority, the Louisiana Fundscite In re Bank One Shareholders Class Actions,96 F Supp. 2d 780 (N.D. Ill. 2000) . However, be-cause Bank One involved a hedge fund seeking tobe named lead plaintiff, the Court finds this caseinapplicable to the present facts, Id. at 783-84.

Some courts considering this question have limitedinvestment manager standing in securities fraud cases tosituations where the adviser or manager holds un re stricteddecision-making authority to purchase stock on behalf ofits clients and is also the attorney-in-fact for its clients .

See [*30] Weinberg v. Atlas Air Worldwide Holdings,Inc., 216 F.R .D. 248, 255 (S.D.N.Y. 2003) ; Smith v.

Suprema Specialties, Inc., 206 F. Supp . 2d 627, 634-

35 (D .N.J. 2002) . Even under this narrower approach,the Court finds Glickenhaus has provided sufficient evi-dence to suppo rt the conclusion it has standing to asse rtthe claims common to the class Glickenhaus has pro-vided a swo rn declaration from its general partner, JamesGlickenhaus, stating it "has complete investment discre-tion in choosing securi ties to purchase for the benefit ofits clients" and is "attorney-in-fact for all [ its] clientsand [is ] authorized to b ring suit on behalf of [its] clients"(Court File No. 48, Exh. C) . Glickenhaus need not providethe Court with copies of all its contracts to meet its bur-den, rather the Louisiana Funds must affirmatively proveGlickenhaus does not have standing . That Glickenhaus'declaration was submi tted with its Reply (Court File No .

2003 U .S . Dist . LEXIS 24633, *3 0

48) to the Louisiana Funds' attacks on its motion (Cou rtFile Nos . 26,39) rather than with its original motion (Cou rt

File No .18 ) is of no consequence since the PSLRA doesnot require intervening class members seeking [*31] tobe named lead plaintiff file a sworn cert i fication at all,much less with their initial motions . See 15 U.S.C. § 78u-4(a)(2)(A) ; Greebel v. FTP Software, Inc ., 939 F Supp.57, 61-62 (D. Mass. 1996) .

The Court additionally notes the distinctions betweenthe nature of Glickenhaus' financial interest and that ofother class members might well provide even greater in-centive for Glickenhaus to effectively pursue the claimsof the class. The incentive for investors who were bothpurchasers and owners of UnumProvident securities risesout of a desire to recoup personal losses . As a result,the magnitude of the incentive would be roughly propor-tionate to the amount of the loss . However, Glickenhaus'incentive results from a desire to recover losses incurredby its clients as a result of the advice or management ofGlickenhaus . Therefore, Glickenhaus' incentive is muchgreater than the actual dollar value of its clients ' loss be-cause Glickenhaus also seeks to maintain customer trustand goodwill in order to sustain its business .

The Louisiana Funds also argue Glickenhaus is not ad-equate to serve as lead plaintiff because ( 1) Glickenhaus

has [*32 ] failed to provide the Court with sufficient in-formation and/or declarations to insure Glickenhaus iswilling and able to take on the responsibilities of se rv-ing as lead plaintiff (Court File No . 26, pp. 6-8); and (2)Glickenhaus has not included in its declarations a state-ment it had "entered into a reasonable retainer agreementwith counsel" (Id. at 8). The Court finds the LouisianaFunds' contentions unpersuasive . First, the Court findsGlickenhaus has, in fact , provided sufficient declarationsof its willingness and ability to serve as lead plaintiff(see Court File Nos . 19; 48, Exh. Q . Second , a detailed

account of the terms of a movant ' s fee agreement with pro-

posed lead counsel (or even the mere existence of such

an agre ement) is neither a prerequisite to nor especially

persuasive evidence in support of a motion to be named

lead plaintiff . See In re Cavanaugh, 306 F.3d at 733("Negotiations with counsel before lead plaintiff has evenbeen appointed have an inherently hypothetical and con-tingent quality, making them a relatively poor indicatorof plaintiffs adequacy to se rve as lead .") . [*33] Thirdand finally, that the Louisiana Funds might have providedmore detail in their declarations and ce rt i fi cations is of noconsequence . Once the presumption has been established,the Court will not engage in a relative inquiry comparing

the adequacy of the presumptive lead plaintiff to that of

other class members . Cendant, 264 F3d at 268 .

IV. CONCLUSION

Page 8

For the reasons stated herein, the Court will DENYthe Louisiana Group's motion to be appointed lead plain-tiff (Court File No . 10) and GRANT Glickenhaus' mo-tion to be so designated (Court File No. 18) . Accordingly,Intervenor Glickenhaus & Co . will be appointed LeadPlaintiff in this securities class action and its chosen at-torneys, Milberg Weiss Bershad Hynes & Lerach, LLP,shall be Lead Counsel . Lead Plaintiff Glickenhaus willbe required to file an amended consolidated complaintin accordance with the Court's Order accompanying thismemorandum. However, the Court pretermits a determi-nation of whether Liaison Counsel should be appointedand, if so, who should be Liaison Counsel .

An Order shall enter.

CURTIS L . COLLIER

UNITED STATES DISTRICT JUDG E

ORDER

For the reasons [*34] stated in the accompanyingMemorandum, the Court GRANTS Intervenor PlaintiffGlickenhaus & Co .'s motion to be appointed lead plain-tiff (Court File No . 18) and DENIES Intervenor PlaintiffsTeachers' Retirement System of Louisiana and LouisianaSchool Employees' Retirement System joint motion to benamed co-lead plaintiffs (Court File No . 10) . The Courthereby APPOINTS Intervenor Plaintiff Glickenhaus &Co. Lead Plaintiff in this consolidated putative securi-ties class action and APPROVES its selection of MilbergWeiss Bershad Hynes & Lerach, LLP, as Lead Counsel .However, the Court defers its decision of whether LiaisonCounsel should be appointed . Lead Plaintiff Glickenhausshall file an amended consolidated complaint on behalf ofthe class no later than Monday, December 8, 2003, andDefendants shall file an answer within twenty (20) daysof the filing of the consolidated complaint in accordancewith the Federal Rules of Civil Procedure .

The Court hereby sets an initial management confer-ence in this case for Friday, January 16, 2004, at 9 :00a.m.

SO ORDERED.

ENTER :

CURTIS L. COLLIER

UNITED STATES DISTRICT JUDGE

WestUaw.Not Reported in F . Supp .Not Reported in F .Supp ., 1997 WL 461036 (N .D .I1I .)(Cite as : Not Reported in F .Supp . )

PBriefs and Other Related Document sOnly the Westlaw citation is currently available .

United States District Court , N .D . Illinois .Harry LAX, on behalf of himself and all others

similarly situated, Plaintiff,V .

FIRST MERCHANTS ACCEPTANCECORPORATION, et al ., Defendants .

Milton CASTILLO, Jr . and Chris VINES, Plaintiffs,V .

Mitchell C . KAI-IN, Thomas R. EHMANN, andFIRST MERCHANTS ACCEPTANCE CORP .,

Defendants .Samuel ZUCKER, Plaintiff,

V.

FIRST MERCHANTS ACCEPTANCE CORP., andMitchell C. KAHN, Defendants .

Jared HERSHKOWITZ, on behalf of himself and allothers similarly situated , Plaintiff,

V .

Mitchell C. KAHN, Thomas EIIMANN, Paul VANEYL, and FIRST MERCHANTS ACCEPTANCE

CORP ., Defendants .

Robert MILLER, on behalf of himself and all otherssimilarly situated , Plaintiff,

V.FIRST MERCHANTS ACCEPTANCE CORP .,

Mitchell C. KAHN, Thomas EHMANN, Paul VANEYL, Marcy H . SHOCKEY, Solomon A .

WEISGAL ; and Stowe W. WYANT, Defendants .SANDERS FAMILY PARTNERS Plaintiff,

V .FIRST MERCHANTS ACCEPTANCE CORP .,

Mitchell C. KAHN, Thomas EHMANN, and PaulVAN EYL, Defendants .

Howard HERTZBERG, Plaintiff,V.

FIRST MERCHANTS ACCEPTANCE CORP .,Mitchell C . KAHN, Thomas EHMANN, and Pau l

VAN EYL, Defendants .Sami and Suzanna SAWDAYE, on behalf ofthemselves and all others similarly situated,

Plaintiffs,V .

FIRST MERCHANTS ACCEPTANCE CORP ., etat, Defendants .

James L. KATZ, Andrew GRIFFIN, PROFITSHARING PLAN, KATZ MANAGEMENT

PROFIT SHARING PLAN for the Benefit of Ab eKATZ, Abe KATZ Custodian for Tracy KATZ,

Page I

EVANSTON RADIOLOGISTS PROFIT SHARINGPLAN for the Benefit of David ROCHESTER,

EGGENER FAMILY LIVING TRUST, RichardEGGENER Custodian for Brian EGGENER, Paul

DUNCAN, and Mary Tyler GANON, Individually,and On Behalf of All Others Similarly Situated,

Plaintiffs,


Mitchell C . KAHN, Thomas EHMANN, and PaulVAN EYL, Defendants .

Leo HIIRSCH, Trustee of the Goldenberg & HirschProfit Sharing Plan, Plaintiff,


Mitchell C . KAI-IN, Thomas EHMANN , and Paul

VAN EYL, Defendants .Robert GOLDSTEIN, Plaintiff,

FIRST MERCHANTS ACCEPTANCE CORP .,Mitchell C. KAHN, Thomas EHMANN, and Paul

VAN EYL, Defendants .Ma rv in and Patsy JACOBS , et at ., on behalf of

themselves and all others similarly situated,Plaintiffs ,

FIRST MERCHANTS ACCEPTANCE CORP ., etal ., Defendants .

Jeff GRUBBA, on behalf of himself and all otherssimilarly situated, Plaintiffs,

FIRST MERCHANTS ACCEPTANCE CORP ., etal ., Defendants .

No . 97 C 2715, 97 C 2716, 97 C2737, 97 C 2791,97 C 3767, 97 C 4237, 97 C 4013, 97 C 4236 .

Aug. 11, 1997 .

MEMORANDUM OPINION AND ORDE R

COAR , District Judge .*1 Before the court are three motions for appointmentof lead plaintiff and approval of selection of leadcounsel pursuant to § 21 D(a)(3)(B) of the SecuritiesExchange Act of 1934 and/or § 2713(a)(3)(13) of theSecu rities Act of 1933 .

1 . Facts

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First Merchants Acceptance Corporation ("FirstMerchants" or "Company") is a Delaware corporationwith its principal place of business in Deerfield,Illinois. The Company purchases retail installmentloan contracts on automobiles. On April 16, 1997,First Merchants announced that it would restate its1996 financial results and delay reporting its firstquarter 1997 results because it had found "irregularitiesinvolving unauthorized entries in the Company'sfinancial records ." (Lax Compl ., ~ 2). After thisannouncement, First Merchants' stock price fell to$2.75 per share . To appreciate the magnitude of thefall in price, note, for example, that on April 19, 1996,the shares traded at S26.375 per share . To date, FirstMerchants has not admitted that the accountingirregularities affected any period other than 1996 andthe first quarter of 1997 .

All of the instant actions were filed following the April16, 1997 announcement . The first complaint filed wasthat by plaintiff Lax . Lax's counsel published a noticeof the pendency of that complaint through BusinessWire, in compliance with § 21 D(a)(3(A)(I) of the 1934Act. After the Lax Notice was published, otherplaintiffs filed related securities class action complaintsalleging similar facts . To date, at least thirteen suchcomplaints have been filed in this district . Some ofthose complaints alleged class periods different (eithershorter or longer) than that alleged in the LaxComplaint. Until June 12, 1997, the earliest date forthe beginning of any class period alleged in a "FirstMerchants" complaint was January 25, 1996. Noticeswere filed informing investors that actions had beenfiled that began the class period on that date . (See, e .g.,Finkel Aff., Exh . D (notice published April 28, 1997 inPRNewswire )) . All of these notices apparentlyinformed potential class members that they had untilsixty days from the date of the filing of the Laxcomplaint to file a motion to be named as lead plaintiff(See id.) .

FN1 . In relevant part, the notice stated asfollows :[O]n April 18, 1997, a class action lawsuitwas filed . . . on behalf of all persons whopurchased or otherwise acquired the commonstock of First Merchants Acceptance Corp .("First Merchants" or the "Company")between April 18, 1996 and April 16, 1997,inclusive (the "Class Period") .The complaint charges First Merchants andcertain officers and directors of the Companyduring the relevant time period with violationsof Sections 10(b) and 20(a) of the Securities

Page 2

Exchange Act of 1934 by, among other things,issuing to the investing public false andmisleading financial statements and pressreleases concerning First Merchants' incomeand earnings. . . .

if you are a member of the class describedabove, you may, not later than sixty days fromtoday, move the Court to serve as leadplaintiff of the class, if you so choose . . . .(Gardy Aff, Exh. B ; Schulman Aff., Exh . B) .

On June 12, 1997, however, two class actions werefiled that assert that the class period began onSeptember 23, 1994, at least sixteen months prior to thebeginning of any other alleged class period . SeeJacobs, et aL v. First Merchants Acceptance Corp., etat, No. 97 C 4236 and Grubba v. First MerchantsAcceptance Corp., et at, No. 97 C 4237. TheSeptember 23, 1994 date apparently corresponds to thedate on which First Merchants stock was first publiclytraded . The Jacobs and Grubba complaints also assertclaims not found in any of the other complaints . Forexample, the Jacobs and Grubba complaints name theaccounting firm of Deloitte & Touche as a defendant .The complaints also assert claims arising under theSecurities Act of 1933 and claims for negligence,violation of the Illinois Consumer Fraud and DeceptiveBusiness Practices Act, common law fraud, andnegligent misrepresentation .

*2 Despite the differences between the complaints, thiscourt made findings of relatedness on April 29, May28, June 6, and June 20, 1997 ; subsequently, all of the"First Merchants" cases in the district were reassignedto this judge's calendar. Presently before the court aremotions by two groups plaintiffs/potential classmembers to be appointed lead plaintiff, as well as amotion by a third group of plaintiffs to be appointedlead plaintiff for purchasers of First Merchants notes .

11. Discussion

A. The Private Securities Litigation Reform Act of199 5

The issues before the court arise under the PrivateSecurities Litigation Reform Act of 1995 (PSLRA),Pub .L . No . 104-67 , which amended the Securities Actof 1933, 15 U .S .C. t; 77a-77bbbb , and the SecuritiesExchange Act of 1934, 15 U .S .C . ~ 78a-78111 . ThePSLRA applies to private class actions, such as thisone, brought pursuant to the Federal Rules of Civi l

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Not Reported in F .Supp .Not Reported in F .Supp ., 1997 WL 461036 (N .D .III .)(Cite as: Not Reported in F .Supp . )

Procedure . See 15 U .S .C . § 77z-I(a)(1) . As noted inFischler v. Amsouth Bancorporation, No. 96-1567-Civ-T-17A, 1997 WL 118429 (M .D.Fla . Feb .6, 1997),Congress enacted the PSLRA in response to perceivedabuses of the class action procedure . Id. at *1 (citing1I .Conf.Rep. No. 104-369, at 31 (1996) ) . "Themanifest intent of the [PSLRA] is determining theplaintiff most capable of pursuing the action andrepresenting the interests of the class." Id. at *2 (citingII .Conf.Rep . No . 104-369 , at 34)) .

The PSLRA amended the Securities Exchange Act of1934 by adding § 21D, to be codified at 15 U .S .C . §78u-4 . t'-"2 Section 21 D(a)(3 ) now sets fort h proceduresfor early notice to potential class members of the filingof the class action . 15 U .S .C .A . § 78u-4(a)(3) . Underthose provisions , the named plaintiff in the action mustfile notice within twenty days of filing suit to informpotential class members of their right to move to beappointed lead plaintiff . 15 U.S.C .A. ~ 78u-4(a)(3)(A)( i) . Such notice must be published "in awidely circulated national business - oriented publicationor wire service ." 15 U .S .C .A . a 78u-4(a)(3)(A)(i) .

FN2 . While the complaints in this litigationassert claims under both the 1933 and 1934acts, the bulk of the claims arise under the1934 act . The court will therefore cite to itsprovisions in determining lead plaintiff in thislitigation . In any event, the lead-plaintiffprovisions of the 1933 and 1934 acts areidentical .

The PSLRA also altered the procedure by which thecourt appoints lead plaintiff for the purported class .Section 21D(a)(3)(B)(i) provides :Not later than 90 days after the date on which a noticeis published . . . the court shall consider any motionmade by a purported class member in response to thenotice, including any motion by a class member who isnot individually named as a plaintiff in the complaint orcomplaints, and shall appoint as lead plaintiff themember or members of the purported plaintiff class thatthe court determines to be most capable of adequatelyrepresenting the interests of the class members . . . .

15 U.S.C .A. ¢ 78u-4 (a)(3)(B)(i) . The PSLRA createsa rebuttable presumption that the most adequateplaintiff is that person who "has either filed thecomplaint or made a motion in response to a notice[published pursuant to 15 U .S .C.A. § 78u-4(a)(3)(A)(i)]," "has the largest financial interest in the reliefsought ," and "otherwise satisfies the requirements ofRule 23 ." 15 U .S .C .A . § 78u -4(a)(3)(B )( iii)(I) aa).

Page 3

(bb), & (cc) . Any member of the purported plaintiffclass may rebut the presumption upon proof " that thepresumptively most adequate plaintiff . . . will not fairlyand adequately protect the interests of the class . . . [or]is subject to unique defenses that render such plaintiffincapable of adequately representing the class ." 15U.S .C.A. § 78 u-4(a)(3)(B)(iii )(lI)(aa) & (bb) . Apurported class member may unde rtake discovery tomount such a challenge only if she "first demonstrates areasonable basis for finding that the presumptivelymost adequate plaintiff is incapable of adequatelyrepresenting the class." 15 U .S .C .A. § 78u-4(a)(3)(B)(iv) .

*3 Once the cou rt has appointed lead plaintiff, thePSLRA provides that the lead plaintiff " shall, subject tothe approval of the cou rt, select and retain leadcounsel ." 15 U.S .C .A. § 78u-4(a)(3)(B)(v) ,

B. Jacobs/Lax Group and Castillo Group Motion s

Under the provisions outlined above, the "Jacobs/LaxGroup" is presumptively the most adequate leadplaintiff. tN3 This is by virtue of the fact that theJacobs/Lax Group has timely moved this court to beappointed as lead plaintiff, has the largest financialinterest in the relief sought, and otherwise appears tomeet the adequacy and typicality requirements of Rule23 . However, the "Castillo Group" contests thispresumption . F N4 First, the Castillo Group argues thatthe Jacobs/Lax Group has not complied with the noticerequirements of § 21 D(a)(3)(A). Specifically, theCastillo Group contends that the Jacobs/Lax Group"failed to inform investors that it extended the ClassPeriod to 1994 and also failed to describe the claimsasserted in its cases ." (Castillo Mem . in Opp. toLax/Jacobs Motion, at 3) Second, even if § 21 D'snotice provisions have been satisfied, the CastilloGroup contends that the Jacobs/Lax Group cannotadequately represent the purported class . The courtwill discuss these arguments in turn .

FN3 . The Jacobs/Lax Group is comprised of

the named plaintiffs in Jacobs, et at v. First

Merchants Acceptance Corp., et al., No. 97 C4236 ; Lax v. First Merchants AcceptanceCorp., et al., No. 97 C 2715 ; Katz, et aL v.

First Merchants Acceptance Corp., et al„ No .

97 C 3738 ; and Grubba v. First MerchantsAcceptance Corp., et a!., No. 97 C 4237, aswell as certain other class members that havenot yet filed complaints .

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FN4 . The Castillo Group, referred to as the"Abbey Group" by the Jacobs/Lax Group,consists of the plaintiffs in Castillo, et al. v.

Kahn, et al., No. 97 C 2716 ; Zucker v. FirstMerchants Acceptance Corp., et aL, No. 97 C

2737 ; Miller v. First Merchants Acceptance

Corp., et a1., No. 97 C 2836 ; Sanders Family

Partners v. First Merchants AcceptanceCorp ., of al., No. 97 C 2981 ; Hertzberg v.

First Merchants Acceptance Corp., of al., No .

97 C 2984 ; Hirsch v. First MerchantsAcceptance Corp., et a!., No. 97 C 3767 ;

Goldstein v. First Merchants AcceptanceCorp., et al., No . 97 C 4013; and

Hershkowitz v. First Merchants AcceptanceCorp., et al., No. 97 C 2791, as well as fifty-nine other class members who have not filed

complaints , but who support the CastilloGroup's motion .

1 . Notic e

The Castillo Group initially contended that no noticeregarding the expanded class period (i .e., September23, 1994 to April 16, 1997) had been published . Thiscontention was clearly incorrect. On June 14-16,1997,a notice was published in Investor's Business Daily,which stated as follows:On June 12, 1997 class actions were filed . . . againstFirst Merchants Acceptance Corporation, certain of itsformer officers and directors and its auditor on behalfof all persons who purchased First Merchants' commonstock between September 23, 1994 and April 16, 1997(the "Class Period"). The Complaint charges thatduring the Class Period, defendants violated Sections10(b) and 20(a) of the Securities Exchange Act of 1934,and Section I I of the Securities Act of 1933 by makingfalse and misleading statements and SEC filingsconcerning First Merchants' income and earnings .Similar actions have been previously filed . If you are aclass member and wish to be appointed lead plaintiffyou must move the court to be appointed not later thansixty days from April 18, 1997 . . . .

(Jacob/Lax Reply Mem. in Support of Motion, Fxh . A) .

While the Castillo Group 's now admits that its initialcontention was incorrect , it neve rt heless argues that thenotice that was published was inadequate because itdoes not comply with the strictures of § 21D . TheCastillo Group's arguments in this regard areunavailing .

Section 2 1D(a)(3)(A)(i)(11) provides that the publishednotice should instruct potential class members "that, not

Page 4

later than 60 days after the date on which the notice ispublished, any member of the purported class maymove the court to serve as lead plaintiff of thepurported class ." 15 U .S .C .A. ~ 78u-4(a)(3)(A1(i)(Il)(emphasis added) . The notice published in Investor'sBusiness Daily clearly does not comply with thislanguage, because it instructs potential class membersthat they must file a motion to serve as lead plaintiffwithin sixty days of April 18, 1997, and not withinsixty days of the date of the notice (i .e ., June 14, 1997) .The court finds this deficiency to be immaterial, forseveral reasons.

*4 At the outset , it is doubtful whether § 21 D requirespublication of notice of the extended class period in theJacobs and Grubba complaints . Section21 D(a)(3)(A)(ii) providesjiff more than one action on behalf of a class asse rt ingsubstantially the same claim or claims arising under thischapter is filed , only the plaintij) or plaintiffs in thef rst

filed action shall be required to cause notice to bepublished in accordance with clause (i) .

15 U .S .C .A. ~ 78u-4(a)(3)(A)(ii) (emphasis added) .In this case , the court has already made a finding ofrelatedness between the Jacobs and Grubba actionsand the complaints alleging shorter class periods andhas ordered the reassignment of all the cases to thisjudge's calendar. FE'S This finding was based on the factthat the complaints were based on substantially thesame claims, despite the fact that they alleged differentclass periods . '~~ The fact that a later-filed complaintalleges a different class period would not bring thatcomplaint out of the aegis of § 21 D(a)(3 )(A)(ii) . Thatsection refers only to claims and not to class periods .If a later action asserts substantially the same claims, nonew notice is required . In this case, Jacobs andGrubba do assert substantially the same claims as theother actions, namely , those based on the SecuritiesExchange Act of 1934 . While the Jacobs and Grubbacomplaints also name Deloitte & Touche as a defendantand assert additional statuto ry and common law claims,such claims do not render the Jacobs and Grubbaactions dissimilar to the other actions under §21 D(a)(3)(A)(ii) .

FNS . Local Rule 2.31 provides forreassignment of a case to the calendar ofanother judge of the district if that case isfound to be "related" to an earlier-numberedcase assigned to that judge . The rule definesrelatedness as follows :Two or more cases may be related if one ormore of the following conditions is or are met :

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(1) the cases involve the same property ;(2) the cases involve the same issues of fact orlaw ;(3) the cases grow out of the same transactionor occurrence ;(4) in class action suits, one or more of theclasses involved in the cases is or are of [sic]the same. . . .

FN6 . None of the Castillo Group plaintiffsopposed the relatedness motions . In thewords of the cou rt in Chan , et al. v.Orthologic Corp., et al. , No. CIV 96-1514(D.Ariz . Dec. 17, 1996) (Broomfield, J .)(attached as exhibit to Jacobs/Lax Mem . inOpp . to Abbey Motion), the Castillo Group's"concerns regarding the different class periodsdid not cause the [ [Castillo Group plaintiffs]the same concern at the [ [relatedness] stageas they evidently do now ."

Beyond the fact that notice is not required in this case,the court finds that requiring published notices forcomplaints that merely expand the class period toinform class members that they may move to beappointed lead counsel within sixty days of the date ofthat published notice would be inconsistent with thepurposes of the PSLRA. Instead of ensuring that leadplaintiffs are appointed as quickly as possible after thefiling of the first class action complaint, enforcement ofsuch a rule would mean that the lead plaintiff could notbe appointed until sixty days after the publication of thelast notice related to that securities litigation . In somecases, appointment of lead counsel could be delayedindefinitely if new complaints alleging earlier startingdates for the class period were filed, Such a resultwould clearly thwart the intent of the PSLRA, whichwas meant to have lead plaintiffs appointed as soon aspracticable . '--"

FN7 . The Castillo Group's contention that thedate given in the Investors Business Dailynotice for class members to file lead-plaintiffmotions is improper is also somewhatdisingenuous . At least one of the notices inthe Castillo Group adopted the sameconvention of setting the date for filing oflead-plaintiff motions as sixty days from thedate on which the first notice (ic ., the LaxNotice) was published . (See Finkel Aff., Exh.D (notice dated April 28, 1997 that informedpotential class members that they had untilsixty days from April 18, 1997 to file lead-plaintiff motions) . In fact, what is not in

Page 5

dispute in this case is that potential classmembers had only until June 17, 1997 to filemotions to be named lead plaintiff at this time .It would be incongruous if class members whobelieve that their claims date back to stockpurchases as early as September 1994, butwhose class period encompasses that allegedby other plaintiffs, could not move to be leadplaintiff. Under the Castillo Group'sreasoning, such class members would haveuntil 60 days from the date of filing of thenotice extending the class period to September1994 to move to be lead plaintiff of that classperiod. In the meantime, however, the courtwould have presumably ruled on previouslead-plaintiff motions for class periodssubsumed by the extended class period .Nor is the court concerned that the noticeregarding the extended class period waspublished only days before the filing deadlinefor lead-plaintiff motions . The PSLRA doesnot envisage that all potential class memberswill receive notice of the right to be leadplaintiff. If this were the case, the PSLRAwould have provided for an individual-noticerequirement, rather than a published-noticerequirement . The PSLRA's notice provision,then, is clearly intended to reach sophisticatedinvestors . In this case, investors were firstnotified of First Merchants' wrongdoing andof the initiation of the Lax class action in mid-April 1997 . Presumably, this prompted someof those investors to file their own complaintsand perhaps ultimately led to the filing of theJacobs and Grubba actions . The court issatisfied that the PSLRA's intent to informpotential class members of their right to movefor lead-plaintiff status has been not beenundermined .

The Castillo Group's second objection to the June 14-16 Investor's Business Daily notice is that it was notpublished in "a widely circulated business-orientedpublication or wire service," as required by §21D(a)(3)(A) . The court rejects this contention . ThePSLRA does not define "widely circulated ." Thus, thecourt must make its own interpretation as to what theterm means . In this case, the court finds that, whileInvestor's Business Daily might not have as large a

circulation as the Wall Street Journal, it is neverthelesswidely circulated and, more importantly, apparentlyread by sophisticated investors . The likelihood of a

First Merchants' investor actually seeing a notice in theInvestor's Business Daily "is arguably as great asfinding such information by skimming the back page s

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of the Wall Sireet Journal." Greebel v. FTP Software,Inc., 939 F .Supp . 57, 63 (D.Mass .1996) .

*5 The court therefore concludes that the noticerequirements of § 21 D have been met in this action andthat the applicable class period for determining leadplaintiff is that which is alleged in the Jacobs andGrubba actions, i .e ., September 23, 1994 to April 16,1997. In reaching this conclusion, the court iscognizant of the fact that strict adherence to this rulecould encourage abuses . Clearly, such a holdingwould allow parties to wait until only a few days beforethe initial 60-day period runs to file additional classaction complaints that purport to lengthen the classperiod in an attempt to become the party with thelargest financial interest in the litigation . While suchconcerns are raised in this case, the court ispreliminarily satisfied that the Jacobs and Grubbacomplaints have a good-faith basis for extending theclass period to September 1994 . Should subsequentdevelopments reveal that the pleading of an extendedclass period was not done in good faith, this court willbe able to fashion a sanction that will adequatelyaddress the transgression .

FN8 . While First Merchants has only admittedthat the accounting irregularities affected 1996and early 1997 stock prices, such admissionson the part of a defendant should not controlthe length of the class period. TheJacobs/Lax Group has pointed to several factssupporting a class period dating back toSeptember 1994 . Specifically, it points toFirst Merchants' admission that it overstatedincome by S22 million and intends to writethis off in the first quarter of 1997 as a way to"catch up" on uncollectible expenses on oldloans, as well as First Merchants' statementthat the S22 million will not be included in theCompany's 1996 restatement of income . TheJacobs complaint relies on these statements toallege that the $22 million is not attributableto either 1996 or 1997 operations . Jacobscompl ., T T 4, 44) . Determining whether thecomplaint is correct in these assertions is foranother day .In any event, and as the Castillo Group notes,the court should not determine the properclass period under Rule 23 at this stage of thelitigation . In fact, the Castillo Group hasspecifically stated that it is only attacking theJacobs/Lax Group's class period on the basisof the fact that Jacobs/Lax "has not compliedwith the [PSLRA] and, therefore, cannot

Page 6

maintain a claim on behalf of a class at thistime ." (Castillo Group Reply Mem ., at 7 n . 8) .Because the Jacobs/Lax Group has compliedwith the PSLRA, the bulk of the CastilloGroup 's objections to the class period forpurposes of determining lead plaintiff aremooted .

2 . Typicality and Adequacy

The Jacobs/Lax Group is presumptively the mostadequate plaintiff in this action . Plaintiffs in theJacobs/Lax Group either filed a complaint and/or madea motion to be lead plaintiff in satisfaction of §21 D(a)(3)(B)(iii)(I)(aa) . Those plaintiffs are also the"person or group of persons" that have the largestfinancial interest among the named plaintiffs in thisclass action . The PSLRA does not state how the courtshould determine who has the largest financial interest,but four factors are surely relevant : (1) the number ofshares purchased; (2) the number of net sharespurchased; (3) the total net funds expended by theplaintiffs during the class period ; and (4) theapproximate losses suffered by the plaintiffs . (SeeJacobs/Lax Mem . in Support of Motion, at 12-13)(suggesting factors) .

In this case, members of the Jacobs/Lax Group bought120,820 shares during the class period September 23,1994 to April 16, 1997 . ► -' Those same plaintiffs sold13,150 shares during that period, meaning that they hada net purchase of 107,670 shares, which had a value of$1,908,467 . Finally, the Jacobs/Lax plaintiffsallegedly suffered damages of approximatelyS1,406,376 . (See id.) . '` ' n

FN9 . For the purposes of these motions, thecourt will accept as true the figures andcalculations put forward by the respectiveparties .

FNIO. The Castillo Group alleges that theJacobs/Lax Group's loss during this periodwas only $1,382,219 . (Castillo Mem, in Opp .to Lax/Jacobs Motion, at 11) .One member of the Jacobs/Lax Group alsohas suffered the greatest single alleged loss ofany of the plaintiffs . Larry A. Davisallegedly has more than $700,000 in damagesthrough a joint trading account with his wifeand through his IRA account . Thus, namingthe Jacob/Lax Group as lead plaintiff wouldfurther the purposes of the PSLRA, whichattempted to ensure that sophisticated

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investors (as measured by the level ofinvestment) would control the course ofsecurities litigation, rather than it beingcontrolled by securities lawyers . See Greebe!v. FTP Software, Inc., 939 F .Supp. 57, 63(D .Mass .1996) ("Congress' purpose was notto ensure notice to the entire class, but merelyto those sophisticated investors that Congressdeemed presumptively most adequate to serveas lead plaintiffs in securities class actions .").

Members of the Castillo Group purchased some163,054 shares during the period January 25, 1996 toApril 16,1997 . (No figures have been provided for theclass period beginning September 23, 1994 .) TheCastillo Group has suffered losses of approximately$1,123,214 during the period September 23, 1994through April 16, 1997 . (Castillo Mem. in Opp . toLax/Jacobs Motion, at 11) . r"11 Furthermore(according to the Jacobs/Lax Group), the CastilloGroup sold nearly 70% of its First Merchant holdingsduring the class period at prices that were inflated bythe alleged fraud, which would presumably diminishtheir actual losses. (See Jacobs/Lax Mem. in Opp. toAbbey Group Motion, at 5) . During the same period,the Jacobs/Lax plaintiffs sold only 11% of their shares.(See Id.) . These figures indicate that the Jacobs/LaxGroup has the largest financial interest in this litigation,owing to the fact that the plaintiffs that make up thegroup have suffered the largest alleged losses .

FNI 1 . The Castillo Group allegedly sufferedlosses of 51,151,672 for the period January25, 1996 through April 16, 1997 . (CastilloMem. in Opp. to Lax/Jacobs Motion, at 10) .

*6 Finally, the Jacobs/Lax Group otherwise satisfies therequirements of Rule 23 . Rule 23(a) states that : Oneor more members of a class may sue or be sued asrepresentative parties on behalf of all only if (1) theclass is so riumerous that joinder of all members isimpracticable, (2) there are questions of law or factcommon to the class, (3) the claims or defense of therepresentative parties are typical of the claims ordefenses of the class, and (4) the representative partieswill fairly and adequately protect the interests of theclass. However, as noted by one court, "[a] wide-ranging analysis under Rule 23 is not appropriate andshould be left for consideration of a motion for classcertification . This inquiry, therefore, focuses on thequalities of the class representatives enumerated in[Rule] 23(a)(3) and 23(a)(4), that is, typicality andadequacy ." Fischler, 122 N .C .App . 15, 468 S .E.2d 826,1996 WL 118429, at * 2 .

Page 7

The court finds that the Jacobs/Lax Group is bothtypical and adequate under Rule 23(a) . All of theclaims in these cases arise from plaintiffs ' purchases ofFirst Merchants securities during a time in whichdefendants overstated the Company 's income andthereby a rt ificially inflated share prices . While thetime period in which these overstatements variesbetween the two plaintiff groups, the Jacobs/Lax Groupmeets the typicality requirement because its claims"arise [ ] from the same event or practice or course ofconduct that gives rise to the claims of other classmembers ." DeLaFuente v. Stokely- Vanfam Inc.713 F .2d 225, 232 (7th Cir .1983) (citation omitted) .Nevertheless , if discovery in this case shows that thedifferent class periods do significantly affect the natureof the part ies' claims , the court may grant a motion todivide the class into appropriate subclasses . SeeSchwartz v. Harp, 108 F.R.D. 279, 282(C.D.Cal . 1985) .

As to adequateness under Rule 23(a) standards, theJacobs/Lax Group must simply ( I) not have claims thatare antagonistic to or that con fl ict with those of otherclass members, Rosario v. Livaditis, 963 F .2d 1013,1018 (7th Cir .1992 ) ; (2) have sufficient interest in theoutcome of the case to ensure vigorous advocacy,

Gammon v. GC Serv. Ltd. Partreysltip, 162 F .R.D .313, 317 (N .D.lll .1995) ; and (3 ) be represented byattorneys who are competent , experienced, qualified,and generally able to conduct the litigation vigorously,id . See also Halperin v. Nichols, Safina, Lerner & Co .,

No. 94 C 6960, 1996 WL 634037 (N,D .111 . Oct.29,

1996 (Plunkett, J .) (listing adequacy criteria) . In this

case, there can be no serious dispute that the interests ofthe Jacobs/Lax Group are aligned with those of theclass, that the Jacobs/Lax Group will prosecute thiscase with vigor, or that its chosen counsel arecompetent, experienced, and quali fied .

The facts that some plaintiffs in the Jacobs/Lax Grouphave sued Deloitte & Touche and that they havebrought additional claims under the 1933 act and statelaw does not render the group inadequate to be leadplaintiff. In In re Donkenny Inc. SecuritiesLitigation, 171 F.R.D. 156 (S.D.N.Y.1997)(Cedarbaum , J .), the cou rt found that the party that waspresumptively the most adequate plaintiff (i . e., EmanonPa rt ners ) did not fail to meet the adequacy andtypicality requirement merely because it hadinvestments in call and put options in addition toinvestments in common stock . In Doukenny, the otherpa rties moving for lead plaintiff status argued thatEmanon Partners ' call and put option investments"invited the type ofunique defenses disallowed by Rule

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23 for class representatives ." Donkeruru 171 F.R .D .at 158 . The court rejected this argument , noting thatthe bulk of Emanon Pa rtners' claims related to itsinvestments in common stock and that the other movingparties had not otherwise demonstrated atypicality orunique defenses .Id.

*7 In this case, there is no dispute that the Jacobs/LaxGroup's investments were in the same types ofsecurities as those of the Castillo Group . The onlydifference in those investments is that some of theJacobs/Lax investors also purchased First Merchantsecurities in 1994 and 1995 . This does not renderthese plaintiffs atypical or inadequate . The CastilloGroup itself includes complaints with varying classperiods. One alleges a class period of less than threemonths (i .e ., Zucker v. First Merchants AcceptanceCorp., et at., No . 97 C 2737), while others allege classperiods of up to fifteen months . The varying classperiods within the Castillo Group (and between theCastillo Group and the Jacobs/Lax Group) cannevertheless be harmonized because all of thecomplaints are based upon a common set of operativefacts .

FN 12 . Even several of the members of theCastillo Group purchased First Merchantsstock during the class period alleged by theJacobs and Grubba complaints . (See GardyAff., Exh . C (Miller Certification, indicatingpurchase of shares in November andDecember 1995) & Exh. D (BallardCertification, indicating purchase of sharesbeginning in October 1994)) .

The Castillo Group contends that the additional claimsasserted by the Jacobs/Lax plaintiffs, namely, thoseagainst Deloitte & Touche and those under the 1933 actand under state law, render the Jacobs/Lax plaintiffsatypical and inadequate because it means that they willbe subject to dnique defenses . This argument isunavailing Section 21 D sets up a presumption that theplaintiff with the largest financial interest is the mostadequate lead plaintiff. While that presumption maybe rebutted by showing that the presumptively mostadequate plaintiff is subject to unique defenses, theopposing party must also show that such uniquedefenses "render such plaintiff incapable of adequatelyrepresenting the class ." 15 U.S .C .A. § 78u-4(aj(3)(B ( iii)(1I)(bb) . In this case , the Castillo Grouphas not shown that, in addition to being subject tounique defenses , the Jacobs/Lax plaintiffs will notadequately represent the claims of the entire class .

Page 8

Also unpersuasive is the Castillo Group's contentionthat the additional claims asserted by the Jacobs/LaxGroup makes it unsuitable to represent the interests ofother plaintiffs . On the contrary the fact that theCastillo plaintiffs do not assert claims under the 1933act, under state law, or against Deloitte & Touche raisesthe question of whether the Castillo Group canadequately represent the interests of those plaintiffswho do bring such claims .

The court concludes that the Jacob/Lax Group is themost adequate lead plaintiff in this litigation .

3 . Appointment of Lead Counse l

The PSLRA provides that the "most adequate plaintiffshall, subject to the approval of the court, select andretain counsel to represent the class ." 15 U .S,C.A .78u-4(a)(3)(B)(iv). The Jacobs/Lax Group hasretained the law firms of David B . Kahn & Associates,Ltd . and Milberg Weiss Bershad Hynes & Lerach LLPas co-lead counsel . The court has reviewed theresumes of these firms and has noted their involvementin similar law suits. The court is satisfied that thesefirms are competent, experienced, and qualified torepresent the interests of the plaintiff class. Therefore,the law firms of David B . Kahn & Associates, Ltd, andMilberg Weiss Bershad Hynes & Lerach LLP areappointed as co-lead counsel, provided that there is noduplication of attorneys' services, and the use of co-leadcounsel does not in any way increase attorneys' feesand expenses. See Donkeuuy, 171 F.R.D . at 158(noting that use of co-lead counsel should not result inincreased attorneys' fees and expenses) .

C . Edgar Group' s Motion

*8 A third group of plaintiffs-the "Edgar Group" '-N"-has moved to be named lead plaintiff of a separate classof purchasers of First Merchant debt securities . Thismotion will be denied. Currently, none of thecomplaints names debt purchasers nor have any of theEdgar Group plaintiffs filed a complaint on behalf ofsuch purchasers . Furthermore, in its reply brief, theEdgar Group disingenuously noted that its motion wasunopposed . This is not surprising, given the fact thatthe Edgar Group apparently failed to serve its motionon many of the other plaintiffs . For these reasons, thecourt denies the Edgar Group's motion at this stage ofthe litigation .

FN13 . The Edgar Group consists of James


Not Reported in F .Supp .Not Reported in F .Supp ., 1997 WL 461036 (N .D .III .)(Cite as: Not Reported in F.Supp . )

Edgar, Mary Edgar, Emory Sova, Doris Sova,and John Beuker.

WHEREFORE, for the reasons stated above, theJacobs/Lax Group ' s motion for appointment as leadplaintiff and for approval of selection of lead counsel isGRANTED. The plaintiffs in Jacobs, at a!. v. FirstMerchants Acceptance Corp., at al. , No. 97 C 4236;Lax v. First Merchants Acceptance Corp . , et al., No .97 C 2715 ; Katz, et al. v. First Merchants AcceptanceCorp. , et al. , No. 97 C 3738 ; and Grtrbba v. FirstMerchants Acceptance Corp ., et al., No. 97 C 4237,and class members David Kailbou rne and PeterGreenwald are appointed as lead plaintiffs in thismatter . The law firms of David B . Kahn & Associates,Ltd . and Milberg Weiss Bershad Hynes & Lerach LLPare appointed co-lead counsel .

The Castillo Group's motion for appointment as leadplaintiff and for approval of selection of lead counsel isDENIED. The Edgar Group's motion for appointmentas lead plaintiff and for approval of selection of leadcounsel is DENIED . The Jacobs/Lax Group's motionto strike the Edgar Group's lead plaintiff papers isDENIED as moot .

N .D .111 .,1997 .Lax v . First Merchants Acceptance Corp .Not Reported in F .Supp ., 1997 WL 461036 (N .D.lll . )

Briefs and Other Related Documents (Back to top)

• 1 :97cv04236 (Docket) (Jun . 12, 1997)• 1 :97cv04237 (Docket) (Jun . 12, 1997)• 1 :97ev04013 (Docket) (Jun . 03, 1997)• 1 :97ev03767 (Docket) (May. 22, 1997)• I :97cv02791 (Docket) (Apr . 21, 1997)• 1 :97cv02716 (Docket) (Apr . 18, 1997)• 1 :97cv02715 (Docket) (Apr . 18, 1997)• 1 :97cvO2737 (Docket) (Apr . 18, 1997 )

END OF DOCUMENT

Page 9


LEXSEE 2000 U .S . DIST. LEXIS 994 1

MARVIN J . NETSKY, MARKS BROTHERS , INC., and ERIC BEANE, On Behalf ofThemselves and All Others Similarly Situated , Plaintiffs, v. CAPSTEAD MORTGAGE

CORPORATION, RONN K. LYTLE, CHRISTOPHER T. GILSON, JULIE A. MOORE,ANDREW F. JACOBS and WILLIAM H . RUDLUFF, Defendants.

Civil Action No . 3 :98 -CV-1716-L (CONSOLIDATED ACTION) Consolidated With CivilAction No . 3 :98-CV-1809-L, Civil Action No. 3 :98 -CV-1827-L, Civil Action No. 3 :98-CV-1847-L, Civil Action No . 3 :98-CV--1978--L, Civil Action No. 3 :98-CV-2029-L, CivilAction No . 3 :98 -CV-2109-L, Civil Action No . 3 :98 -CV-1802-L, Civil Action No . 3 :98-CV-1828-L, Civil Action No . 3 :98-CV-1849-L , Civil Action No . 3 :98-CV-1885-L, CivilAction No . 3 :98 -CV-1886-L, Civil Action No. 3 :98-CV-1958-L, Civil Action No . 3 :98-CV-2054-L, Civil Action No . 3 :98 -CV-2087-L, Civil Action No. 3 :98-CV-2122-L, CivilAction No . 3 :98-CV-2196-L, Civil Action No. 3 :98-CV-2232-L, Civil Action No . 3 :98-

CV-2538- L

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS,DALLAS DIVISION

2000 U.S. Dist. LEXIS 994 1

July 12, 2000, DecidedJuly 12, 2000, Filed, Entered on Docket

DISPOSITION : [*1] Netsky Group's motion for ap-

pointment of lead plaintiff and approval of lead counselgranted in part and denied in pa rt, and the motions of theRozenfeld Group and Med-Plan and UBC Fund denied .

PECKERMAN, IRA MONTI, ANN MONTI, DORISHARTE, TERESA M GRIMM, consolidated plaintiffs(98-CV-1716 ) : Roger Leon Mandel, Attorney at Law,Stanley Mandel & Iola, Dallas, TX USA .

COUNSEL : For MARVIN J NETSKY, plaintiff (98-CV- 1716) : Robert M Roseman, Attorney at Law, SpectorRoseman & Kodroff , Philadelphia , PA USA .

For MARVIN J NETSKY, plaintiff (98-CV- 1716) : KirkB Hulett, Attorney at Law, Milberg Weiss Bershad Hynes& Lerach , San Diego , CA USA.

For MARVIN J NETSKY, MARKS BROTHERS INC,ERIC BEANE, plaintiffs (98-CV-1716) : Marc RStanley, Atto rn ey at Law, Stanley Mandel & Iola, Dallas,TX USA.

For JANE C SCHWARTZ, MARTIN FRIEDMAN,RONALD LEWIS, consolidated plaintiffs (98-CV-1716) : Jeffrey L Kodroff, Robert M Roseman , Attorneysat Law, Spector Roseman & Kodroff, Philadelphia, PA

USA.

For JANE C SCHWARTZ , MARTIN FRIEDMAN,RONALD LEWIS, RICHARD KOPELMAN,FRANK LANZILLOTTI, ABRAM WEISS, PEARL

For JANE C SCHWARTZ, MARTIN FRIEDMAN,RONALD LEWIS, consolidated plaintiffs (98-CV-

1716) : [*2] Vincent R Cappucci, Attorney at Law,Entwistle & Cappucci, New York, NY USA .

For MARTIN FRIEDMAN, RONALD LEWIS, RUTHWIGGIN, ROBERT NMN POPE, MARY WALLS,RICHARD KOPELMAN, FRANK LANZILLOTTI,GERALD STREIT, ABRAM WEISS, CHARLESS ZUCKER, HENRY ROSENBERG, PEARLPECKERMAN, IRA MONTI, ANN MONTI,SHARI LEVY, ROBERT A STAUB, THEODORE PLAPORTE, W JOHN MAXEY, DORIS HARTE, LEWG KACHULIS, TERESA M GRIMM, THEODOREKAPLAN, SELMA KAPLAN, JACK GOLDSTEIN,consolidated plaintiffs (98-CV-1716) : Marc R Stanley,Attorney at Law, Stanley Mandel & Iola, Dallas, TXUSA.

For CHARLES S ZUCKER, consolidated plaintiff (98-CV-1716) : Robert M Roseman, Attorney at Law, SpectorRoseman & Kodroff, Philadelphia , PA USA .

2000 U .S . Dist. LEXIS 9941, * 2

For CHARLES S ZUCKER, consolidated plaintiff (98-CV-1716) : Miles Tepper, Attorney at Law, Schoengold& Sporn, New York, NY USA .

For PEARL PECKERMAN, IRA MONTI, ANN

MONTI, consolidated plaintiffs (98-CV- 1716) : WilliamS Lerach , Kirk B Hulett, G Paul Howes , Attorneys atLaw, Thomas E Egler, Milberg Weiss Bershad Hynes &Lerach , San Diego, CA USA .

For MED-PLAN INC, CASEY PLOSZAJ, LAURAKLEINSCHMIDT DEGRANGE, LAURENDEGRANGE, consolidated plaintiffs : Terrell W Oxford,Martha [*3] A Evans, Attorneys at law, SusmanGodfrey, Dallas, TX USA .

For MARY JEAN NALLY, THOMAS E NALLY, con-solidated plaintiffs (98-CV-1716) : Jules Brady, AaronBrody, Tzivia Brody, Attorneys at Law, Stull Stull &Brody, New York, NY USA.

For MARY JEAN NALLY, THOMAS E NALLY, con-solidated plaintiffs (98-CV-1716) : Joseph D Ament,Attorney at Law, Much Shelist Freed Denenberg Ament& Eiger, Chicago, IL USA .

For MARY JEAN NALLY, THOMAS E NALLY,LOUIS E GERSTLE, YVONNE MISSRY, STEPHENROZENFELD , consolidated plaintiffs (98-CV--1716) :Roger F Claxton, RobertJ Hill , Attorneys at Law, Claxton& Hill, Dallas, TX USA .

For HOWARD GUNTY INC, consolidated plaintiff (98-CV-1716) : Jules Brody, A tt o rney at Law, Stull Stull &Brady, New York, NY USA.

For HOWARD GUNTY INC, YVONNE MISSRY, con-solidated plaintiffs (98-CV-1716) : Stanley Bernstein,Attorney at Law, Kreindler & Kreindler, Mel E Lifshitz,Attorney at Law, Bernstein Liebhart & Lifshitz, NewYork, NY USA.

For LOUIS E GERSTLE, consolidated plaintiff (98-CV-1716) : Paul Paradis, Wolf Popper, James V Bashian,Attorney at Law, Law Office of James V Bashian, NewYork, NY USA .

For ROBERT MARKEWICH, consolidated plaintiff [*4](98-CV-1716): Fred Taylor Isquith, Wolf HaldensteinAdler Freeman & Herz, New York, NY USA .

For ROBERT MARKEWICH, consolidated plaintiff (98-CV-1716) : Robert Everett Wolin, Michael D Napoli,Attorneys at Law, Wolin Ridley & Miller, Dallas, TX

USA .

Page 2

For LEW G KACHULIS, consolidated plaintiff (98-CV-1716) : Alfred G Yates, it, Law Office of Alfred G Yates,Pi tt sburgh, PA USA.

For LEW G KACHULIS, consolidated plaintiff (98-CV-1716) : William S Lerach, Attorney at Law, Milbery WeissBershad Hynes & Lerach, San Diego, CA USA .

For LEW G KACHULIS, consolidated plaintiff (98-CV-1716) : Steven E Cauley, Atto rney at Law, Cauley &Geller, Little Rock, AR USA .

For RALPH AKER, LORRAINE LOVE, consolidatedplaintiffs (98-CV- 1716) : Robert J Hill, Attorney at Law,Claxton & Hill , Dallas, TX USA.

For IRENE MOHR, MEL MOHR, consolidated plain-tiffs (98-CV-1716) : Roger F Claxton, Attorney at Law,Claxton & Hill , Dallas, TX USA.

For TERESA M GRIMM, consolidated plaintiff (98-CV-17I6) : Sherrie R Savett, Todd Collins, Attorneys at Law,Berger & Montague , Philadelphia, PA USA .

For TERESA M GRIMM, consolidated plaintiff (98-CV-1716) : Marvin L Frank , Attorney at Law, Rabin [*5] &Peckel, New York, NY USA.

For CAPSTEAD MORTGAGE CORPORATION,RONN K LYTLE, CHRISTOPHER T GILSON, JULIEA MOORE, ANDREW F JACOBS, ANDREW FRUDLUFF, defendants (98-CV-- 1716) : George WalterBramble tt, Jr, Noel M B Hensley, Kerry McHugh Breaux,Attorneys at Law, Haynes & Boone, Walter Graves Pettey,III, Robert H Mow, Jr, Stephen Granberry Gleboff, DannyS Ashby, Attorneys at Law, Hughes & Luce, JamesDennis McCarthy, Atto rney at Law, Diamond McCarthyTaylor & Finley, Dallas, TX USA .

For WILLIAM H RUDLUFF, consolidated defendant(98-CV-1716) : Walter Graves Pettey, III, Robert H Mow,Jr, Stephen Granberry Gleboff, Danny S Ashby, Attorneysat Law, Hughes & Luce, Gerald C Conley, James L Truitt,Timothy E Taylor, Attorneys at Law, Andrews & Kurth,James Dennis McCarthy, Attorney at Law, DiamondMcCarthy Taylor & Finley, Dallas, TX USA .

For ERNST & YOUNG, consolidated defendant (98-CV-1716) : Robe rt Rees Summerhays , Attorney at Law, WeilGotshal & Manges, Dallas, TX USA .

For STEPHEN ROZENFELD, UNITED

2000 U .S. Dist. LEXIS 9941, * 5

BROTHERHOOD OF CARPENTERS AND JOINERSOF AMERICA LOCAL 3127 PENSION FUND,movants (98-CV-1716) : Samuel P Spo rn, Atto rney atLaw, Schoengold & Sporn , New York, NY USA .

For [*6] STEPHEN ROZENFELD , UNITEDBROTHERHOOD OF CARPENTERS AND JOINERSOF AMERICA LOCAL 3127 PENSION FUND, movants(98-CV-1716 ) : Roger F Claxton , Robe rt J Hill,Atto rneys at Law, Claxton & Hill, Dallas, TX USA .

For MED-PLAN INC, movant (98-CV-1716) : TerrellW Oxford, Attorney at Law, Susman Godfrey, Dallas,TX USA.

JUDGES : Sam A. Lindsay, United States District Judge .

OPINIONBY: Sam A . Lindsay

OPINION :

MEMORANDUM OPINION AND ORDER

Before the court are the Netsky Plaintiffs Group's("Netsky Group") Motion to be Appointed Lead PlaintiffsPursuant to Section 21D(a)(3)(B) of the SecuritiesExchange Act of 1934 and for Appointment of LeadPlaintiffs' Co-Lead Counsel, filed September 21, 1998 ;Motion of the Rozenfeld Group for Appointment ofLead Plaintiffs, Approval of Lead Counsel and Entry of[Proposed] Pre-Trial Order No .l, filed September 21,1998; nl Motion for Appointment of Med-Plan Inc .

as Lead Plaintiff and for Approval of Lead Counsel,filed October 2, 1998; and the Joint Amended andSupplemental Motion for Appointment of Med Plan Inc .("Med-Plan") and the United Brotherhood of Carpentersand Joiners of America Local 3127 Pension Fund (the"UBC Fund") as Lead Plaintiffs and for Approval [*7] ofLead Counsel, filed December 15, 1998 . Upon consider-ation of the motions, responses, replies, evidence, and ap-plicable law, the court, for the reasons that follow, grantsin part and denies in part the Netsky Group's Motionfor Appointment of Lead Plaintiffs and Appointment ofPlaintiffs' Co-Lead Counsel . The remaining motions forappointment of lead plaintiff and approval/appointmentof lead counsel are denied . n 2

nl In its lead plaintiff motion, the RozenfeldGroup proposes, as an alternative, that the court ap-point UBC Fund as lead plaintiff should the courtdecide to appoint a single person to represent the in-terests of the class . UBC Fund, however, has sincejoined with Med-Plan and now seeks to be ap-pointed co-lead plaintiff with Med-Plan . Becausethe Rozenfeld Group has neither moved to with-

[*8]

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draw its motion for appointment of lead plaintiffnor otherwise informed the court of its position,the court is incertain whether the group's thirty-eight individual members desire to nevertheless beappointed lead plaintiff. The court, therefore, willconsider the Rozenfeld Group's motion but only asit pertains to the thirty-eight individual members .As UBC Fund has requested that it be appointed co-lead plaintiff in this litigation, the court will con-sider its shares and financial losses independentlyfrom that of any other member of the purportedclass .

n2 On December 15, 1998, Med-Plan and UBCFund filed a joint motion to be appointed co-leadplaintiffs in this action . As Med-Plan no longerseeks to be appointed sole ]cad plaintiff in this lit-igation, its individual motion for appointment oflead plaintiff and approval of lead counsel is de-nied as moot .

1 . Factual and Procedural Background

This consolidated securities fraud class action isbrought pursuant to the Securities Exchange Act of 1934("Exchange Act"), as amended by the Private SecuritiesLitigation Reform Act of 1995 ("PSLRA") and Rule 1Ob-5 of the Securities Exchange Commission ("SEC") pro-mulgated thereunder. Plaintiffs are either individual per-sons or entities that purchased or otherwise acquiredthe common stock of Defendant Capstead MortgageCorporation ("Capstead" or "Company") between April17, 1997 and June 25, 1998 (the "Class Period") . Capsteadis a Dallas based corporation that invests in mortgagebacked securities and serviced mortgage loans, and op-erates as a real estate investment trust . Defendants RonnK. Lytle, Christopher T. Gilson, Julie A. Moore, [*9]Andrew F. Jacobs and William H. Rudluff ("IndividualDefendants") are all officers and/or directors of Capsteador Capstead, Inc ., the subsidiary which conduct's theCompany's mortgage servicing operations . n3

n3 The court will refer to Capstead and theIndividual Defendants collectively as "Defendants"unless otherwise indicated .

Plaintiffs allege that during the Class Period,Defendants issued false and misleading statements re-garding Capstead's financial results, the strength of theCompany's business, and the success of its investmentstrategy. Plaintiffs also allege that Defendants represented

2000 U .S . Dist . LEXIS 9941, * 9

that Capstead was experienced in and uniquely well posi-tioned to generate steady earnings with a stable dividend

regardless of the direction of interest rates . Plaintiffs fur-ther allege that as a result of these representations andother positive statements disseminated by Defendants re-garding the Company's ability to protect, and even en-hance its portfolio of investments from fluctuations ininterest rates, the price [* 101 of Capstead's stock pricewas artificially inflated during the Class Period .

On June 26, 1998, Capstead announced that it wouldsuffer a loss of $255 million. This loss was attributed

to the Company's repositioning its mortgage securi-ties portfolio, which entailed the sale of Capstead'sInterest Only portfolio, as well as its Fannie Mae/FreddieMac and Ginnie-Mae adjustable rate mortgages securi-

ties . Capstead also announced an anticipated impairmentcharge of $45 million on its mortgage servicing port-folio because of continued high mortgage prepaymentrates, and cautioned that its third quarter dividend wouldbe much lower than the Company had previously stated .

Following these disclosures, the price of Capstead's stockfell sharply, and according to Plaintiffs, traded at $8-

11/16 per share at the time this action was filed - well

below the Class Period high of $27-11116 .

Over the next few months, a total of twenty-four pu-tative class action lawsuits were filed against Defendantsby various named Plaintiffs each alleging violations of

the federal securities laws . Each of those lawsuits weresubsequently consolidated into this action . The Netsky

Group, the Rozenfeld Group, and [*11] Med-Plan andUBC Fund now move to be appointed lead plaintiff inthis action and request approval of their choice of leadcounsel . n4

n4 The Netsky Group is comprised of 1,155

persons or entities who purchased or acquired inexcess of 1 .6 million shares of Capstead stock dur-ing the Class Period, and who collectively suffered

a loss of $25 million . The Rozenfeld Group con-sists of thirty-nine investors, including UBC Fund,whose members collectively purchased approxi-mately 64,671 shares of Capstead stock during theClass Period and allege an aggregate loss of ap-proximately $899,764. Med-Plan and UBC Fundtogether purchased 80,000 shares of Capstead stockduring the Class Period and collectively allege dam-ages of approximately $879,000 to $904,000 .

H. Legal Standard

The appointment of lead plaintiff in a securities class

action is governed by the PSLRA, codified in relevant

part at Section 21D(a) of the Exchange Act, 15 U.S.C. §

Page 4

78u-4. Under the PSLRA, the court "shall appoint [* 12]

as lead plaintiff the member or members of the purportedplaintiff class that the court determines to be most capableof adequately representing the interests of class members

. . . ." 15 U S C. § 78u-4(a)(3)(B )(i). Where consolidation

of multiple cases has occurred , the court is directed to ap-

point the most adequate plaintiff as lead plaintiff for theconsolidated actions . 15 U.S.C. § 78u-4(a)(3)(B)(ii) . In

determining whom should serve as lead plaintiff , the cou rt

is directed to adopt a presumption that the most adequateplaintiff is the person or group of persons that 1) filed thecomplaint or moved for appointment as lead plaintiff in

response to a notice (of the pendency of the action) under

§ 78u-4(a)(3)(A)(i) ; 2) has the largest financial interest

in the relief sought by the class ; and 3 ) otherwise satis fi es

the requi re ments of Rule 23 of the Federal Rules of CivilProcedure. See 15 U.S.C. § 78u-4( a)(3)(B)(iii)(I) . To re-

but this presumption, a member of the purpo rted plaintiff

class must establish that the presumptively most adequateplaintiff will not fairly and adequately protect the interests[*13] of the class, or is subject to unique defenses thatrender such plaintiff incapable of adequately representing

the class . See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I1) .

III . Appointment of Lead Plaintiff

A. Analysis of Presumption's Requirements

1 . The Notice Requirement

Any class member seeking to serve as lead plaintiffmust file a lead plaintiff motion within sixty days (60)of the date on which the notice advising of the pen-dency of the action is published. See 15 U.S.C. 78u-

4(a)(3)(A)(i)(II). In cases where more than one actionis filed, the time begins to run from the filing of the first-filed action, and the sixty day limitations period is cal-

culated from the date on which notice for the first-filedaction is published . See In re Telxon Colp . Sec. Litig., 67

F. Supp. 2d 803, 818 (N.D. Ohio 1999) . In this case, it isundisputed that the first-filed complaint in this litigation

was filed on July 23, 1998, and styled Marvin J. Netsky,

Marks Brothers, Inc. and Eric Beane, et al. v. Capstead

Mortgage, et al., Civil Action No . 3 :98-CV-1716-R . On

that same date, the Netsky Group published a [*141 no-tice of the pendency of the action over the Business Wire,

a widely circulated national business-oriented wire ser-

vice. n5 See Declaration of Kirk B . Hulett in Support of theNetsky Group's Motion to Be Appointed Lead PlaintiffsUnder Section 21D(a)(3)(B) of the Securities ExchangeAct of 1934 and For Appointment of Lead Plaintiffs' Co-Lead Counsel, Exhibit 4. Therefore, the deadline for filingmotions for appointment of lead plaintiff was September

21, 1998 . As both the Netsky Group and the RozenfeldGroup filed motions for appointment of lead plaintiff onSeptember 21, 1998, the court concludes that these two

2000 U . S . Dist . LEXIS 9941, * 1 4

groups satisfy the first requirement under the PSLRA's

lead plaintiff provision .

n5 The Business Wire is a business orientedwere service within the meaning of the PSLRA,and has been recognized as a suitable vehicle forsatisfying the notice and publication requirementsof the PSLRA . See In re Nice Sys . Sec. Litig., 188FR.D. 206, 216 n .8 (D.N.J. 1999)(citing Greebel vFTP Software, Inc ., 939 F Supp. 57, 62 (D. Mass .1996) .

[*15

Med-Plan and UBC Fund filed their joint amendedand supplemental motion for appointment as co-leadplaintiffs on December 15, 1998, nearly three months af-ter the deadline for filing motions for appointment of leadplaintiff had expired . n6 Moreover, by the time Med-Planand UBC Fund filed their joint motion, briefing on leadplaintiff motions had already been completed . BecauseMed-Plan and UBC Fund filed their joint motion for ap-pointment as co-lead plaintiffs well after the deadlinefor filing lead plaintiff motions, the court concludes thattheir motion was not timely filed . n7 Ordinarily, a plain-tiff who fails to satisfy one or more of the statutory re-quirements may not be deemed the presumptively mostadequate plaintiff. In this case, however, the court be-lieves that such a determination would be unfair, giventhe length of time the lead plaintiff motions have beenpending in this court . Under the circumstances, to whollyexclude Med-Plan, individually or in conjunction withUBC Fund, from consideration as the presumptively mostadequate plaintiff would elevate form over substance anddeprive an injured investor of an opportunity to be selectedlead plaintiff. Therefore, the [* 161 court declines to disre-gard Med-Plan from consideration as the presumptivelymost adequate plaintiff at this stage of the analysis .

n6 After the initial lead plaintiff motions werefiled, Med-Plan, UBC Fund and the Netsky Groupengaged in negotiations for establishing an agreedstructure for lead plaintiff. When an agreementcould not be reached among the three sets of plain-tiffs, Med-Plan and UBC Fund filed a joint motionto be appointed co-lead plaintiffs ,

n7 Med-Plan contends that its initial motion forappointment of lead plaintiff was timely filed andtherefore it has satisfied the first requirement un-der the PSLRA's lead plaintiff provision . The courtdisagrees . Prior to forming an alliance with UBCFund, Med-Plan sought to be appointed as sole leadplaintiff in this action . See Motion for Appointmentof Med-Plan Inc . as Lead Plaintiffand for Approval

Page 5

of Lead Counsel, filed October 2, 1998 . Med-Planargues that because the PSLRA directs the court toconsider all motions for lead plaintiff filed by classmembers within 90 days of notice of the pendencyof the lawsuit, and Med-Plan filed a complaint andmotion within that time period, its motion shouldbe considered timely filed . While the PSLRA re-quires the court to consider any motion made bya purported class member, the Act also requiresthat those motions be filed within sixty days of thepublication of the published notice of the first-filedaction . See In re Telxon Corp. Sec . Litig., 67 F.Supp. 2d at 818. The PSLRA imposes strict timerequirements to ensure that the lead plaintiff is ap-pointed at the earliest possible time, and to expedite

the lead plaintiff process. Id. As Med-Plan did notfile its initial motion until October 2, 1998, elevendays after the deadline for filing motions for leadplaintiff, the court concludes that the motion wasnot timely filed .

17]

2. Largest Financial Interest Requirement

As previously stated, the presumptively most ade-quate plaintiff is, inter alia, the person or group of personshaving the largest financial interest in the relief sought bythe class. While the PSLRA neither defines "largest fi-nancial interest" nor explains how such a determinationshould be made, courts have found the following fac-tors relevant to this inquiry : 1) the number of sharespurchased during the class period ; 2) the number of netshares purchased during the class period ; 3) the total netfunds expended by the plaintiffs during the class period ;and 4) the approximate losses suffered during the classperiod. See In re Olsten Corp. Sec. Litig., 3 K Supp . 2d286, 295 (E.D.N.Y. 1998)(citing Lax v. First MerchantsAcceptance Corp., 1997 U.S. Dist. LEXIS 11866, 1997WL 461036, at *5 (N .D .1ll . Aug . 11, 1997) ; see alsoGluck v. Cellstar Corp., 976 F Supp. 542, 546 (N.D. Tex.1997)(although not specifically enumerated, same factorswere considered in determining plaintiff having largestfinancial interest in the relief sought by the class) .

In its lead plaintiff motion, the Netsky Group requeststhat [*18] the court appoint an assemblage of 1,155persons or entities who purchased various quantities ofCapstead securities during the Class Period, contendingthat altogether they have the largest financial interest inthe relief sought by the class . The Netsky Group has sincerequested that the court appoint the following persons andentities as lead plaintiff. (1) Glenn and Betty MacDonaldand the MacDonald Family Trust (the "MacDonalds") ;

(2) Paul Jacobs and the Paul Jacobs Trust; (3) KilPatrick

2000 U .S . Dist . LEXIS 9941, *1 8

Life Insurance Co . ; (4) Robert McKee and the McKeeTrust ; (5) George and Mizue O'Hara, (6) Zin CapitalCorp. ; (7) Phillip and Mary Ann Woodard; and (8)Francis Yans (the "Netsky Subgroup"). See The NetskyGroups' Response to Med-Plan's and Rozenfeld Group'sAmended and Supplemental Petition or Appointment ofLead Plaintiff (sic), filed January 4, 1999, at pp .7-8,11 . The Netsky Group contends that collectively, thesemembers purchased 199,158 shares of Capstead stockand suffered losses of $3 .69 million . n8 The Rozenfeld

Group contends that its members have the greatest finan-cial loss having purchased approximately 64,671 sharesof Capstead stock during the Class Period (30,000 sharesare [* 19] attributable to UBC Fund), and collectively suf-fered losses of approximately $899,764 ($ 328,987 .50 ofthe total loss amount is attributable to UBC Fund) . Med-Plan and UBC Fund contend that as the two institutionalinvestors with the largest financial interest, they shouldbe appointed lead plaintiff. Specifically, Med-Plan andUBC Fund allege that combined they purchased 80,000shares of Capstead stock during the Class Period and havesuffered damages attributable to the alleged fraud of ap-proximately $879,000 to $904,000 .

n8 The Act's presumption is applied accord-ing to the "financial interest" of the "group of per-

sons" proposed as lead plaintiff. See 15 U.S.C.78u-44(a)(3)(B)(iii)(I); See In re the Baan Co.

See. Litig., 186 FR.D. 214, 217 (D.D.C. 1999) .Because the Netsky Group now proposes that itseight member subgroup be appointed lead plain-tiff, the court will limit its analysis to whether theNetsky Subgroup has the largest financial interestof the relief sought by the class .

*20

It appears that the Netsky Subgroup has the largest fi-nancial interest in the relief sought by the class, n9 Noneof the moving plaintiffs questions whether a random as-sortment of persons is a "group" within the meaning ofthe PSLRA's lead plaintiff provision, or whether a groupof persons may aggregate their shares for purposes ofassessing the financial interest at stake, n10 In assess-ing which candidate has the largest financial interest inthe relief sought, the Netsky Group contends that the de-termination should be based on the plaintiffs' respectivelosses . In determining its losses, the Netsky Group hastaken the amount of shares purchased minus the salesprice, or if not sold, the stock's price after the alleged

fraud was revealed. Specifically, the Netsky Group statesthat for Capstead securities not sold by the group be-fore the end of the Class Period, the loss is calculatedby multiplying the number of shares held by the aver-

Page 6

age-share price during the trading days after the end ofthe Class Period . The prices used were $3 .80 (commonstock), $15 .13 (Preferred A stock) and $8 .84 (PreferredB stock) . Med-Plan and UBC Fund, on the other hand,contend that the largest financial [*21] interest shouldbe measured by the damages attributable to the allegedfraud . Med-Plan and UBC Fund contend that a prelimi-nary analysis of damages shows that Capstead shares hadless inflation from the alleged fraud at the time the NetskyGroup's single largest investor (the MacDonald CharitableTrust) purchased its shares than at the time Med-Plan andUBC Fund purchased their shares . Because the combineddamages of Med-Plan and UBC Fund are approximately$879,000 to $904,000 and the combined damages of theMacDonalds are $542,000 to $669,000, Med-Plan andUBC Fund contend that they have the largest financialinterest in the litigation . Whether calculated by the ag-gregate losses or economic damages attributable to thealleged fraud, the court finds that the Netsky Subgrouphas the largest financial interest in the relief sought by theclass .

n9 Although the Netsky Group states thatKilPatrick Life Insurance Company purchased18,100 shares of Capstead stock, 9,000 of thoseshares were purchased outside the Class Period .Therefore, those shares will not be considered indetermining the financial interest of the NetskySubgroup .

[*22]

n10 Med-Plan and UBC Fund initially arguedthat the Netsky Group was too large to act as leadplaintiff and therefore should not be allowed to ag-gregate its members' damages to form the largestfinancial interest in the litigation for purposes ofqualifying for the presumptively most adequateplaintiff. In response to this argument, the NetskyGroup requested the court to appoint certain mem-bers of its entire group as lead plaintiffs. WhileMed-Plan and UBC Fund challenge the adequacyof the Netsky Subgroup, they do not object to thesepersons and entities aggregating their losses forpur-poses of determining who has the largest financialinterest in the litigation.

Med-Plan and UBC Fund also contend that theyshould be appointed co-lead plaintiffs in this litigationbecause they are the types of lead plaintiffs Congress in-tended to put in control of securities fraud class actions .

nl1 The Netsky Group, however, challenges whetherMed-Plan and UBC Fund are institutional investors at

2000 U .S . Dist . LEXIS 9941, *22

all. Although it disputes the status of both Med-Plan andUBC Fund as institutional investors, the Netsky Group[*231 primarily focuses on Med-Plan's status as an insti-tutional investor. The Netsky Group contends that Med-Plan, contrary to its assertion that it is an insurance com-pany, states its business purpose as "Business Services -Credit Bureaus and Collection Agencies ; Personal SupplyServices ; Management, Consulting and Public Relations ;

Detective and Protection Agencies, etc ." See The Netsky

Group's Response to Med-Plan's and Rozenfeld Group'sAmended Supplemental Petition or Appointment of LeadPlaintiff, filed January 4, 1999 at p. 9 . The Netsky Groupfurther asserts that Med-Plan lists total capital of $1,000and authorized shares of common stock at 100. Med-Planresponds that it is an institutional investor as contemplatedby the Act, asserting that it was formed in 1984 to providemedical care insurance for the workers of several smallrelated businesses. According to Med-Plan, the relatedbusinesses contributed monies to Med-Plan to fund themedical care benefits for their workers and Med-Plan in-vested those contributions and administered the paymentof benefits. n 12 See Reply to the Netsky Group's Responseto the Motion for Appointment of Med-Plan Inc . and theUnited Brotherhood [*24] of Carpenters and Joiners ofAmerica Local 3127 Pension Fund as Lead Plaintiffs andfor Approval of Lead Counsel, filed January 19, 1999 at

pp. 9-10.

nl I Although disputed by the Netsky Group,Med-Plan contends that it is a private medical in-surance company. See Memorandum of Law inSupport of Amended and Supplemental Motionfor Appointment of Med-Plan, Inc . and the UnitedBrotherhood of Carpenters and Joiners of AmericaLocal 3127 Pension Fund as Lead Plaintiffs andfor Approval of Lead Counsel, filed December 15,

1998 at p 3 . UBC Fund is a labor pension fund thatprovides pension benefits to the members of Local3127 of the United Brotherhood of Carpenters andJoiners of America . Id.

n12 Med-Plan does not at this time providemedical care benefits but is still set up to providesuch benefits and continues to invest the remain-

ing contributions. See Reply to the Netsky Group'sResponse to the Motion for Appointment of Med-Plan Inc . and the United Brotherhood of Carpentersand Joiners of America Local 3127 Pension Fund asLead Plaintiffs and for Approval of Lead Counsel,filed January 19, 1999 at p .10 .

[*251

As noted by Med-Plan and UBC Fund, the PSLRAdoes not define institutional investor, however, in suppo rt

Page 7

of its position, the two rely on SEC Rule 144A, which per-tains to Private Resales of Securities . Because insurancecompanies and private employee benefit plans are con-sidered "qualified institutional buyers" under SEC Rule144A, Med-Plan and UBC Fund assert that they may beclassified as institutional investors under the Act . ThatRule, however, also requires that such entities own andinvest in the aggregate at least $100 million in securi-ties of issuers . See Rule 144A(a)(i) . As neither Med-Plannor UBC Fund has shown that it individually invested atleast $100 million in Capstead or any other securities, itappears that neither meets the definition of a "qualifiedinstitutional buyer" under SEC Rule 144A ; nevertheless,the court is satisfied that Med-Plan and UBC Fund are

institutional investors as contemplated by the Act, as bothindicate that they invest in issuers securities on behalf ofothers .

Med-Plan and UBC Fund argue that the Act estab-lishes a preference that institutional investors act as class

representatives, and in support of their position cite Glucku Cellstar Corp ., 976 F. Supp. 542, 548 (N.D . Tex . 1997) .[*261 In Gluck, a group of individual investors brought asecurities fraud class action and moved for appointmentas lead plaintiff . In aggregate, the group owned 58,000shares of stock and estimated losses of less than $900,000 .Also vying to be appointed lead plaintiff was an institu-tional investor that purchased at least 1 million shares ofthe defendant company's stock and estimated its losses atover $10 million . Concluding that the financial interest ofthe group of individual investors was significantly smallerthan that of the institutional investor, the court found theinstitutional investor the presumptive lead plaintiff andappointed it rather than the group of individual investors .

In this case, the Netsky Subgroup purchased over190,000 shares of Capstead stock during the class periodand allege losses in excess of $3 million. Moreover, theMacDonalds alone purchased 71,375 shares of Capsteadstock during the Class Period and allege losses in excessof $1 .26 million . With the exception of KilPatrick LifeInsurance Company, the remaining investors individuallypurchased Capstead stock ranging from 10,000 to 27,000during the Class Period, and allege losses in the amount[*271 of $224,170 to $498,161 . While Congress has ex-pressed its preference for securities fraud litigation to bedirected by large institutional investors, it also recognizedthat class members with large amounts at stake will rep-resent the plaintiff class more effectively than class mem-bers with small amounts at stake. See Conference Reporton Securities Litigation Reform, H .R .Rep . No. 369, 104thCongress, 1st Sess . 31, reprinted in 1995 U .S .C .C .A .N .679,733 ; Gluck, 976 F Supp. at 548 . As no other memberof the purported class has submitted any evidence demon-strating that his, her or its financial interest exceeds that of

2000 U . S. Dist. LEXIS 9941, *2 7

the Netsky Subgroup, the court concludes that the NetskySubgroup has the largest financial interest in the reliefsought by the class .

The court grants the Netsky Group ' s alte rnative re-quest that ce rtain of its members serve as lead plaintiffs .To appoint a group of 1,155 persons as lead plaintiffswould ce rtainly contravene one of the legislative pur-poses of the PSLRA - preventing lawyer-driven litiga-tion. In re Donnkenny Inc. Sec. Litig., 171 F.R.D. 156,157 (S.D .N. Y 1997). The purpose behind the PSLRA is toempower investors [* 28] so that they, not their lawyers,control p rivate securities litigation by allowing the cou rtto ensure the transfer of primary control of private secu-rities litigation from lawyers to investors . See In re NiceSys. Sec. Litig. , 188 F.R.D. 206, 215 (D.N.J. 1999)(citingChill v. Green Tree Financial Corp., 181 F.R.D. 398, 407

(D .Minn . 1998). Congress intended to increase the like-lihood that pa rt ies with signi fi cant holdings in issuers,whose interests are more aligned with the class of share-holders, will part icipate in the litigation and exercise con-trol over the selection ofplaintiff s counsel . See Gluck, 976F Supp. at 544 (citing Conference Repo rt on Securi tiesLitigation Reform, H .R .Rep . No. 369, 104th Congress,1st Sess . 31, reprinted in 1995 U .S .C .C .A .N. 679, 731) .

A group of 1, 155 lead plaintiffs would not be able to have

the type ofmeaningful pa rticipation in the conduct of thelitigation as contemplated by the Act. The court , how-ever, believes that a smaller select group of investors withsigni fi cant holdings who have suffered signi fi cant losseswill satisfy the statuto ry goal of the PSLRA . n1 3

n13 Med-Plan and UBC Fund argue that theNetsky Subgroup has neither moved for appoint-ment as lead plaintiff or filed a complaint, The

cou rt disagrees . The court finds that , although the

members comprising the Netsky Subgroup were

not specifically named in the Netsky Group's mo-tion, they were included in the 1,155 members seek-ing to be appointed lead plaintiff. In addition, eachhas signed a certification establishing his, her or itsfinancial interest in the relief sought by the class,and attesting to the member 's eligibility as enun-ciated in 15 U.S.C. § 78u-4(a)(2)(A) . These cer-tifications were a tt ached as exhibits to the NetskyGroup' s motion.

[*29]

3. Rule 23 Requirements

As for the third requirement , the PSLRA requires thatin addition to having the largest financial interest in theoutcome of the litigation, the lead plaintiff also satisfy therequirements of Fed. R . Civ. P 23 . Pursuant to Rule 23,

Page 8

a plaintiff may sue as a representative party on behalf ofthe class if 1) the class is so numerous that joinder of allmembers is impracticable, 2) there are questions of law orfact common to the class, 3) the claims or defenses of therepresentative parties are typical of the claims or defensesof the class, and 4) the representative parties will fairlyand adequately protect the interests of the class. Whilethe court must conduct a rigorous analysis of the Rule 23requirements for purposes of determining class certifica-

tion, Castano a American Tobacco Co ., 84 F3d 734, 740

(5th Cir. 1996), a wide ranging analysis of the rule is notnecessary for purposes of appointing a lead plaintiff . SeeGluck, 976 F Supp . at 546. The only provisions relevantat this stage of the litigation are typicality and adequacy ofrepresentation . Id. The typicality requirement focuses onthe similarity [*30] between the named plaintiffs' legaland remedial theories and the theories of those whom theypurport to represent. See Mullen v. Treasure Chest Casino,LLC, 186 Fad 620, 625 (5th Cir. 1999), cert. denied, 120S. Ct. 1169, 145 L. Ed. 2d 1078 (2000). In determiningwhether one can adequately represent the interest of theclass, the court considers the Plaintiffs ability to vigor-ously prosecute the class claims and an absence of conflictor antagonism between the interests of the named plain-tiffs and the interest of the class. See Kalodner v. Michaels

Stores, Inc., 172 F.R .D. 200. 204-205 (N.D. Tex. 1997) .

In this case, investors traded millions of shares ofCapstead securities during the Class Period . Commonquestions of law and fact, such as whether federal securi-ties laws were violated, whether Defendants acted reck-

lessly in omitting and misrepresenting material facts, andwhether members of the class have sustained damages,predominate over questions solely affecting individualmembers of the class . The claims asserted by the NetskySubgroup are typical, if not identical, to the claims of theclass because, like each class member, [*31 ] its memberspurchased Capstead securities during the Class Periodand allegedly suffered damages as a result of Defendants'alleged conduct . In addition, there is no evidence of anyapparent conflicts between the Netsky Subgroup and theother class members . For these reasons, the court con-cludes that the Netsky Subgroup satisfies both the typi-cality and adequacy requirements . Accordingly, the courtfinds that the Netsky Subgroup is the presumptively mostadequate plaintiff because it satisfies each of the re-quirements under the PSLRA's lead plaintiff provision .Specifically, members of the Netsky Subgroup, in con-junction with the Netsky Group, timely moved to be ap-pointed lead plaintiffs in this litigation ; its members haveestablished that they possess, in the aggregate, the largestfinancial interest in the relief sought by the class ; and itsmembers otherwise satisfy the requirements of Fed. R.

Civ. P. 23 .

2000 U .S. Dist . LEXIS 9941, *3 1

B. Analysis of Rebuttal Evidenc e

The court now considers whether the RozenfeldGroup or Med-Plan and UBC Fund have rebutted thestatutory presumption in favor of the Nctsky Subgroup.As previously stated, the presumption of most adequateplaintiff can only be rebutted [*321 by showing that thepresumptively most adequate plaintiff either 1) will notfairly or adequately protect the interests of the class, or

2) is subject to unique defenses that render the plaintiffincapable of adequately representing the interests of theclass . See 15 U.S.C. 78u-4(a)(3)(B)(iii )( I1) . Neither theRozenfeld Group nor Med-Plan and UBC Fund have pre-sented evidence that the Netsky Subgroup will not fairlyor adequately protect the interests of the class or are sub-ject to unique defenses that render them incapable of ade-quately representing the class . As the presumption has not

been rebutted, the cou rt appoints the Netsky Subgroup aslead plaintiff in this litigation .

IV. Defendants' Objections

Defendants object to the Netsky Group, RozenfeldGroup and Med-Plan on a number of grounds, includ-ing attempts by the Netsky Group to thwart discovery,the number of persons and entities originally selectedby the Netsky Group for appointment as lead plaintiff,the Rozenfeld Group's failure to file certifications of twomembers with its complaint, and deficiencies in Mcd-Plan's certification . Defendants also object to the appoint-ment of Milberg [*33] Weiss Bershad Hynes & Lerach,LLP, as co-lead counsel in this litigation . Defendants lackstanding at this stage of the litigation to oppose a motionfor the appointment of lead plaintiff. See Gluck, 976 F.Supp . at 550 (only potential plaintiffs may be heard re-garding the appointment of lead plaintiff) . Defendants,

however, retain the right to challenge the Rule 23 require-ments at the class certification stage . Defendants concede

that they lack standing to challenge the selection of leadplaintiff or lead counsel but contend that they should beallowed to address matters that are beyond the scope ofthe appointment of lead plaintiff/lead counsel . To the ex-tent that Defendants attempt to address matters concern-ing the selection of lead plaintiff or lead counsel, theirobjections are overruled . With respect to those objec-tions which Defendants contend address matters outside

Page 9

the lead plaintiff/lead counsel selection process, the courtfinds that they are now moot in light of the court's rulingtoday.

V. Lead Counse l

The PSLRA requires the lead plaintiff to select leadcounsel to represent the class subject to the court's ap-proval, See 15 U.S.C. § 78u-4 [*34] (a)(3)(B)(V) . TheNetsky Group moves for approval of four law firms asits choice of counsel: Milberg Weiss Bershad Hynes &Lerach, LLP, Spector & Roseman, P.C and Berger &Montague, P.C . as co-lead counsel, and Stanley, Mandel& Iola, L .L .P. as liaison counsel. The court has reviewedthe resumes of these firms and is satisfied that they havethe necessary competence, qualifications, and experienceto represent the interests of the plaintiff class . Given thesize of the putative class, the court will allow these firmsto serve as co-lead counsel and liaison counsel. The court,however, cautions the firms that representation of the pu-

tative class should be performed in such a way that thereis not duplication of efforts, and that costs and expensesare not unnecessarily incurred for the representation ofplaintiffs . Accordingly, the law firms of Milberg WeissBershad Hynes & Lerach LLP, Spector & Roseman, P .C .and Berger & Montague, P.C . are appointed co-lead coun-sel, and the law firm of Stanley, Mandel & Iola, L .L .P. is

appointed local liaison counsel .

VI. Conclusio n

For the reasons previously stated, the Netsky Group'smotion for appointment of lead plaintiff and approval[*35] of lead counsel is granted in part and denied inpart, and the motions of the Rozenfeld Group and Med-Plan and UBC Fund are denied . The Netsky Subgroupis hereby appointed lead plaintiff in this litigation . Thelaw firms of Milberg Weiss Bershad Hynes & LerachLLP, Spector & Roseman, P.C . and Berger & Montague,P.C. are appointed co-lead counsel, and the law firm of

Stanley, Mandel & Iola, L .L .P. is appointed local liaison

counsel .

It is so ordered this 12th day of July, 2000 .

Sam A. Lindsay

United States District Judge

Page I

LEXSEE 2004 US DIST. LEXIS 2564 1

EARL THOMPSON , versus THE SHAW GROUP INC ., et at

CIVIL ACTION NO . 04-1685 SECTION "C" (1 )

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OFLOUISIANA

2004 U.S. Dist. LEXIS 25641

December 13, 2004, DecidedDecember 14, 2004, Filed ; December 15, 2004 , Entere d

DISPOSITION : Institutional Investor Group appointed Lead Plaintiff.

COUNSEL : [*I] For EARL - THOMPSON, plaintiff : Andrei V. Rado, Peter E . Seidman, Milberg Weiss BershadHynes & Lerach LLP, New York, NY; Lewis Stephen Kahn, Kahn Gauthier Law Group, LLC, New Orleans, LA .

For INDIANA ELECTRICAL WORKERS' PENSION TRUST FUND IBEW, PLUMBERS AND PIPEFITTERSLOCAL UNION NO. 630 PENSION-ANNUITY TRUST FUND, CARPENTERS PENSION FUND OF BALTIMORE,MARYLAND, HAWAII LABORERS PENSION PLAN, ALASKA ELECTRICAL PENSION FUND, plaintiffs : Joel R .Waltzer, Waltzer & Associates, New Orleans, LA ; Darren J . Robbins, Lerach Coughlin Stoia Geller, Rudman & RobbinsLLP, San Diego, CA ; David A. Rosenfeld, Lerach Coughlin Stoia Geller, Rudman & Robbins, LLP, Melville, NY .

For SHAW GROUP INC, TIM BARFIELD, JR, J M BERNHARD, JR, RICHARD F GILL, ROBERT BELK, defendants :Steven W. Copley, Gordon, Arata, McCollam, Duplantis & Eagan LLP, New Orleans, LA ; J . J . (Jerry) McKernan,McKernan Law Firm, Baton Rouge, LA; Clifford Thau, Steven R. Paradise, Vinson & Elkins, LLP, New York, NY.

For ROBERT BEAUCOUDRAY, LINDA CORSI, KATHLEEN CORSI, MARK CORSI, KAMAL DALLAL, ROGERKEHM, WILLIAM MYRICK, PHYLLIS PRESENT, ROBERT SEYMOUR, movants : Jules Brody, Aaron L. Brady,Stull, Stull & Brody, New York, [*2] NY; C . Mark Whitehead, 111, Whitehead Law Firm, New Orleans, LA .

For NEW JERSEY BUILDING LABORERS PENSION FUND, NEW JERSEY BUILDING LABORERS ANNUITYFUND, MARK H LUBER, movants : Andrei V. Rado, Peter E. Seidman, Milberg Weiss Bershad Hynes & Lerach LLP,New York, NY; Lewis Stephen Kahn, Kahn Gauthier Law Group, LLC, New Orleans, LA .

For DOMINICK CERRONE, M TRESINE DIMARTINO, movants: Eric J. O'Bell, Eric J . O'Bell, LLC, Metairie, LA .

For MIKE BENZEN, movant : William Paul Wilkins, Koederitz & Wilkins, Baton Rouge, LA .

For ANN ARBOR EMPLOYEES' PENSION SYSTEM, WESTLAND CITY POLICE & FIRE RETIREMENT SYSTEM,movants : David Lyman Browne, James R . Dugan, 11, Dugan & Brown, PLC, New Orleans, LA .

For JONATHAN NELSON, movant : Andrew Allen Lemmon, Lemmon Law Firm, Hahnville, LA; Jeffrey P. Fink,Robbins Umeda & Fink, LLP, San Diego, CA .

JUDGES : Judge Helen G . Berrigan, United States District Judge .

OPINIONBY: Helen G. Berrigan

OPINION :

2004 U . S . Dist . LEXIS 25641, * 2

Order and Reasons

Page 2

This matter comes before the Court on the plaintiffs' competing motions for appointment of Lead Plaintiff and Counselin the proposed class action involving allegations of securities fraud in the purchase of Defendant Shaw [*3] Group's

stock . After considering the plaintiffs' briefs, supporting exhibits, methods of damages calculation, and the applicablelaw, the Court finds that the Institutional Investor Group ("HG"), as the plaintiff-movant with the largest financial interestin the present litigation which is not subject to the statutory bar on repeat plaintiffs, should be appointed Lead Plaintiff .

1. Factual Background

This matter arises out of allegations of securities fraud in the purchase of Defendant Shaw Group's stock between

October 19, 2000 and June 10, 2004 ("Class Period") . Defendants are Shaw Group, Inc . and various high-ranking corporate

officers . The company provides comprehensive services to the power, process, and environmental and infrastructure

industries . Plaintiffs' chief allegation is that the defendants made public misrepresentations in denying internal reasons forthe declining price of their company's stock, when in reality they were knowingly shoring up its appearance of financialhealth by secretly shifting funds from a "contract loss reserve" and "gross margin reserve" to cover costs. Plaintiffs allege

that the failure to disclose this means of covering costs, coupled [*4] with inaccurate public statements of corporatefinancial health, fraudulently induced the plaintiffs to purchase the stock at artificially inflated prices .

All plaintiffs recite similar facts as to the basis for these allegations : In November 2000, the defendants had established

$83 .7 million in a gross margin reserve and $36 .4 million in a contract loss reserve . By mid-May 2001, the defendants, in

connection with the acquisition of another company, swelled the aggregate amount of the reserve funds to approximately

$228 million . With rumors about the possible financial weakness of the Shaw Group, the stock price fell from $60 pershare in June 2001 to below $30 per share in August, then to $20 per share by December . During this consistent decline,

the Shaw Group issued two public announcements, on June 21 and December 12, 2001, disavowing any knowledge ofinternal reasons for the stock's decline and expressing confidence in the accuracy of the company analysts' estimate of

earnings, backlogs, and margins for fiscal 2002 and 2003. Plaintiffs allege these announcements were misrepresentations

because the defendants knew that funds were being shifted from the reserves to "manage" [*5] earnings .

Meanwhile in late 2000 and 2001, company officers sold $80 million in stock, $60 million of which allegedly flowed

directly to four of the named corporate officer-defendants . From 2001 to 2003, the defendants nevertheless continued to

raise millions through the offering of common stock, liquid yield option notes ("LYONS") and senior unsecured notes at

10 .75% . Defendants also acquired the IT Group, with its 1 .67 million shares valued at $50 per share.

On June 1, 2004, the Securities and Exchange Commission ("SEC") launched an informal investigation, focusing on

the accounting for the Shaw Group acquisitions . The market reaction to this news was unfavorable, and the Shaw Group

stock bottomed out at $10 .15 by June 13 . On June 16, Milberg Weiss, counsel for Plaintiff New Jersey Building and

Laborers Group ("NJBLG"), filed this class action suit, with publication of notice the following day in Business Wire on

June 17 . (Rec . Doc. 10, Ex . A, Publication of Class Action in Business Wire).

The plaintiffs of the proposed class are purchasers of Shaw Group securities during the Class Period .

H . Procedural Backgroun d

In late July 2004, the Court consolidated [*6] the complaints of various plaintiffs, which were both individualinvestors and fiduciaries of pension funds with similar fraud allegations as mentioned above (hereinafter "Securities

Fraud Action") . (See Rec . Doc. 4-7) . The Court consolidated the derivative shareholder suit Jonathon Nelson (hereinafter

"Derivative Suit") with the first filed case, Earl Thompson v. Shaw Group et al, 04cv 1685, on August 31, 2004 . nl

(Rec . Doc . 24 .) On August 16, 2004 several plaintiffs requested appointment as Lead Plaintiff, six of which remain : (1)

Policemen and Firemen Retirement System for Detroit ("Detroit P&F"), (2) Institutional IIG, (3) the Dallal Group, (4)

NJBLG, (5) Ann Arbor Employees' Pension System ("Ann Arbor"), and (6) Mike Bentzen .

nI The Court notes that Nelson brought the derivative suit against high ranking officials of the Shaw Group intheir individual capacity in the name of the company whereas the plaintiffs here make fraud allegations against the

company itself. In both instances, however, the factual allegations turn on the central issue of misrepresentationspurportedly made by the Shaw Group, which artificially increased the stock price to the detriment of stock

purchasers in the proposed fraud class actions and the shareholders in the derivative suit .

2004 U.S . Dist . LEXIS 25641, * 6

*7

Page 3

On October 20, 2004, the Court granted oral argument on the issue of the appointment of Lead Plaintiff and took theplaintiffs' briefs under submission . At that time, the undersigned requested that Detroit P&F submit supplemental briefingon the following issues : (1) the Fund's "adjusted" calculation of its financial interest to take into consideration pre-ClassPeriod purchases that were sold during the Class Period ; and (2) the status of other pending securities fraud litigationwhich Detroit P&G directs as Lead Plaintiff.

On November 10, 2004, the Court ruled after oral argument that Reusche v. Barfield et al, 04cv2213, a secondderivative shareholder suit arising out of the same factual allegations, be consolidated with both the Nelson derivative suitand the Securities Fraud Action . (Rec . Doc . 92) . The Court subsequently issued an Order imposing a limited stay on theReusche action pending the selection of Lead Plaintiff in the Securities Fraud Action and/or the filing of an Amended

Complaint . n2 (Rec . Doc . 93) .

n2 The conditions of the limited stayed mirrored those in a stipulation agreement on October 4, 2004 betweenDerivative Plaintiff Nelson and the defendants . See Rec . Doc . 47.

[*8 ]

III, Law and Analysi s

The chief criterion for selection of Lead Plaintiff is the financial interest each plaintiff has in the litigation ( i.e. loss

sustained due to the defendant' s alleged fr aud) . Of the plaintiffs in the running , the approximate financial stakes are asfollows in descending order : ( 1) Detroit P&F, with losses of over $1 . 4 million ; n3 (2) IIG's interest in the litigation is$572,000 ; (3) the Dallal Group with losses of $378 ,607; (4) NJBLG with losses of $277,315 ; (5) Ann Arbor with lossesof $152,706.45 ; and (6 ) Mike Bentzen with losses of $49 ,030 . Despite the apparent straightforwardness of the selectionprocess under 15 U.S.C. §§ 78u-4 (a)(3)(A), a determination of Lead Plaintiff in this case hinges on whether the statuto rybar on plaintiffs which have been lead plaintiff in five or more actions in the previous three years applies to Detroit P&F,an institutional investor.

n3 As is discussed below, this figure is calculated under the "first-in/first-out" methodology ("FIFO") whoseaccuracy in measuring the genuine financial interest is questionable . Under alternate methods, Detroit P&G's stake

can be calculated as $841 .625 .70 or as a net gain of $409,737 . See Order and Reasons, infra, Part III .C .I n6 .

[*9]

A. Criteria for Selection of Lead Plaintiff in Securities Fraud Class Actio n

Section 21D(a)(3)(B) of the Private Securities Litigation Reform Act ("PSLRA") sets forth procedures for selection oflead plaintiff. First, the plaintiff filing the action must publish notice to the potential class within 20 days . 15 U.S.C. §.S

78u-4(a)(3)(A)(i) . Second, within 60 days of publication, any person or group may apply with the Court for appointmentof lead counsel . 15 US.C §§ 78u-4(a)(3)(A)(i) . Third, the Court shall consider any and all motions for appointment as

lead plaintiff within 90 days of publication . 15 US.C. §.'78u -4(a)(3)(B) .

1 . Certificatio n

"Under the PSLRA, parties filing complaints (i .e ., named plaintiff(s)) must file a certification that complies with

subsection 78u-4(a)(2)(A) ." See, e.g., Greebel v. FTP Software, Inc ., 939F Supp. 57, 61-62 (D. Mass. 1996)(holding thatonly named plaintiffs, rather than all parties moving for appointment as lead plaintiff, need comply with the certificationrequirement) ; Gluck v. Cellstar Corp., 976 F Supp . 542 (N. D. Tex. 1997) . [* 10] Subsection (a)(2)(A) provides :

Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification,which shall be personally signed by such plaintiff and filed with the complaint, that-

(i) states that the plaintiff has reviewed the complaint and authorized its fi ling;

2004 U .S . Dist . LEXIS 25641, *1 0

(ii) states that the plaintiff did not purchase the security that is the subject of the complaint at thedirection of plaintiffs counsel or in order to participate in any private action arising under thischapter;

(iii) states that the plaintiff is willing to serve as a representative party on behalf of a class,including providing testimony at deposition and trial, if necessary;

(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of thecomplaint during the class period specified in the complaint ;

(v) identifies any other action under this chapter, filed during the 3-year period preceding thedate on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve

as a representative party on behalf of a class; and

(vi) states that the plaintiff will not accept [*11] any payment for serving as a representativeparty on behalf of a class beyond the plaintiffs pro rata share of any recovery, except as orderedor approved by the court in accordance with paragraph (4) .

Page 4

15 U.S.C. § 78u-4(a)(2)(A) . Each of the movant-plaintiffs filed with his complaint a sworn certification that complieswith each of these six requirements, and the other proposed lead plaintiffs filed certifications with this motion . Therefore,the Court finds that movants have satisfied the certification provision.

2 . Notification

Subsection 78u-4(a)(3)(A)(i) provides that no later than 20 days after the date on which the complaint is filed, the

plaintiffs bringing the class action must publish "in a widely circulated national business-oriented publication or wireservice, a notice advising members of the purported plaintiff class ." Notice will include : (1) the pendency of the action,

the claims asserted therein, and the purported class period ; and (2) that not later than 60 days after the date on which thenotice is published, any member of the purported class may move the court to serve as lead plaintiff of the purported class .

§ 78u-4(a)(3)(A)(i)(1-II) . [*12] "If more than one action on behalf of a class asserting substantially the same claim orclaims arising under this chapter is filed, only the plaintiff or plaintiffs in the first filed action shall be required to causenotice to be published in accordance with clause (i) ." § 78u-4(a)(3)(A)(ii) .

On June 16, 2004, Milberg Weiss, counsel for the plaintiff NJBLG, filed this class action suit, with publication of

notice the following day in Business Wire on June 17 . (Rec. Doc . 10, Ex . A) . The June 17 notice named the pendingaction, enumerated the claims, set forth the purported class period (October 19, 2000 to June 10, 2004), and stated thatany member of the purported class could move to serve as lead plaintiff within sixty days after the date of notice . Id.

Courts have repeatedly recognized Business Wire to be a business-oriented wire service within the meaning of the

PSLRA and thus an acceptable means of publishing notice . See, e.g., Greebel, 939 F. Supp. at 62-63 (noting that reliance

on Business Wire is not subject to happenstance of buying a newspaper on the day that notice appears, as press release

remains accessible for substantial period of [ * 13] time) ; accord In re Nice Systems Sec. Litig., 188 F.R .D . 206, 216(D.N.J. 1999) .

Accordingly, first-to-file plaintiff NJBLG satisfies the notification requirement . Furthermore, the other movants are

also in compliance with Section 78u-4(a)(3)(A)(iii) because they timely filed their Motions for Appointment as Lead

Counsel.

3 . Rebuttable Presumptio n

Under the "rebuttable presumption" established pursuant to the PSLRA, the Court will select the Lead Plaintiff

based on the following criteria : (1) a plaintiff must have filed the complaint or a motion for appointment in response to

published notice ; (2) the plaintiff with the "largest financial interest in the relief sought by the class", and (3) a plaintiffthat otherwise satisfies the requirements ofFed.R.CivR 23(a) . 15 U.S.C. §' 78-4(a)(3)(B)(iii)(1)(aa)-(cc) .

Courts have concluded that the amount of the plaintiffs financial interest in the litigation is the defining criterion in

2004 U .S . Dist, LEXIS 25641, *1 3

the selection process :

Page 5

[The statute] "provides in categorical terms that the only basis on which a court may compare plaintiffscompeting to serve as lead is the size of their financial stake in [* 14] the controversy . Once it determineswhich plaintiff has the biggest stake, the court must appoint that plaintiff as lead, unless it finds that he doesnot satisfy the typicality or adequacy requirements.

In re Cavanaugh, 306 F. 3d 726, 736 (9th Cir. 2002) . Accord Tarica v. McDermott Intl, Inc ., 2000 U.S. Dist. LEXIS 5031,at *12 (E.D. La . April 13, 2000) (finding group of four plaintiffs with highest financial loss to be most adequate as LeadPlaintiff) .

The PSLRA is silent on the method for calculating financial losses . Two competing methodologies have emerged :(1) the "first-in/first-out" ("FIFO"), and (2) the "last-inlfirst-out ("LIFO") method, for which some district courts haveadopted a four-factor test . n4 Under FIFO, the status quo method, n5 shares sold during the class period are matched withthe first shares held or purchased at the beginning of the class period, whichever comes first . Under the LIFO approach, aplaintiffs sales of the defendant's stock during the class period are matched against the last shares purchased, resulting inan off-set of class-period gains from a plaintiffs ultimate losses .

n4 The four- factor test takes into account these plaintiff - investor transactions during the class period byassessing : (1) the number of shares purchased during the class period ; (2) the number of net shares purchasedduring the class peri od ; (3) the total net funds expended by the plaintiffs during the class period ; and (4) theapproximate losses suffered during the class period . In re Olsten Corp . Sec. Litig., 3 F Supp. 2d 286, 295 (E. D. N. Y.

May 4, 1998) . See also In re Orthodontic Ctrs. Of Ain ., Inc., Sec . Litig., 2003 U.S. Dist. LEXIS 25264 (E.D. La.Dec . 17, 2001) ( Porteus, J .) ("While the PSLRA neither defines'largest financial interest ' nor explains how such adetermination should be made, several factors have been enumerated in our jurisprudence relevant to this inqui ry." )

[* 15]

n5 Many federal appeal courts and commentators regard FIFO , which the Internal Revenue Se rv ice ("IRS")consistently uses, as a firmly established methodology for calculating loss for tax purposes in the context ofsecu ri ties investments . See, e .g., 26 C.F.R. 1 .1012-1(c)(1) ; Helvering v. Campbell, 313 U.S. 15, 20-21, 85 L . Ed.1159, 61 S. Ct. 798. 1941-1 C.B. 361 (1941) ; Holmes v. Commissioner of Internal Revenue, 134 F2d 219, 221(3th Cir. 1943) ([FIFO] is so old and well known that any extended explanation . . . would be superfluous . It is

incorporated in [the tax code] . It is su ffi cient to say that it establishes a presumption to be followed.") ; Wood v.

Commissioner of Internal Revenue, 197 F2d 859, 863 (5th Cir. 1952).

In this case, the competing methodologies affect only the calculation of Detroit P&G's financial stake . However, theCourt need not choose definitively among these methodologies at present because it is prepared to eliminate Detriot P&Gon alternative grounds under the statutory bar pursuant to 15 U.S. C. §,¢ 78-4(a)(3)(B)(vi) . For the immediate [* 161 narrowpurpose of considering the financial stake of the other movants for Lead Plaintiff, the Court resorts to the traditionalFIFO methodology. In ultimately deciding damages in future phases of this litigation, the Court notes that FIFO may be

insufficiently accurate and jettisoned in favor of LIFO .

Under the FIFO method, Detroit P&G provisionally has the largest financial stake, at more than $1 .4 million . n6 IIGhas the second largest financial stake in the litigation with purported losses of $572,000. (Rec . Doc . 68 at 2) . The Court

adopts the persuasive authority of the Cavanaugh and Tarcia rulings that the financial stake is the determinative factor

unless the presumptive lead plaintiff runs afoul of the requirements under Fed. R. Civ. P. 23(a) . As mentioned above, theCourt will disqualify Detroit P&G under the statutory bar . Therefore, IIG is the presumptive lead plaintiff .

n6 It should be noted that this figure is by no means settled . In response to the Court's request, Detroit P&Gre-calculated its financial interest as $841 .625 .70 in light of pre-Class Period purchases and overall sales during

the Class Period . See Rec . Doc. 81 at 4, Ex. B . To further complicate matters, NJBLG asserts that Detroit P&Fexperienced a net gain of $409,737 from transactions during the Class period while the Shaw Group stock traded at

2004 U .S . Dist . LEXIS 25641, *1 6

artificially high prices . (Rec. Doc . 50 at 8) .

[*17]

2 . Rule 23(a) Requirements

Page 6

As to the third criterion , the Court looks at the typicali ty and adequacy requirements under Fed.R .Civ.P 23(a) at the

time of appointment of lead counsel. n7 See, e .g., In re Oxford Health Plans, Inc. Sec. Litig., 182 F.R.D. 42, 49 (S.D.N.Y.1998) ; In re Olsten Corp. Sec . Litig., 3 F. Supp.2d 286, 296 (E.D.N.Y. 1998) . Typicality exists where plaintiffs' claimsarise from the same series of events and are based on the same legal theories as the claims of all class members . Mullenv. Treasure Chest Casino, LLC, 186 F3d 620, 625 (5th Cir. 1999) ("[The] test for typicality is not demanding . It focuseson similarity between the named plainti ffs' legal and remedial theories and the theories of those who they purpo rt torepresent.") Adequacy exists unless the Court finds ( 1) the presence of a potential conflict between the proposed lead

plaintiff and the class members ; or (2) or the proposed lead plaintiffs chooses counsel to represent the class who is

unqualified, incompetent , or otherwise unable to vigorously conduct the contemplated litigation on behalf of the class

members .

n7 Once the Lead Plaintiff is appointed , it will then file for class certification such that the defendant mayoppose class ce rti fi cation under all four elements ofRule 23 (a) (numerosity, commonality, typicality, and adequacyof representation) . See Gluck, 976 F Supp . at 546.

*18

JIG compo rts with the Rule 23(a) requi re ments of typicali ty and the adequacy of representation . It is clear that IIG'sclaims are typical of the claims brought by the other plaintiffs since all the allegations of fraud a ri se from the same

circumstances involving the purported misrepresentations by members of Defendant Shaw Group .

As to the adequacy prong, the other plaintiffs have made no showing of any actual or potential conflicts of interestbetween 110 and the other plaintiffs . In regard to the competency of counsel, counsel for NJBLG objected to the "11thhour" withdrawal of the Alaska Fund from JIG's stable of plaintiffs as supposedly indicative of lacking oversight bycounsel. The timing of the withdrawal notwithstanding, the Cou rt is satisfied with JIG's explanation of the events and its

apparent prompt removal of Alaska Fund as not to run afoul of the statuto ry bar under 15 U.S.C. §§ 78-4(a)(3)(B)(vi) . n8

See Rec . Doc . 68 at 1-2 . Therefore, there is no convincing evidence before the Cou rt that IHG would genuinely provide

inadequate representation of the proposed class . Accordingly , JIG should be Lead Plaintiff considering that Detroit P&G

is disqualified [* 19] as a repeat plaintiff . See Order and Reasons, infra, Pa rt I11 .B .

n8 IIG sought withdrawal because it was purportedly discovered on October 12, 2004 that Alaska Fund wasplaintiff in In re Krispy Kreme Doughnuts, Secs. Litig., 2004 US. Dist. LEXIS 26282, No. 1.04CV00416 (M. D.N. C.Oct. 6, 2004) . With inclusion of Alaska Fund in JIG, lIG would have been subject to the statutory bar on repeatprofessional plaintiffs.

B. Statutory Bar on Repeat Plaintiffs/Exemption for "Insti tutional Investor"

The PSLRA establishes "Restrictions on Professional Plaintiffs", which provide :

Except as a court may otherwise permit, consistent with the purposes of the section, a person may not be alead plaintiff, or an officer, director, or fiduciary of lead plaintiff, in no more than 5 securities class actions

brought as plaintiff class actions pursuant to the [Fed .R.Civ.P.] during a three-year period .

15 U.S.C. §§ 78-4(a)(3)(B)(vi) .

Courts have the discretion to exempt institutional investors (such as public [* 20] pension fund) from the statutorylimitation . See, e.g.. Smith v. Suprema Specialties, Inc. 206 F Supp .2d 627, 640-641 (D.N.J 2002) (characterizing the

legislative history as indicative that securities class action reform was not aimed at institutional investors) ; In re Critical

Path, Inc. Sec Litig., 156 F Supp. 2d 1102, 1112 (ND. Cal. 2001) (opining that institutional investors do not represent the

type of professional plaintiff [the Reform Act] seeks to restrict) ; Piven v. Sykes Enters ., 137 F. Supp. 2d 1295, 1304 (M.D.

2004 U .S . Dist . LEXIS 25641, *20

Fla. 2000) (finding clear statutory authority for court to permit institutional investor to exceed limit) .

Page 7

The exemption, however, is not absolute . See Aronson v. McKesson HBOC, Inc. 79 F. Supp . 2d 1146, 1156 (N.D .Cal.

1999) (deciding to bar repeat institutional investor because "the text of the statute contains no flat exemption .") If acourt detennines that an institutional investor's participation in five or more litigations poses a risk of overstretch, theinstitutional investor may be disqualified under the statutory bar . See, e .g., Chiaretti v. Orthodontic Ctrs . ofAui., Inc ., No .03-1027, 2003 U.S. Dist. LEXIS 25264 (E.D . La . Aug. 28, 2003) [*211 (emphasizing prevention of over-representationas primary tenet of PLSRA where court enforced statutory ban against institutional investor) ; In re Unumprovident Corp.

Sees. Litig., 2003 U.S. Dist. LEXIS 24633, at *J9 (E.D . Tenn . Nov. 6, 2003) (pointing to the risk of a repeat plaintiffspreading itself too thin to furnish adequate representation) . In re Enron Carp . Sec. Litig., 206 F.R.D. 427, 455 (S.D.

Tex. 2002) ("Simultaneous participation in securities class actions or applications for appointment as lead plaintiff couldresult in institutional investor having fewer resources available and being less able to police counsel's conduct, and thus

undermine the purpose of the PSLRA") .

NJBGL argues that the statute encompasses not only Detroit P&G, but also its "officers and fiduciaries" whenconsidering the applicability of the limitation on institutional investors . (Rec. Doc. 93 at 2-3) (citing 15 U.S.C. §§ 78-

4(a)(3)(B)(vi)) . Under this interpretation, Detroit P&G's Ronald Zajac, as fiduciary and in-house counsel, is currently

directing seven securities fraud class actions . Detroit P&F responds that these other on-going [*22] lawsuits have varyingprocedural postures, making it unlikely that its resources would be insufficient, i .e. it is unlikely that two law suits willproceed to trial simultaneously . (Rec . Doc 81 at 4-7) .

Any speculation aside, the Court rules simply that there is a risk of overstretch where Detroit P&G would be directinga total of eight concurrent lawsuits were Detroit P&G selected as Lead Plaintiff here as well . To eliminate the risk ofoverstretch, the Court deems that it is sounder to appoint I1G as Lead Plaintiff, which also has a substantial stake in thelitigation if not equal to Detroit P&G's financial interest . Although the legislative history appears to favor institutionalinvestors, a policy of equal force is the general prevention of over-representation regardless of the plaintiffs status . SeeChiaretti, 2003 U.S. Dist . LEXIS 25264 at *5 (finding that general counsel of institutional investor with oversight over

six class actions fell within congressional intent to bar repeat plaintiffs) . As mentioned above, the applicability of thestatutory bar to Detroit P&G obviates the relevance of the amount of its financial interest and, for the present time, [*23]the question of the proper method for calculating that interest .

Accordingly, with Detroit P&G thus eliminated, IIG is confirmed as Lead Plaintiff.

D. Selection of Lead Counse l

The Court should interfere with the Lead Plaintiffs selection of counsel only when necessary " to protect the interests

of the class ." 15 U.S.C. §§ 78-4(a)(3)(B)(iii)(11)(aa) . Unless the Cou rt detects a conflict between the proposed Lead

Counsel and the class members , Lead Plaintiffs selection is presumed to be proper. Because no plaintiff has made a

persuasive showing that IIG's proposed Lead Counsel will be unable or unwilling to protect the interests of the class, theCourt does not disturb IIG's selection of Lerach Coughlin Stoia Geller Rudman & Robbins, LLP.

IV. Conclusion

Although Detroit P&G purportedly has the largest fi nancial stake in the litigation, its current pa rt icipation in seven

other class actions, as lead counsel or fiduciary, serves as grounds for disqualification due to a risk of over-representation

pursuant to 15 U.S. C. §§ 78-4(a)(3)(B)(vi) . With Detroit P&G eliminated , I1G is the presumptive lead plaintiff, with

the second [*24] largest financial interest of approximately $572 ,000 . Finally, as IIG comports with the Rule 23(a)requirements of typicality and adequacy of representation, the Cou rt holds that IIG should be appointed Lead Plaintiff .

IT IS ORDERED that 11G be appointed Lead Plaintiff , with authorization to select Lcrach Coughlin Stoia Geller

Rudman & Robbins, LLP, as Lead Counsel and Waltzer and Associates as Liaison Counsel . The respective addresses of

Lead and Liaison Counsel are as follows :

Lerach Coughlin Stoia Geller Rudman & Robbins, LLPDarren Robbin s401 B Street, Ste . 1700San Diego, CA 92101(619)231-1058

2004 U .S . Dist . LEXIS 25641, *24

[Lead Counsel]

Waltzer and AssociatesJoel Waltze r14939 Chef Menteur Hwy. Ste. DNew Orleans, LA 70129(504)254-440 0[Liaison Counsel ]

The Court will send all notices to Liaison Counsel .

New Orleans, Louisiana, this 13th day of December, 2004 .

Judge Helen G . Berriga n


Page 8

VVestlawNot Reported in F .Supp .2 dNot Reported in F .Supp .2d, 2001 WL 1782712 (N .D_Cal .)(Cite as : Not Reported in F .Supp .2d )

HBriefs and Other Related DocumentsOnly the Westlaw citation is currently available .

United States District Court, N .D . California .Mark CARSON, Plaintiff,

V .

CLARENT CORPORATION, et al, Defendant .No . C 01 -03361 CRB .

Dec . 14, 2001 .

ORDER APPOINTING LEAD PLAINTIFF

BREYER, District J .*1 This securities fraud action arises out of theSeptember 4, 2001 announcement by defendant ClarentCorporation that it was restating its financialstatements, appointing an investigative committee, andsuspending certain corporate officers . The NASDAQsubsequently suspended all trading in Clarent . Varioussecurities fraud cases were immediately filed in thisDistrict and consolidated before the Court . Now beforethe Court are competing motions to be appointed leadplaintiff. After carefully considering the papers filed bythe parties, and having had the benefit of oral argument,the Court GRANTS the motion of Otter Creek Partnersto be appointed lead plaintiff.

DISCUSSION

The PSLRA provides that the Court "shall appoint aslead plaintiff the member or members of the purportedplaintiff class that the court determines to be mostcapable of adequately representing the interests of classmembers (hereafter in this paragraph referred to as the"most adequate plaintiff") in accordance with thissubparagraph ." 15 U .S .C . § 78u-4(a)(3)(B)(I) . The Actcreates a rebuttable presumption as to who is the mostadequate plaintiff:Subject to subclause (II), for purposes of clause (I), thecourt shall adopt a presumption that the most adequateplaintiff in any private action arising under this chapteris the person or group of persons that-(aa) has either filed the complaint or made a motion inresponse to a notice under subparagraph (A)(i) ;(bb) in the determination of the court, has the largestfinancial interest in the relief sought by the class ; and(cc) otherwise satisfies the requirements of Rule 23 ofthe Federal Rules of Civil Procedure .

Page 1

15 U .S .C. ti 78u-4(a)(3)(B )( iii)(I) . This presumption"may be rebutted only upon proof by a member of thepurpo rted plaintiff class that the presumptively mostadequate plaintiff-

(aa) will not fairly and adequately protect the interestsof the class ; or ( bb) is subject to unique defenses thatrender such plaintiff incapable of adequatelyrepresenting the class ." 78u-4 (a)(3)(B)(iii)(I) .

The Jacobs Group has by far the largest financialinterest in the relief sought by the class . Nonetheless,the competing plaintiffs claim that they are not entitledto the rebuttable presumption because they did nottimely move to be appointed lead plaintiff and do nototherwise satisfy the requirements of Rule 23 .

A. Timeliness of the Jacobs Motion

The PSLRA provides that within 20 days of filing asecurities fraud complaint, the first plaintiff to so filemustcause to be published, in a widely circulated nationalbusiness- oriented publication or wire serv ice, a noticeadvising members of the purported plaintiff class-(I) ofthe pendency of the action, the claims asserted therein,and the purpo rted class period ; and (II ) that , not laterthan 60 days after the date on which the notice ispublished, any member of the purported class maymove the cou rt to se rve as lead plaintiff of thepurported class .

*2 15 USC S 78u-4(a)(3)(A) (i) (emphasis added) . TheCourt then may appoint as lead plaintiff one who fi led acomplaint or who made a motion for appointment oflead plaintiff. Id . L 78u-4(a)(3)(B )( iii)(I) .

In this case the first plaintiff to file a complaint, theCarson plaintiff, filed the notice in the Business Wireon September 5, 2001 . The notice advised the investingpublic of the lawsuit and the right of class members tomove for appointment of lead plaintiff by November 5,

2001 . The Jacobs Group, however, filed their motion

on November 21, 2001-more than two weeks too late .

At least three courts have held that such a late filing,without a reasonable explanation, makes the classmember ineligible to serve as lead plaintiff . See In reMicroStralegy Inc . Sec . Litie 110 F .Supp .2d 427, 433(E .D.Va,2000) ; In re Telxon Corp . Secs. 67


Not Reported in F . Supp .2dNot Reported in F .Supp .2d, 2001 WL 1782712 (N .D.Cal .)(Cite as: Not Reported in F .Supp.2d )

F.S p.2d 803, 818 (N.D.Ohio 1999) ; Lax v. FirstMerchants Accept. Corp., 1997 U.S . Dist . LEXIS11866 at *4 (N .D .III . Aug . 11, 1997) .

At oral argument the Jacobs Group did not try to justifytheir late filing; rather, they argued that given theirlarge financial stake in Clarent the Court shouldnonetheless appoint them lead plaintiff. The Courtdeclines the Jacobs Group's invitation to ignore thePSLRA's time requirements . The PSLRA does not havedifferent filing deadlines based on the financial interestof the movant . Accordingly, the Court denies theJacobs Group's motion .

B . The Other Movant s

Three other "groups" filed motions to be appointed lead

plaintiff and appeared at oral argument . LaurenAssociates and Stanley Tomchin are not related andhave not come forward with any explanation as to whythey should be treated together and the Cou rt declines

to do so . See n Re Network Associates Litigatioj 76 F

.Supp .2d 10 17 (N,D .Cal .1999) . With Lauren Associatesand Tomchin treated separately , the two movants withthe largest financial stake are Dr . Semmoto, who lost

approximately $500,000, and Otter Creek Pa rtners,

with a S3 . 1 million interest. Otter Creek is thus

presumptively the most adequate plaintiff. As the other

movants have not come forward with proof that rebutsthe presumption that Otter Creek Pa rtners is the most

adequate lead plaintiff, Otter Creek Pa rtners should beappointed. Dr. Semmoto nonetheless requests leave totake discovery of Otter Creek Pa rtners . At this stage inthe litigation , however, discovery is permitted only if"the plaintiff first demonstrates a reasonable basis for afinding that the presumptively most adequate plaintiffis incapable of adequately representing the class ." 15U.S .C. § 78u-4( a)(3)(B)(iv ) . Dr . Semmoto has not

made such a demonstration. Accordingly, the Court

will appoint Otter Creek Partners as lead plaintiff and

Bernstein Litowitz Berger & Grossman LLP as class

counsel .

CONCLUSION

For the foregoing reasons, the Court GRANTS themotion of Otter Creek Partners to be appointed leadplaintiff and APPROVES the Otter Creek Partners'selection of Bernstein Litowitz Berger & GrossmanLLP as Lead Counsel for the class . Otter Creek Partnersshall fi le a consolidated class action complaint within45 days of the date of this Order.

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*3 IT IS SO ORDERED .

N.D.Cal.,2001 .Carson v . Clarent Corp .Not Reported in F .Supp .2d,(N .D.Cal.)

2001 WL 178271 2

Briefs and Other Related Documents (Back to top )

• 3 :01cv03361 (Docket) (Sep . 05, 2001 )

END OF DOCUMENT

0 2005 Thomson/West . No Claim to Orig . U .S . Govt . Works .

LEXSEE 2002 U .S . DIST. LEXIS 10474

IN RE BAAN COMPANY SECURITIES LITIGATION ; THIS DOCUMENT RELATESTO ALL ACTIONS

98-2465 (ESH/JMF)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBI A

2002 U.S. Disc LEXIS 10474

June 10, 2002, Decide d

SUBSEQUENT HISTORY: [*1 ] Rejecting Order ofFebruary 20, 2003, Reported at : 2003 U.S. Dist. LEXIS2578. Motion granted by , Class ce rtification granted by Inre Baan Co. Secs, 2002 U.S. Dist. LEXIS 27875 (D .D.C .,July 19, 2002)Rejected by, Motion denied by In re Baan Co. Sec. Litig.,245 F Supp . 2d 117, 2003 U.S. Dist, LEXIS 2578 (D .D.C .,2003)

dants : Leslie Gordon Fagen, PAUL, WEISS, RIFKIND,WHARTON & GARRISON, New York, NY .

For JAN BAAN, J .G . PAUL BAAN, defendants : SaulMurray Pilchen, Andrew L . Sandler, Colleen PatriciaMahoney, Stephen Paul Vaughn, Andy Gene Rickman,SKADDEN, ARPS, SLATE, MEAGHER & FLOM, [*21LLP, Washington, DC.

PRIOR HISTORY: In re Bean Co . Secs . Litig., 271 F.Supp. 2d 3, 2002 U.S. Dist. LEXIS26764 (D.D .C ., 2002 )

DISPOSITION: Recommended that J .G . Paul Baan's re-newed motion to dismiss for lack of personal jurisdictionpursuant to Federal Rule of Civil Procedure 12(b)(2) anddefendant Vanenburg Group's renewed motion to dismissfor lack of personal jurisdiction pursuant to Fed . R . Civ.P. 12(b)(2) be granted .

COUNSEL : For LAURE SALERNO, PLAINTIFFSLIAISON COUNSEL, plaintiffs : Andrew Neil Friedman,COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C.,Washington, DC .

For LEAD PLAINTIFFS, plaintiff : Joshua H. Vinik,MILBERG, WEISS, BERSHARD, HYNES & LERACH,LLP, New York, NY.

For PLAINTIFFS' CO-LEAD COUNSEL, plaintiff:Lee S . Shalov, Cary L. Talbot, MILBERG, WEISS,BERSHARD, HYNES & LERACH, LLP, New York, NY.

For PLAINTIFFS' CO-LEAD COUNSEL, plaintiff:Ralph M. Stone, SHALOV, STONE & BONNER, L .L .P.,New York, NY.

For BAAN COMPANY, N .V., TOM C. TINSLEY,N.M. KLAAS WAGENAAR, WILLIAM O . GRABE,DAVID C . HODGSON, AMAL M . JOHNSON, defen-

For VANENBERG VENTURES, B.V., defendant :Robert James Symon, Frank Leone, Jr ., SPRIGGS &HOLLINGSWORTH, Washington, DC .

For VANENBERG VENTURES, By ., defendant :William K. Holmes, Melvin G. Moseley, Jr., WARNERNORCROSS & JUDD LLP, Grand Rapids, MI .

For MCI COMMUNICATIONS CORPORATION,GERALD H, TAYLOR, TIMOTHY F . PRICE,DOUGLAS L . MAINE, BERT C . ROBERTS, JR .,DAVID M . CASE, defendants : Scott William Muller,DAVIS, POLK & WARDWELL, Washington, DC .

SECURITIES AND EXCHANGE COMMISSION, am-icus : Luis De La Tone, SECURITIES & EXCHANGECOMMISSION, Washington, DC .

JUDGES : JOHN M . FACCIOLA, UNITED STATESMAGISTRATE JUDGE .

OPINIONBY: JOHN M. FACCIOLA

OPINION :

REPORT AND RECOMMENDATIO N

Judge Huvelle has asked for a Report andRecommendation as to the disposition of J .G. PaulBaan's Renewed Motion to Dismiss for Lack of PersonalJurisdiction Pursuant to Federal Rule of Civil Procedure12(b)(2) and Defendant Vanenburg Group's Renewed

2002 U .S . Dist . LEXIS 10474, * 2

Motion to Dismiss for Lack of Personal JurisdictionPursuant to Fed. R . Civ. P. 12(b)(2) . nl

ni Plaintiffs' claims are described in detail inIn re : Baan Company Securities Litigation, 103 FSupp. 2d 1 (D.D.C 2000).

[*31

I recommend that both motions be granted for thereasons stated below.

Applicable Principles of Law

When a defendant challenges the jurisdiction of thecourt over his person, the case law indicates that the anal-

ysis should take place i n three distinct stages . First, thecourt must ascertain whether the allegations in the com-plaint establish, on a prima facie basis, jurisdiction overthe defendant' s person. Second Amendment Foundationv U.S. Conference of Mayors, 348 U.S. App. D.C. 238,274 F3d 521, 523 (D.C. Cir: 2001) . If they do, then in

this Circuit, the plaintiff, who has the burden of establish-ing juri sdiction , must be permitted adequate discoveryto establish that the court' s assertion of ju risdiction overthe defendant ' s person meets statuto ry and constitutionalstandards . In re : Baan Co. Securities Litigation, 81 F.Supp. 2d 75 (D.D.C. 2000) . At this stage , allegations nolonger suffice ; plaintiff must " adduce any concrete" evi-dence that the defendant is subject to the court 's personal

jurisdiction . First Chicago. Int'1 v. United Exchange Co.,

Ltd, 267 U.S. App. D.C. 27, 836 F2d 1375, 1377 (D.C.

Cir. 1988) . Accord : GTE New Media Services, Inc. v.

Be llsouth Corp., 339 U.S. App. D.C. 332, 199 F3d 1343,

1349 (D.C. Cir. 2000). [*4] This proposition is self-evident ; if allegations sufficed without discove ry, therewould be no need for the discovery permitted .

At the final stage , the Federal Rules of Evidence are asoperative as they are at any other stage of the proceedings .Thus, as has been speci fi cally held, plaintiff must estab-lish personal jurisdiction by admissible evidence . Barrettv. Lombardi, 239 F3d 23, 27 (1st Cir. 2001).

The Court's Task

In this case, I have permitted discovery on the juris-dictional issues and defined with precision and in detailthe discovery plaintiffs were permitted to take to try tosupport their allegations as to the court's jurisdiction overthe defendant J.G. Paul Baan ("Baan") and VanenburgGroup ('Vanenburg") .

Plaintiffs did take the discovery as to Baan but, dueto their extraordinary dilatoriness, I was compelled toconclude that they had forfeited the right I had grantedthem to take discovery from Vanenburg by taking a de-

Page 2

position from a Vanenburg designee pursuant to Fed. R .Civ. P. 30(b)(6) . As a result , the analysis as to these twodefendants is radically different .

As to Baan , I assess whether the evidence in the formof Baan ' s affidavits [*5] and his deposition support theexercise of personal jurisdiction over him .

As to Vanenburg, I have to determine whether theinformation tendered in support of plaintiffs ' allegationsqualifies as evidence . If I conclude that it is does not,I then have to determine whether the information thatwould qualify as evidence or is admi tted to be true byVanenburg supports the exercise of personal jurisdictionover Vanenburg . I begin with Baan .

Baan 's Affidavi t

The two affidavits Baan submitted negate , of course,plaintiffs' claim that he has sufficient contacts with theUnited States . In these affidavits Baan states :

1 . He is a citizen of the Netherlands wherehe has lived all of his life .

2. He has never maintained a residence in theUnited States nor owned any property in theUnited States. He has no bank accounts inthe United States ,

3 . He was Managing Director of Vanenburgduring the class period ; Vanenburg is regis-tered to do business only in the Netherlands .His office is in the Netherlands and he didnot have an office in the United States duringthe class period .

4 . Vanenburg did not maintain an office in theUnited States during the class period . [*6]It never employed any staff (other than coun-sel), signed any leases, had any business ad-dresses, or advertised in the United Statesduring the class period .

5 . He never executed any contracts on be-half of Vanenburg in the United States. Baanhad little involvement in matters that relate toVanenburg's sales and accounting . Meetingsof Vanenburg's Board of Directors and Boardof Managing Directors took place in theNetherlands and never in the United States .

6 . He visited the United States on four iso-lated occasions during the class period tomeet with companies that were affiliates orattractive acquisition prospects. Each trip

2002 U .S . Dist. LEXIS 10474, * 6

lasted a few days; in all, he spent less than 15days in the United States in the class periodin connection with this travel .

7 . He was never in the United States for anypurpose related to any of the activities form-ing the basis of the fraud alleged in the com-plaint and he never attended any meetings inconnection with any activities in the UnitedStates concerning sales of Baan Companyproducts to any of Vanenburg's subsidiariesin the United States .

8 . He was a Supervisory Director of the BaanCompany through a part of the class pe-riod, [*7] i e., until December, 1997 whenhe ceased being Chairman of the Board ofSupervisory Directors . He held no manage-ment position with the Baan company andhis responsibilities with that company werelimited.

9. He did not have an office within the BaanCompany's office in the Netherlands nor anoffice in the United States when he was onthe Supervisory Board and the company's

Chairman .

10 . He came to the United States on one oc-casion to attend a meeting of the Baan Board

Statements by plaintiffs concerning Baan

Trips to the United States were made for theexpress purpose ofoverseeing the businessconducted by Vanenburg's U .S . affiliates aswell as the marketing of Baan and itsproducts to businesses domiciled in theUnited States .

Paul Baan participated in acquiring theVanenburg affiliates in the United States andhad substantial personal holdings in variouscompanies located in Palo Atlo, California .

As conceived by Paul and his brother JaanBaan, Vanenberg's sole purpose was to se rveas a shell company to enable Paul Baan, as itsManaging Director, to acquire and managemultiple subsidiaries to serve as purportedBaan "resellers ."

Page 3

of Supervisory Directors but the meeting didnot relate in any way to the activities formingthe fraud alleged in the complaint. This wasthe only trip he made to the United Stateson behalf of the Baan Company in the classperiod .

11 . He had no responsibility for the account-ing practices alleged in the complaint norany knowledge of how the Baan Companyreported revenue during the class period orwhether its reporting procedures compliedwith the Generally Accepted AccountingPrinciples .

12 . He never traveled to the United States forpersonal reasons at any time during the classperiod nor conducted any personal businessin the United States during the class period .All contacts he had with the [*8] UnitedStates during the class period were for busi-ness purposes on behalf of either the BaanCompany or Vanenburg .

The second element of plaintiffs' proof would haveto be Baan's deposition, which plaintiffs cite in supportof its allegations regarding the validity of the exercise ofpersonal jurisdiction. Unfortunately, the allegations areutterly unsupported by the portions of the transcript asthe following chart shows :

Baan's deposition testimony

No such testimony was given .



2002 U .S . Dist . LEXIS 10474, * 8

Statements by plaintiffs conce rning Baan

Paul Baan managed Vanenburg's UnitedStates operations from abroad .

Baan's deposition testimony


Paul and Jan Baan were careful to retaincomplete control of their Vanenburg votingrights when granting the shares to theStichting Oikonomos Trust, againexemplifying their desire to maintain

exclusive control over Baan, throughVanenburg .

Paul Baan was actively involved inreviewing, evaluating, and overseeing thevery revenue recognition policies that causedBaan's financial results to be materiallyfalse and misleading throughout theclass period.

Paul Baan admittedly had numeroustelephonic contacts with United Statescounsel concern ing Vanenburg' s "strategicbusiness purposes" including making"acquisitions for the Vanenburg group ."

Citing Tr. 77 :11-79 :16 .

In connection with the United Statestransactions, for the purpose of negotiatingand finalizing the terms of theseacquisitions, Paul Baan necessarily hadtelephonic contact with other individualslocated in this country.

Paul Baan even arranged for the purchase ofUnited States real estate through one ofVanenburg's Group's affiliates . Citing Tr. at68 :22-69 :3 .



At the pages of thetranscripts cited, Paul Baantestified that he communicatedwith individuals representingacquisition prospects beforemeeting "not frequently. "Tr. 78 :13 . There is noreference in the cited pagesto any conversations withcounsel . Baan testified(Tr. 67 :8) that he contactedU .S . counsel for Vanenburg forstrategic business purposesand not operational purposes .Such strategic businesspurposes would includepurchasing shares in U .S .entities.

No testimony that Paul Baannegotiated or finalized th e

terms of any acquisitions wasgiven .

No such testimony was given.The only testimony at thepages cited is that Vanenburg

did not attempt to rent or buyproperty in U .S . VanenburgGroup affiliate, Baan RealEstate LLC, rented property.No testimony whatsoever that

Page 4

2002 U .S . Dist . LEX1S 10474, *8

Statements by plaintiffs concerning Baan

Vanenburg se rved no function other than toallow Paul Baan to acquire new United Statesaffiliates, and the entity, itself, admittedl ydid no other business . Citing Tr. at25 :14-27:10, 73 :12-21, 76 :12-77:10 .

Vanenburg owned at least 20 Baan affi liatesin the United States. Citing Tr. 28 :1-30 :22 .

Baan's deposition testimonyPaul Baan arranged forpurchase or rental ofproperty.

No such testimony. At citedpages, testimony was tha t

Vanenburg was formed in theNetherlands to do business inthe software industry; and isa holding company. Notestimony whatsoever that itwas formed to acquire UnitedStates affiliates.

No such testimony . Testimonyat cited page indicates thatVanenburg had stakes in NetShepherd, Webex, and Top Tier.No reference to twenty suchcompanies .

Page 5

*9

To be blunt, the discrepancies in this chart are shock-ing. I have never seen and I hope that I will never seeagain such utter mischaracterizations of what a witnessactually said or such bold assertions based on absolutelynothing the witness said. Allowing for the haste and theinaccuracies that invariably creep into one's prose whenone paraphrases what some one else said, it is still be-yond my comprehension how attorneys can, for exam-ple, represent that a witness's testimony suggested thathe had "substantial personal holdings in various compa-nies located in Palo Atlo, California" when he never usedthe word "California" in his deposition, let alone stated

he had holdings there, nor can I understand how thoselawyers can cite a transcript for the proposition that a cer-tain company had twenty affiliates when in the portion ofthe transcript cited, the witness names only three .

Baan's Motion Should be Granted

When one actually reads what the witness said in hisdeposition and affidavits and disregards plaintiffs mis-characterizations of what the witness said, we are backwhere we started . The only evidence n2 we have is thatBaan is a Dutch citizen who during the class period [* 10]did absolutely no personal business and had no personalcontacts with the United States . He traveled to the UnitedStates on four brief business trips to do the business of thecompanies which employed him . He has no property in

the United States, no bank account here, and no personalinvestments here . Simply put, there is no evidence that he

ever did any personal business in the United States duringthe class period . Finally, there is no evidence whatsoeverthat he participated in the transactions of which plaintiffscomplain. Accordingly, whether the question is viewed asone of special or general jurisdiction, the claim that Baancan be subjected to the personal jurisdiction of this courtfails,

n2 Plaintiffs point to documents that impeachBaan's testimony by showing that he had moreknowledge of Baan Company's accounting prac-tices than he admitted . Supplemental Memorandumof Law in Opposition to Defendant J .G . Paul Baan'sRenewed Motion to Dismiss for Lack of PersonalJurisdiction at 9-13 . But, as Baan points out, he wasnever confronted with these documents during hisdeposition . There is therefore no evidentiary foun-dation for the assertion that he knew what was inthem . That a document was sent to a person doesnot mean that the person saw or read it . Without hisadmission that he saw them, documents sent to himby others cannot impeach him.

[*11]

First, general jurisdiction speaks to such a pervasivepersonal presence in the forum that the exercise of ju-

2002 U .S . Dist . LEXIS 10474, *1 1

risdiction does not offend fundamental fairness . In re :Baan Co. Securities Litigation, 81 F Supp. 2d at 81-85 .In this case, we have a European citizen who traveledto the United States sporadically and briefly on companybusiness and who otherwise has absolutely no personalcontacts with the United States. To suggest that his pres-ence in the United States is as pervasive as Toyota, Sony,or Phillips and that it is as fair to subject him to personaljurisdiction as it is to subject those foreign companies tojurisdiction over their corporate persons is fatuous.

Second, as to special jurisdiction, premised on thedefendant's performance of the act that is the premiseof liability, there is no evidence whatsoever that Baanpersonally participated or approved of the transactionscomplained to be fraudulent. Unless and until there is,there is an utter lack of connection between him, in hispersonal capacity, and the acts claimed to have harmedplaintiffs .

In this context, it is important to bear in mind thatplaintiffs' approach to the personal jurisdiction [*12]question has always been premised on the assertion thatBaan, as an individual, is subject to personal jurisdictionbecause of the acts he did or the knowledge he had in hiscapacity as a controlling shareholder or director of a com-pany that is alleged to have done business in the UnitedStates. The problem with that analysis is that it obliteratesthe distinction between personal jurisdiction premised onwhat one person does for himself advancing personal in-terests and what he does for the entity that employs himor in which he has a substantial, controlling stock interest .

The Supreme Court has emphasized that the validityof the assertion of personal jurisdiction must be premisedon the facts pertaining to each individual defendant .

Calder v. Jones, 465 U.S. 783, 790, 79 L. Ed. 2d 804,104 S. Ct. 1482 (1984). It therefore follows, for example,that the legitimate assertion of personal jurisdiction over acorporate employer does not mean that the corporate em-ployees are equally subject to personal jurisdiction in that

forum . Keeton v. Hustler Magazine. 465 U.S. 770, 781

n .13, 79 L. Ed. 2d 790, 104 S. Ct. 1473 (1984) ; Young v

Sullwold, 2000 U.S. Dist. LEXIS 14047 (Sept . 27, 2000) ;Nat'l Petroleum Marketing, Inc . v. Phoenix Fuel Co. . Inc.,902 F Supp. 1459, 1469 (D . Utah 1995) ; [*13] UnitedResources 1988-1 Drilling and Completion Program v .Avalon Exploration Inc., 1994 U.S. Dist. LEXIS 152, * 13

(S .D.N.Y Jan . 10, 1994) . As Judge Harris of this courtexplained in another case .

A court does not have jurisdiction over in-dividual officers and employees of a cor-poration just because the court has juris-diction over the corporation. See Keeton

Page 6

v. Hustler Magazine, 465 U.S. 770, 780 n.

13, 104 S. Ct . 1473, 79 L. Ed. 2d 790

(1984) ; Wiggins v. Equifax, Inc., 853 F. Supp.500, 503 (D.D.C.1994) . Personal jurisdic-tion over officers of a corporation in theirindividual capacities must be based on theirpersonal contacts with the forum, not theiracts and contacts carried out solely in a cor-porate capacity. Wiggins, 853 F Stipp . at503; see also Schwartz, 938 F Supp. at 6n. 8. Although plaintiff has proffered evi-dence that Muammer Agim traveled to theDistrict, engaged in contract negotiations inthe District, and ultimately signed a contractwith a substantial connection to the District,all these activities were apparently carriedout on behalf of defendant PROGEN . See,e.g ., Protocol [*14] Circular Addendum .Since plaintiff has proffered no evidence thatMuammer Agim had personal contact withthe District, the Court grants his motion todismiss for lack of personal jurisdiction.

Overseas Partners, Inc . v. PROGEN Musavirlik veYonetirn Hizmetleri, Ltd. Sikerti, 15 F Supp. 2d 47, 51(D.D.C. 1998).

What other rule could there be? If a New York corpo-ration sends a salesman to Iowa to sell computer software,the corporation's sending him there may subject it to ju-risdiction in Iowa because of the salesman's acts but ithardly subjects the salesman to the jurisdiction of theIowa courts . Whether the salesman is or is not subject toIowa's jurisdiction is a function of what he did in advanc-ing his own interests while he was in the state .

Additionally, these jurisdictional issues become eas-ier to comprehend when one sees them in an internationalcontext and imagines what would happen in a particularsituation if, in response to the assertion of personal ju-risdiction by a United States court, foreign courts did thesame . Unless the distinction between jurisdiction over acorporation based on its activities and jurisdiction over acorporation's directors [* 15] and officers based on theirpersonal activities is kept true, the Board of Directors ofFord or General Motors would be subject to personal li-ability in courts worldwide not because of what they didin those countries but because of what Ford or General

Motors did . The deleterious consequences of such an in-ability to distinguish between what a company does in acountry through its employees and what the employeesthemselves do would have staggering implications forinternational trade. Thus, I persist in my view that per-sonal jurisdiction can only be based on Baan's personal

2002 U .S . Dist . LEXIS 10474, *1 5

activities in the United States and not on the activitieshe performed here in service to Vanenburg or the Baancompany . It is not, after all, illegal in the United Statesor the Netherlands to do business in the corporate form .Yet, if the court were to subject Baan to personal liabilitybecause of his activities on behalf of Vanenburg and theBaan company, the legitimate limitation of liability pro-vided by the corporate form would disappear, endanger-ing with personal liability foreign corporate officers anddirectors who travel to America on company business .

Finally, the fact that American securities law may[* 16] subject an individual to liability when she con-trols a corporation that violates that law does not meanthat American courts may necessarily subject a foreigninvestor to its jurisdiction solely because she has the ca-pability by virtue of stock ownership to control that non-American corporation or is a member of its Board ofDirectors. To conclude otherwise is to confuse a formof statutory liability with a constitutional command thatthe exercise of personal jurisdiction be fundamentally fair.Whether or not one can control a corporation is one thing ;whether that control is in itself an appropriate premise ofpersonal jurisdiction is another. As I have pointed out,potential control of an international corporation doingbusiness in the United States is not in itself an adequatebasis for an American court to exercise personal jurisdic-tion over an individual claimed to have that potential byvirtue of stock ownership or membership on the boardof directors . In re: Baan Co . Securities Litigation, 81 F.Supp. 2d at 78-79.

Vanenburg's Motion Should Be Grante d

In asserting that this court should exercise jurisdictionover Vanenburg, a Dutch corporation, plaintiffs [* 17] relyon (1) statements by Judge Green in her decision deny-ing the defendants' motion to dismiss, (2) the allegationsof their complaint, and (3) newspaper articles . All are,however, insufficient .

First, in ruling on the motion to dismiss, JudgeGreen took no evidence and made no findings whatso-

ever. Instead, Judge Green was obliged to take as true theallegations of the complaint and she did so . In re : BaanCompany Securities Litigation, 103 F. Supp. 2d at 4. Tosay that her opinion provides support for certain allega-tions is to argue in a perfect circle. Allegations that JudgeGreen had to take as true do not thereby become true .

Second, as I have explained, we have moved beyondthe allegations of the complaint . Plaintiffs must prove thatcertain facts are true through admissible evidence . If theydon't, and if they rely only on the allegations of their com-plaint, they have not even advanced the ball a foot downthe field .

Page 7

I appreciate that I have had to conclude that plaintiffshave forfeited their right to take the discovery I permittedfrom a Vanenburg 30(b)(6) designee . Plaintiffs' inabilityto secure any discovery is a bed of their own making andthey must [* I8] now lie in it .

Third, newspaper articles are hearsay even if they con-tain a statement that might qualify as an admission againstinterest. This is so because the truthfulness of the propo-sition that the party uttered the statement claimed to be anadmission is entirely dependent upon the credibility of thereporter who claims to have heard it. Unless the reporteris called to attest to the truthfulness of her assertion thatshe heard the party make the statement, the newspaperarticle is, in itself, inadmissible . Larez v. Los Angeles,946F.2d 630, 642 (9th Cir 1991) ; Wrightv. MontgomeryCounty, 2002 U.S. Dist. LEXIS 9442, 2002 WL 1060528(E .D . Pa ., May 20, 2002) ; Miles v. Ramsey, 31 F. Supp.2d 869, 875 (D . Colo. 1998) ; In re Columbia SecuritiesLitigation, 155 FR .D. 466, 473 (S.D.N. Y. 1994) .

Using, once again, a process of reduction, the follow-ing statements of fact are the only ones upon which per-sonal jurisdiction could be based because they are them-selves based on either legitimate admissions by a party inSEC filings or the testimony of Paul Baan in his deposi-tion, or because Vanenburg concedes their truthfulness :

13 . During [* 19] the class period,Vanenburg, described by Mr. Baan as a hold-ing company, owned a controlling interestin the Baan Company and Mr. Baan and hisbrother owned, through a foundation or trust,a substantial beneficial interest in Vanenburg .

14 . During the class period, Vanenburgowned a beneficial interest in certainAmerican companies that dealt with the BeanCompany. The manner in which the BaanCompany accounted for some of these deal-ings is the gravamen of plaintiffs' complaint .

15 . Vanenburg offered shares of the BaanCompany for sale on American andEuropean exchanges.

These facts do not, in my view, establish jurisdictionover Vanenburg.

First, I persist in the view articulated in my earlieropinion that mere ownership of a beneficial interest in acorporation , no matter how controlling an interest, doesnot in itself serve as a premise for the exercise of juris-diction over the beneficial owner, whether the owner is a

human being or a corporation . In re : Baan Company

Securities Litigation, 81 F. Supp. 2d at 78-82. Even

2002 U .S. Dist. LEXIS 10474, * 1 9

though plaintiffs continue to rely on a Ninth Circuit de-cision that is to the contrary, I persist in my view thatthe Ninth Circuit [*20] decision is inconsistent with con-trolling Supreme Court precedent and therefore wronglydecided .

I further note that it is the law of this Circuit that aparent corporation cannot be subjected to the jurisdictionof a court that does have jurisdiction over its subsidiarymerely because the parent owns all of the subsidiary 'sstock . El-Fadl v. Central Bank of Jordan, 316 US. App.D. C. 86, 75 F. 3d 668, 675 (D. C. Cir. 1996).

It is also the law of the land in those cases wherethe parent and subsidiary corporations maintain sep-arate and distinct corporate existences and the sub-sidia ry operates independently of the pare nt . GlennR. Sarno, Haling Foreign Subsidia ry Corporations into

Court under the 1934 Act : Jurisdictional Bases andForum Non Conveniens , 55 Law & Contempt. Probs .379, 385 (1992)(citing, inter alia, VolkswagenwerkAktiengesellschaft v. Schlun k, 486 U.S. 694, 706, 100 L.Ed. 2d 722, 108 S. Ct. 2104 (1988) and RESTATEMENT(SECOND) OF CONFLICTS OFLAW § 52 cmt. b (1969) .

n3 Accord: Cannon Mfg. Co . v. Cudahy, 267 U.S. 333,69 L . Ed. 634, 45 S. Ct. 250 (1925); Richard v. BellAtlantic Corp., 946F Supp . 54,68 (D.D .C. 1996) ; FDIC

it Milken, 781 F Supp. 226, 230 (S.D.N.Y 1991) . [*21]There is no evidence whatsoever that Baan Company, itsAmerican subsidiaries, and Vanenburg did not operateindependently.

n3 "Subsidia ry of corporation . Judicial juri s-diction over a subsidia ry corporation does not ofitself give a state judicial jurisdiction over the par-ent corporation . This is true even though the parent

owns all of the subsidia ry' s stock. So a state doesnot have judicial jurisdiction over a parent corpo-ration merely because a subsidiary of the parentdoes business within its territory." RESTATEMENT(SECOND) OF CONFLICTS OF LAWN 52 cmt . b(1969) .

Page 8

have exercised personal jurisdiction over foreign corpo-rations or nationals when those corporations have per-formed an act, such as insider trading, that they couldhave reasonably expected to affect adversely the valueof shares purchased on American exchanges . E.g. SEC

v. Unifund Sal, 910 F.2d 1028, 1032 (2nd Cir. 1990) ;SEC v. Softpoint Inc, 2001 U.S. Dist. LEXIS 286, 2001WL 43611, *6 (S.D .N .Y. Jan . 18, 2001) [*22] ; SEC

v. Euro Security Fund, Coim SA, 1999 US. Dist. LEXIS1537, 1999 WL 76801 (S .D .N.Y. Feb . 17, 1999); NamTai Electronics, Inc. v. Tele Art, Inc., 1994 U.S. Dist.LEXIS 59, 1994 WL 4438 *1 (S .D .N .Y. Jan . 5, 1994) ;Compare SEC v. Alexander 160 F. Supp . 2d 642, 654-

657 (S.D.N.Y 2001). Thus, had Vanenburg directed themanner in which the Baan Company accounted for itsdealings with the subsidiaries , we would have a differentcase . The case we have is based solely on a parent 's owner-ship of a subsidia ry' s stock and the parent 's offer of sharesof that stock on an American market . No American courthas ever held that the parent thereby becomes responsiblein an American court for any of the subsidiary' s acts that

affects the value of the stock . Such a holding, creating,ipso facto, jurisdiction in American cou rts over a foreignparent for any act by the subsidiary merely because of theoffering by a foreign parent of its subsidia ry's stock onan Ameri can market, would have staggering implicationsfor international offerings on American exchanges .

CONCLUSION

I therefore find no basis for the assertion of personaljurisdiction over Baan or Vanenburg [*23] and recom-mend the granting of their motions to dismiss .

Failure to file timely objections to the findings andrecommendations set fo rth in this report may waiveyour right of appeal from an order of the DistrictCourt adopting such findings and recommendations .See Thomas v. Arn, 474 U.S. 140, 88 L . Ed 2d 435,106

S. Ci. 466 (1985) .

JOHN M. FACCIOLA

UNITED STATES MAGISTRATE JUDG E

Second, it is unquestionably true that American courts Dated : June 10, 2002

LEXSEE 2003 U .S . DIST LEXIS 2502 2

In re SUREBEAM CORPORATION SECURITIES LITIGATION,

CASE NO.03 CV 1721 JM (POR)

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OFCALIFORNIA

2003 U.S. Dist. Lj XIS 25022

December 31, 2003, DecidedJanuary 5, 2004, Filed

SUBSEQUENT HISTORY : Motion granted by, in part ,Motion denied by, in pa rt In re Surebeam Corp. Sec. Litig.,2004 U.S. Dist. LEXIS26951 (S.D . Cal., Dec. 30, 2004)

DISPOSITION : FMC Pension Groups's motion for ap-pointment as lead plaintiff was granted conditionedly .FMC Pension Group's motion for approval of law firm aslead counsel was granted. Leason Group, Searcy Group,Bemi and Bildstein's motions for appointment as leadplaintiff and for approval of lead counsel were deniedwithout prejudice . Bildstein's motion for consolidationwas denied as moot.

For FMC LTD, PENSION PLAN & TRUST, plaintiff:Travis E Downs, III, Milberg Weiss Bershad Hynes andLerach, San Diego , CA . Andrew M Schatz, Schatz andNobel, Hartford, CT.

For JAMERICA FINANCIAL INC ., SPEAR CAPITALMANAGEMENT INC, JOSEPH J BROGAN, plaintiffs :Travis E Downs, III , Milberg Weiss Bershad Hynes andLerach, San Diego, CA .

For ANTHONY SEGALLE, [*2] GIN HOY HOM,

plaintiffs : Jeffrey R Krinsk, Finkelstein and Krinsk, SanDiego, CA.

COUNSEL: [*1] For EDWARD WEISS, On Behalfof Themselves and All Others Similarly Situated,DELAWARE CHARTER GTY. TRUST TR. MELVYNMANASTER IRA RIO, On Behalf of Themselvesand All Others Similarly Situated , RHONA CHASE,JAMES JANETTE, STEPHEN M STRACHAN, plain-tiffs : Darren Jay Robbins, Milberg Weiss Bershad Hynesand Lerach, San Diego, CA .

For MICHAEL LAMPKIN, GENE P KIRBY, GARYBLEVINS, THEODORE MAKA, RICHARD MTORRE, JAMES CURRAN, JOHN A SAGE, MICHAELBUSBICE, SR, plainti ffs: Kirk B Hulett , Hulett HarperStewart LLP, San Diego, CA .

For JONATHAN DAVID DOBIS, plaintiff: Zev BZysman, Weiss and Yourman , Los Angeles, CA .

For BERND BILDSTEIN, plaintiff. Marc L Godino,Stull Stull and Brody, Los Angeles, CA.

For NANCY MENSCH, JOHN MENSCH, plaintiffs :Rachele R Rickert , Wolf Haldenstein Adler Freeman andHerz, San Diego, CA.

For GLEN LEASON, OLIVE BRANCH-LEASON,MARY ANN RICHASON, PAUL BERGER, GREGORYLAVDANSKI, plaintiffs: Michael M Goldberg , Glancyand Blinkow, Los Angeles, CA .

For STEVEN MORROW, STEVEN MORROW, plain-tiffs: David B Zlotnick, Law Offices of David B Ziotnick,San Diego, CA.

For ALBERT J BERNI, EVA SEARCY, MANUELE WILKEY, PAUL STRICK, ARSELLA STRICK,RICHARD SHAY, PAUL BERGER, plaintiffs : PeterArthur Binkow, Law Offices of Lionel Z Glancy, LosAngeles, CA .

For SCARSDALE FABRICS, INC ., plaintiff: William SLerach, Milberg Weiss Bershad Hynes and Lerach, SanDiego, CA .

For JOHN TAYLOR, IRENE C HUANG, JAE OKJOO, LAWRENCE E ARONSON, ANDREW L YERRE,plaintiffs: Lionel Z Glancy, Law Offices of Lionel Z

Glancy, Los Angeles, CA.

For THOMAS S DERIVATIVELY ON BEHALF

2003 U .S . Dist . LEXIS 25022, * 2

OF NOMINAL DEFENDANT SUREBEAMCORPORATION, JR, plaintiff: Daniel L Germain,Rosman and Germain , Los Angeles, CA.

For GORDON REED, Derivatively on Behalf of su re -beam Corporation , RICHARD E . RUCKSTUHL, plain-tiffs: Venus Soltan , Soltan & Associates, Costa Mesa,CA .

For SUREBEAM CORPORATION, defendant : DarrenJay Robbins , [*3] Milberg Weiss Bershad Hynes andLerach , San Diego, CA .

For LAWRENCE A OBERKFELL, DAVID A RANE,defendants : Darren Jay Robbins, Milberg Weiss BershadHynes and Lerach, San Diego, CA. Shirli Fabbri Weiss,Gray Cary Ware and Freidenrich , San Diego, CA .

For TITAN CORPORATION, defendant : Jeremy EPendrey, Alschuler Grossman Stein and Kahan, SantaMonica, CA.

For WILLIAM C HALE, MICHAEL J LICATA,ROBERT C ADERS, defendants : Shirli Fabbri Weiss,Gray Cary Ware and Freidenrich , San Diego, CA .

For MARY VALLARIO, plaintiff: Jennifer R Williams,Weiss and Yourman , Los Angeles, CA .

For STEVE LEMON, plaintiff: Betsy Carol Manifold,Wolf Haldenstein Adler Freeman and Herz, San Diego,CA.

For JOHN C ARME, defendant : Timothy R Pestotnik,Luce Forward Hamilton and Scripps, San Diego, CA .Shirli Fabbri Weiss, Gray Cary Ware and Freidenrich,San Diego, CA .

For KEVIN K CLAUDIO, defendant : Timothy RPestotnik , Luce Forward Hamilton and Scripps, SanDiego, CA.

JUDGES : JEFFREY T. MILLER, United States DistrictJudge .

OPINIONBY: JEFFREY T. MILLER

OPINION :

ORDER GRANTING IN PART DENYING INPART FMC PENSION GROUP'S MOTION FORAPPOINTMENT AS LEAD PLAINTIFF ; GRANTINGFMC PENSION GROUP'S MOTION [*4] FORAPPROVAL OF LEAD COUNSEL ; DENYING

Page 2

COMPETING MOTIONS FOR APPOINTMENT ASLEAD PLAINTIFF AND APPROVAL OF LEADCOUNSE L

This is a motion to appoint lead plaintiff and approvelead counsel in a securities class action. Six individualsor groups are moving for appointment as lead plaintiff :(1) FMC Ltd. Pension Plan & Trust, Jamerica FinancialInc ., Joseph Brogan, and Spear Capital Management Inc.("FMC Pension Group"), (2) Glen Leason, Mary AnnRichason, Paul Berger, Gregory Lavdanski, and OliveBranch-Leason ("Leason Group"), (3) Jonathan DavidDobis, (4) Eva Searcy, Manuel Wilkey, Paul and ArnellaStrick, and Richard Shay ("Searcy Group"), (5) AlbertBerni, and (6) Bernhard Bildstcin .

1. Backgroun d

Surebeam Corporation ("Surebeam") provides elec-tronic food irradiation systems and services for the foodindustry . Allegedly, Surebeam developed trouble acquir-ing customers and began to misstate the company's fi-nancial status . Surebeam entered into a joint venture witha Brazilain corporation Tech Ion Industrial Brazil S .A .("Tech Ion"). Surebeam allegedly failed to disclose prob-lems that arose with the Tech Ion project, forgave muchof Tech Ion's debt, and recognized revenue [*5] fromthe Tech Ion deal despite the fact that the company couldnot repay the debt. Surebeam allegedly made false andmisleading statements both in its Prospectus for the com-pany's initial public offering ("IPO") as well as in sev-eral subsequent financial statements . These misrepresen-tations allegedly caused Surebeam's stock to trade at in-flated levels.

Approximately eighteen complaints have been filed inthis district against Surebeam, its officers and directors, itsparent company Titan Corporation, and the underwriterson the IPO. While each complaint alleges its own specifictime period, the class period is generally from March of2001 to August of 2003 . On October 6, 2003, this courtentered an order consolidating the actions then pendingas well as any subsequently filed related actions .

11 . Discussio n

The Private Securities Litigation Reform Act of 1995("PSLRA") dictates the process for determining leadplaintiff in a securi ties class action brought under theSecurities and Exchange Act of 1935 ("Exchange Act")as well as the Securities Act of 1933 ("Securities Act") . 15U.S.C § 78u-4(a)(3)(B) ; 15 U.S.C § 77z-1(a)(3)(B) [*6]; In re Cavanaugh, 306 F.3d 726, 729 (9th Cir. 2002) . n IThe PSLRA requires prompt publication of notice advis-ing class members of the existence of the class action andof their right to move within 60 days of the publication to

2003 U .S . Dist . LEXIS 25022, *6

be appointed lead plaintiff . 15 U.S.C. § 78u-4 (a)(3)(4) .In this case , on August 27, 2003, the plaintiff in Weiss v.Surebeam Corp . published a notice on the Business Wiren2 advising class members of the existence of the lawsuitand of the time limit for filing a motion to be appointedlead plaintiff. Twelve individuals or groups have movedwithin the six ty-day time peri od for appointment as leadplaintiff. Only six of those individuals or groups continueto seek appointment as lead plaintiff. n 3

nl The Exchange Act and the Securities Act'sprovisions regarding appointment of lead plain-tiff and approval of lead counsel are identical .Therefore, for convenience only citations to theExchange Act, as amended by the PSLRA, are in-cluded from this point forward .

n2 There are no objections to the notice in thiscase . Fu rt hermo re, Business Wire has been found tobe an adequate manner of providing notice in secu-rities cases . See Yousefi v. Lockheed Martin Corp .,70 F. Supp. 2d 1061, 1067 (C. D. Cal. 1999) .

[*7]

n3 Steven Morrow, Anthony Segalle, Nancyand John Mensch, Michael Lampkin, Gene Kirbyand Gary Blevins, Theodore Maka and RichardTorre, and James Curran have withdrawn their mo-tions for appointment as lead plaintiff and for ap-proval of lead counsel .

The standard for appointment of lead plaintiff is estab-lished in the PSLRA . That statute mandates that the cou rt"shall appoint as lead plaintiff the member or membersof the purported plaintiff class that the cou rt determinesto be most capable of adequately representing the inter-ests of class members ," referred to as the "most adequateplaintiff." 15 U.S.C. § 78u-4(a)(3)(B)(i) . There is a rebut-table presumption that the most adequate plaintiff is "theperson or group of persons" that meet the following threerequirements :

1 . has either filed the complaint or made amotion in response to a notice ;

2 . has, in the determination of the cou rt, the"largest financial interest " in the relief soughtby the class ; and3. otherwise satis fies the requirements ofRule 23 of the Federal Rules of CivilProcedure. [*8]

Id . § 78u-4(a)(3)(B)(iii)(1) . The presumption establishedabove may be rebutted " only upon proof by a member

Page 3

of the purported plaintiff class that the presumptivelymost adequate plaintiff' either 1) "will not fairly andadequately protect the interests of the class," or 2) "issubject to unique defenses that render such plaintiff in-capable of adequately representing the class ." Id . § 78u-4(a)(3)(B)(iii)(11) .

The Ninth Circuit in Cavanaugh held that the districtcourt is required to strictly follow a three-step processin the determination of lead plaintiff. 306 Fad at 729 .First, the district court must determine if the proceduralrequirements are satisfied . Id. The second step requires thedistrict court to compare the financial stakes of the partiesand determine who has the highest financial interest . Id.at 729-30. Once the individual or group with the largestfinancial interest is identified, the court "must then focus

its attention on that plaintiff' and determine whether theymeet the requirements of Rule 23 . Id. at 730 (emphasisin original). The court may not consider the merits of theother plaintiffs' [*9] claims . Id. at 732 . If the individualor group with the largest stake in the controversy does notmeet Rule 23's requirements the court must inquire intothe adequacy of the individual or group with the secondlargest stake . Id. at 731 . If the individual or group withthe highest financial stake in the litigation does meet therequirements of Rule 23, they must be the presumptivelead plaintiff. Id . "The only basis on which a court maycompare plaintiffs competing to serve as lead is the sizeof their financial stake in the controversy." Id. at 732 (em-phasis in original) . Once the presumptive lead plaintiff ischosen, step three allows the other candidates to attemptto rebut the presumption by attacking that individual orgroup's qualifications under Rule 23 . Id.

A. The Candidates for Lead Plaintiff

Six individuals or groups have moved to be appointedlead plaintiff (1) FMC Pension Group, (2) Leason Group,(3) Dobis, (4) Searcy Group, (5) Berni, and (6) Bildstein .

1, Procedural Requirements

In order to be considered for lead plaintiff status, eachproposed lead plaintiff must, within 60 days of published[* 10] notice of the pendency of the action, move to be ap-pointed lead plaintiff. 15 US.C. § 78u-4(a)(3)(A) . Eachprospective plaintiff must provide a sworn certification

representing that he or she has read the complaint, did notpurchase the securityat the direction of counselor in orderto participate in any private action , and is willing to serve

as a representative party. Id . § 78u-4(a)(3) (A)(i)-(iii) . Theswo rn ce rt ification must set fo rth "all of the transactionsof the plaintiff in the security that is the subject of thecomplaint during the class period specified in the com-plaint ." Id . § 78u-4(a)(2)(A)(Iv) . Each of the movants inthis case has brought a motion within the appropriate time

2003 U .S . Dist . LEXJS 25022, * 1 0

limit and has included the requisite certification .

2 . Largest Financial Interest

The second step under the PSLRA asks which pro-posed lead plaintiff "has the largest financial interest inthe relief sought by the class ." Id. § 78u-4(a)(3)(B) (iii)(I) .

The district court must compare the losses allegedly suf-fered by the various plaintiffs to determine the finan-cial stakes . Cavanaugh, 306 F3d at 730 . Although the

PSLRA does not dictate [*It] the process for determin-ing which party has the largest financial interest, severalcourts have suggested considering : (1) the number of

Page 4

shares purchased during the class pe ri od ; (2) the numberof net shares purchased during the class period; (3) thetotal net funds expended during the class period ; and (4)

the approximate losses suffered during the class period .

A ronson 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 Metchs, Acceptance Corp., 1997 U.S. Dist. LEXIS

11866, *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 total amount approx. losse s

individual members of group, if purchased spent

applicabl e

FMC Pension group 235,500 1,671,400 1,281,62 8Spear Capital 77,450 836,728 654,71 3

Jamerica 84,550 398,561 287,42 0Brogan 50,000 291,255 225,53 0FMC Pension 23,500 144,856 113,965

Leason group 90,000 204,08 6

Glen Leason 43,000 94,49 3Mary Ann Richason 20,000 49,05 1

Paul Berger 20,000 25,35 7Gregory Lavdanski 2,000 20,51 7

Olive Branch-Leason 5,000 14,66 9

Dobis 41,750 189,671 107,823

Searcy Group 51,931 107,23 5Manuel Wilkey 31,00 105,220 63,77 9

Paul/Arnella Strick 12,000 56,640 24,75 6

Richard Shay 6,931 21,860 12,59 4

Eva Searcy 2,000 8,776 6,105

Berri 20,500 38,57 5

Bildstein 200 2,000 1,700

[* 12 ]

None of the numbers provided to this court have beenchallenged . Therefore, FMC Pension Group has thelargest financial interest in this litigation, dwarfing all

other claims with their claim of $1 .2 million .

Aggregatio n

Proposed lead plaintiff Dobis objects to FMC PensionGroup on the ground that the group consists of four un-related entities or individuals whose claims should not beaggregated for purposes of appointing lead plaintiff. The

PSLRA does not explicitly state whether individuals mayaggregate their losses for consideration as lead plaintiff .

2003 U .S . Dist . LEXIS 25022, *1 2

Likewise, the Ninth Circuit has not ruled on the issue of

aggregation . Cavanaugh, 306 F3d at 732 n .8. However,

many district courts have stated that by using the language"member or members of the purported plaintiff class" thestatute envisions aggregation. Yousefi a Lockheed Martin

Corp., 70 F Supp. 2d 1061, 1067 (C.D. Cal . 1999) ; In

re Network Assn Sec . Litig., 76 F. Supp. 2d 1017, 1024

(N.D . Cal. 1999) ; In re UniversalAccess, Inc., 209 F.R .D.

379, 384 (E.D. Tex . 2002) .

Most district courts will not aggregate "huge amal-

gamations of unrelated [*13] 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 Assn, 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 hun-

dred investors lead plaintiff) . To appoint a massive groupwould render the litigation too unwieldy and defeat theobjective 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 consideredthe issue allow aggregation in small groups . Yousefi, 70

F. Supp . 2d at 1071 (two) ; Takeda, 67F Supp . 2d at 1129

(seven) ; Advanced Tissue, 184 F.R.D. at 352 (six); In re

Oxford Health Plans, Inc . Sec . Litig., 182 FR . 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) [* 14] (six) ; In re

Versata, Inc ., Litig., 2001 U.S. Dist. LEXIS 24270, *17

(N.D. Cal. Aug. 17, 2001) (finding small groups of unre-

lated individuals or entities may aggregate) ; In re Baan

Co. Sec. Litig., 186 F.R .D. 214, 216-17 (D.D.C. 1999)(citing the SEC's amicus brief stating small groups ofthree to five may serve as lead plaintiff) . A few courts

have concluded that the proposed group must have somepre-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 ofcharacteristic, distinct from those of almost all other classmembers, 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 pre-existing relationship) .

Although the statute allows a member or members ofthe plaintiff class to qualify as lead plaintiff, absent direc-tion from the United States Supreme Court or the NinthCircuit, this court will not decide the propriety of aggre-gation . It may well be that aggregation is permissible in[* 15] limited circumstances as suggested by the court in

Aronson, but the issue does not require resolution in this

Page 5

case . The shareholder suffering the largest loss within anyof the groups is Spear Capital, a member of FMC Pension

Group. Spear Capital's loss of $654,713 is well above thenext largest loss of $287,420 claimed by Jamerica, alsoa member of FMC Pension Group . Spear Capital alone

qualifies as the presumptive lead plaintiff. It makes no

practical difference if Spear Capital chooses to associatewith other shareholders in order to further distance it-self from the next proposed lead plaintiff. Therefore, the

court will treat FMC Pension Group as the presumptivelead plaintiff with the largest financial interest withoutdeciding the issue of aggregation . n4

n4 If, for example, Glen Leason of the LeasonGroup suffered losses greater than those of SpearCapital, the aggregation issue would be squarelybefore the court and would have to be decided .

Because FMC Pension Group is the presumptive lead

plaintiff, [*161 only that group's adequacy under Rule 23

is discussed below. See Cavanaugh , 306 F3d at 730-32(requiring a sequential process by which only the plaintiff

with the largest financial interest is examined for typical-

ity and adequacy under Rule 23) .

3 . Rule 23 Requirement s

Although Rule 23 contains four basic requirements(numerosity, commonality, typicality, and adequacy ofrepresentation), a presumptive lead plaintiff need onlymake a "preliminary showing" of typicality and adequacy .

Aronson, 79 F Supp. 2d at 1158 . At this stage, the districtcourt is to rely on the presumptive lead plaintiffs com-plaint and sworn certification . Cavanaugh, 306 F3d at731 .

Adequacy

Adequacy of representation under Rule 23 contains

two factors : " 1) that the representative party's attorney bequalified, experienced and generally able to conduct the

litigation; and 2) that the suit not be collusive and plain-tiff's interests not be antagonistic to those of the remain-der 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) ; Let -will v. Inflight Motion Pictures, Inc.,

582 F2d 507, 512 (9th Cir 1978) . [* 17] While the districtcourt has wide latitude concerning the type of informationto consider in determining adequacy, the court may notconsider whether the plaintiff has chosen the best possiblelawyer or the best possible fee arrangement . Cavanaugh,

306 F3d at 732. The choice of attorney may disqual-ify a plaintiff only if it is "so irrational, or so tainted byself-dealing or conflict of interest, as to cast genuine andserious doubt on that plaintiffs willingness or ability to

2003 U .S . Dist . LEXIS 25022, *1 7

perform the functions of lead plaintiff ." Id. at 733 .

In this case, there is no reason to believe that any of thelaw firms vying for lead counsel are not qualified or oth-erwise generally able to conduct this case . Furthermore,there are no allegations and no reason to believe thatFMC Pension Group has an antagonistic relationship tothe remaining class members or that the group's claim iscollusive .

Typicality

Typicality requires that the plaintiffs claim is alignedwith the claims of the remainder of the class . United

Energy, 122 F.R .D. at 256. This factor mandates that thepresumptive lead plaintiffs claim "arise from the sameevent or [* 18] course of conduct giving rise to the claimsof other class members" and be based on the same legal

theory . Id. (citing In re Unioil Sec. Litig., 107F.R.D. 615,620 (C.D. Cal. 1985)) ("The theory behind this prerequi-site is that a plaintiff with typical claims will pursue herown self-interest and advance the interests of class mem-bers accordingly ."). In general, the test considers whetherother members of the class "have the same or similar in-jury, whether the action is based on conduct which is notunique to the named plaintiffs, and whether other classmembers have been injured by the same course of con-duct." Schwartz v. Harp, 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 thepurchaser, and even the specific document influencing thepurchase will not render a claim atypical in most secu-

rities cases ." Weinberger v. Thornton, 114 F.R.D. 599,

603 (S.D . Cal. 1986) . The typicality requirement does notmandate that all claims be identical . Id.

The factual allegations made by FMC Pension Groupare typical of the class . Every proposed (* 19] plain-

tiff alleges essentially the same misrepresentations inSurebeam's financial statements. In fact, the allegationsand complaints are practically identical . While differ-ences exist in the times the different individuals pur-chased their shares of Surebeam, this difference does notdefeat typicality. Schwartz. 108 F.R .D . at 282; Haley v.Medtronic, Inc ., 169 F.R .D. 643, 649 (C.D. Cal. 1996)(holding "plaintiffs claim can still be typical even if theclass members' injuries were suffered at different times") ;Takeda, 67 F Supp. 2d at 1137 (finding slightly differ-ent class periods do not preclude a finding of typicalitybecause varying class periods may be harmonized) .

The only attack on the typicality of FMC PensionGroup is on the ground that the group's interests arenot typical of plaintiffs whose claims arise under theSecurities Act because the group only asserts claims underthe Exchange Act . However, on a number of occasions,

Page 6

courts have found a class representative typical even ifthe class representative is representing claims of bothSecurities Act and Exchange Act claimants . Thornton,114 F.R .D. at 603. [*20] See, e .g., Cameron v, E.M.Adams Co.. 547 F2d 473 (9th Cir. 1976) (class in-cluded both public offering and aftermarket buyers) ; Inre Activision Sec. Litig., 621 F Supp . 415, 433 (MD . Cal.1985) ("It is no barrier that [a] plaintiff may have pur-chased . . . stock pursuant to the initial offering yet he seeks

to represent purchasers in the aftermarket .") ; Weinbergerv. Jackson, 102 F.R.D. 839, 842 (N.D. Cal. 1984) ; In reVictor Technologies Sec. Litig., 102 ER,D. 53 (N.D . Cal.1984) (certified class includes public offering purchasersand aftermarket purchasers). Therefore, FMC PensionGroup has made a preliminary showing of both adequacyand typicality under Rule 23.

4 . Rebutting the Presumptio n

The final step under the PSLRA allows competingplaintiffs to attempt to rebut the presumptive lead plain-tiffs qualifications under Rule 23 . Cavanaugh, 306 F3dat 729. The presumption concerning lead plaintiff canonly be rebutted in two ways : I) by a showing that thepresumptively most adequate plaintiff will not fairly or ad-equately protect the interests of the class, or 2) by a show-ing that the [*21 ] presumptively most adequate plaintiffis subject to unique defenses that render the plaintiff inca-pable of adequately representing the interests of the class .15 U.S.C. § 78u-4(a)(3)(B)(iii)(11) ; Advanced ?issue, 184F.R .D. at 350-51 . At this step of the inquiry, the processis adversarial and the other plaintiffs may present evi-dence disputing the lead plaintiffs prima facie showingof typicality and adequacy. Cavanaugh, 306 F3d at 729 .

Leason Group objects to FMC Pension Group onthe grounds that one of the group's members, JamericaFinancial Inc . ("Jamerica"), is "incurably tainted" by secu-rities industry misconduct . Leason Group maintains thatthe President and principal representative of Jamerica,Mr. Sherwin Brown, is subject to over sixty complaints tosecurities regulators including misrepresentation, unau-thorized trading in client accounts, and use of unsuit-able investments . In fact, Mr. Brown has had his National

Association of Securities Dealers ("NASD") membershipterminated . It is unclear at this time whether these accu-sations involve Surebeam securities or bear any relationto the present action .

On more than [*22] one occasion courts have foundthat an individual is an inadequate lead plaintiff due tounrelated misconduct which implicates the individual'sability to serve as a fiduciary. See Newman v. Eagle Bldg.Techs., 209 F.R.D. 499, 504-05 (S.D . Fla. 2002) (holdingtwo public citations for violations of SEC and NASD'srules render proposed lead plaintiff inadequate due to

2003 U .S . Dist. LEXIS 25022, *22

concerns about potential defenses and his moral char-acter); Network Assn, 76 F. Supp. 2d at 1029 (holdingpresumptive lead plaintiff inadequate due to unrelatedfraud investigation) . Without comment or considerationof Mr. Brown's guilt or innocence as to the underlyingcharges, this court finds that there is at least a potentialthat Jamerica will be subject to unique defenses and willnot 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 foundinadequate the court sever Jamerica from the group andconsider the group's motion independent of Jamerica . Thecompeting lead plaintiffs object to severance of Jamericafrom FMC Pension Group on the grounds [*23] that in-dividual members of a group should not be allowed tosegment and that all members of FMC Pension Group aretainted by inclusion in the group with Jamerica .

Competing plaintiffs' argument that a group rises andfalls as a group and should not be allowed to segment isnot supported by the case law. In fact, courts in this cir-cuit routinely break apart a proposed group in search ofthe 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), forthe proposition that a group cannot be segmented duringthe determination of lead plaintiff. Id. at 1111 . However,the court in In re Critical Path never found segmentationimpermissible . In fact, the In re Critical Path court even-tually appointed an entity lead plaintiff that was severedfrom a larger group . Id. The court merely found that eachindividual or entity, once segmented, must independentlyestablish adequacy and typicality. Id.

Competing plaintiffs also argue that [*24] the entireFMC Pension Group is inadequate by virtue of the fact thatthey moved together with Jamerica and that FMC PensionGroup apparently did not discover, through due diligence,Jamerica's negative circumstance . FMC Pension Groupresponds that Jamerica's misconduct should not reflect on

the remaining group members . FMC Pension group citesNewinan v. Eagle Building Technologies, 209 F.R .D . 499,from the Southern District of Florida for the propositionthat even after one member of a group is eliminated dueto serious misconduct, the remaining group members re-main untainted . Id. at 505 . In Newman, one member ofthe presumptive lead plaintiff group had been publiclycited as violating Securities and Exchange Commissionand NASD rules on two occasions . Id. at 504 . The courtheld the infringing individual inadequate for lead plain-tiff status but found the remaining members of the groupadequate . Id. at 505 . "The only entity that is inadequate

Page 7

for the position of lead plaintiff due to Mr. Kashner's vi-olations of securities laws is Mr. Kashner himself . . . .Such a finding does not kill the ability of the remaining[*25] Davidson Group to serve as lead plaintiff ." Id.

This court chooses to follow the reasoning of theSouthern District of Florida in Newrnan . There is no ev-idence before the court that the remaining members ofFMC Pension Group were involved in securities miscon-duct of any kind . Any alleged misconduct by Mr. Brownonly reflects on the adequacy of Jamerica and not theother members of FMC Pension Group . Therefore, thecourt finds that despite Jamerica's inadequacy to serve aslead plaintiff, the remaining members of FMC PensionGroup meet the adequacy requirement .

Following the elimination of Jamerica, FMC PensionGroup remains the presumptive lead plaintiff. Withoutdeciding the issue of aggregation, FMC Pension Groupis still the plaintiff with the largest financial interest .

FMC Pension still includes the single investor with thelargest 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'sloss of $654,713, (2) Joseph Brogan's loss of $225,530,and (3) FMC Pension's loss of $113,965 . Thus, withoutJamerica FMC Pension Group's aggregate losses amountto $994,208 . The [*261 second largest proposed plaintiff,Leason Group, has only suffered losses of approximately$204,086 . Finally, FMC Pension Group's typicality is notdefeated by elimination of Jamerica. Therefore, even af-

ter Jamerica is removed from the group, FMC PensionGroup remains the presumptive lead plaintiff.

The only other argument that FMC .Pension Groupwill not fairly and adequately represent the class comesfrom Bildstein in his motion to be appointed as a separatelead plaintiff on the claims arising under the SecuritiesAct.

B. "Niche" Lead Plaintiffs

Bildstein moves for this court to appoint co-leadplaintiffs, sometimes referred to as "niche" plaintiffs, thatis one lead plaintiff for the claims under § 10(b) and20(a) of the Exchange Act ("the section 10 claims") andone lead plaintiff for the claims under § 11 and 15 ofthe Securities Act ("the section 11 claims") . Bildstein ar-gues he is the most appropriate plaintiff for the section 11claims . Former proposed lead plaintiff Anthony Segallejoins in Bildstein's motion . FMC Pension Group objectsto the appointment of multiple lead plaintiffs . n 5

n5 Defendants have also filed objection toBildstein's motion to appoint a separate lead plain-tiff on the section 11 claims . However, Defendants

2003 U . S . Dist . LEXIS 25022, *26

lack standing to object to the adequacy or typicali tyof the presumptive lead plaintiff . 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II) ("The p resumption desc ri bed insubclause (I) may be rebutted only upon proof by amember of the purported plaintiff clas s . . .") ; Takeda,67E Supp . 2d at 1138; Gluck v. CellStar Corp. . 976F Supp. 542, 550 (N.D. Tex. 1997) .

[*27

Bildstein argues that a separate lead plaintiff is neededto represent the interests of the section II plaintiffs be-

cause section 11 has different legal requirements . SectionI1 claims may proceed on a strict liability theory whereassection 10 claims require scienter be proven . Bildsteinasserts this difference in scienter creates an "inherentconflict" between the two classes of investors and conse-quently FMC Pension Group will not pursue the section11 claims vigorously.

In support of his argument, Bildstein cites a few casesin which district courts have appointed "niche" lead plain-tiffs . See In re Cendant Corp. Litig., 182 F.R.D. 144,

149-50 (D. N.J. 1998) (appointing co-lead plaintiffs be-cause the presumptive lead plaintiff had a conflict of in-terest due to investments in defendant's institution) ; In

re Nanophase Tech . Corp . Litig., 1999 U.S. Dist . LEXIS16171, *16 (N.D. Ill. Sept. 27, 1999) (appointing co-leadplaintiffs on section 10 and section 11 claims because thelegal 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[*28] plaintiffs on the section II and section 10 claims) .Although Bildstein argues that because the Securities Actand the Exchange Act are two different statutes the courtis required to appoint two different lead plaintiffs, he pro-vides no authority to support this proposition .

In fact, the majority of courts have refused to appointniche lead plaintiffs, arguing that such a practice defeatsthe PSLRA's goal of "minimizing lawyer-driven litiga-tion ." See, e .g ., Advanced Tissue, 184 FR .D. at 352 (re-

fusing to appoint co-lead plaintiffs because one group hadalready satisfied the PSLRA's requirements) ; Aronson, 79

F. Supp. 2d at 1159; Enron Corp., 206F.R .D. at 454-56(refusing to subdivide into multiple "niche" lead plaintiffsbased 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 (E.D.N Y2000) (refusing to appoint subclasses with separate leadplaintiffs because it would "run counter to one of thestated purposes of the PSLRA which is to'minimize costs ;

and to give control of the litigation to lead plaintiffs") ;Gluck v. CellStar Corp., 976 F. Supp. 542, 549 (N.D. Tex .

1997) [*29] ("Increasing the number of Lead Plaintiffs

Page 8

would detract from the Reform Act's fundamental goalof client control, as it would inevitably delegate morecontrol and responsibility to the lawyers for the classand make the class representatives more reliant on thelawyers.") ; Weinberg v. Atlas Air Worldwide Holdings,Inc., 216 F.R .D. 248, 254 (S.D.N. Y. 2003) ("In sum, thereis no need to appoint multiple Lead Plaintiffs in order torepresent different causes of action when subclasses orseparate representatives may be appointed, if necessary,as the litigation proceeds .").

One district court in the Northern District of Californiaspecifically rejected the argument made by Bildstein inthis case . See Aronson, 79 F Stipp. 2d at 1151 . TheAronson plaintiffs requested different lead plaintiffs onthe claims under the Securities Act and the ExchangeAct on the grounds that the two acts "involved differentshowings of scienter and proof." Id . The Aronson courtspecifically held that differences in scienter do not amountto an inherent conflict necessitating multiple lead plain-tiffs. Id. See also In re Diasonics Sec. Litig., 599 F Supp.447, 454 (N.D. Cal. 1984) [*30] ("The Ninth Circuit hasexplicitly rejected the suggestion that there is an incipientconflict between early purchasers and later purchasers in astock offering .") (citing Blackie v. Barrack, 524 F.2d 891,908-10 (9th Cir. 1975)) . Because "all claims are based onthe same financial disclosures, the existence of differentpleading standards does not create the need for a separatelead plaintiff." Aronson, 79 F. Supp. 2d at 1151. While aconflict of interest is an adequate reason to appoint nichelead plaintiffs, the court may not rely on speculationsabout possible future conflicts. Id . The statute presumesthat "one lead plaintiff can vigorously pursue all availablecauses of action against all possible defendants under allavailable legal theories ." Id .

In this case, Bildstein has failed to prove a conflict be-tween the section 10 and section 11 plaintiffs. The claimsof the section 10 and section 11 plaintiffs are based onthe same facts and the different scienter standards do notdefeat the presumption that one lead plaintiff can vigor-ously pursue all available legal claims . The presumptive

lead plaintiff, FMC Pension Group, claims to have [*31]standing to assert section 11 claims and any argumentthat the group will not vigorously represent the interestsof the section I1 plaintiffs is completely speculative atthis point .

C. Lead Counsel

Finally, all parties move for the approval of theirchoice of counsel . The PSLRA dictates that the lead plain-tiff is to select the lead counsel subject to the court'sapproval . 15 U.S.C. § 78u-4(a)(3)(B)(v) . The cou rt mayrefuse to approve a lead plaintiffs choice of counsel if it isnecessary "to protect the interests of the class ." Id . § 78u-

2003 U .S . Dist . LEXIS 25022, *3 1

4(a)(3)(B)(iii)(11)(aa) . In this case , FMC Pension Grouphas selected Milberg Weiss Bershad Hunes & Lerach,LLP ("Milberg Weiss ") as well as Schatz & Noble, P.C .as their counsel . These firms are experienced in securi-ties litigation and the court finds no reason to reject FMC

Pension Group' s selection.

111. Conclusio n

In sum, FMC Pension Groups's motion for appoint-

ment as lead plaintiff [Doe. No. 24-1] is granted condi-tioned on the removal of Jamerica from the FMC PensionGroup . FMC Pension Group's motion for approval ofMilberg Weiss and Schatz & Noble as lead counsel [Doe .No . 24-2] is [*32] granted .

Page 9

Leason Group [Doe. Nos . 1S-I, 18-2], Dobis [Dec.Nos. 35-1, 35-21, Searcy Group [Doc . Nos . 7-1, 7-2],Berni [Doc . Nos. 10-1, 10-2], and Bildstein's [Doe . Nos.30-1, 30-2] motions for appointment as lead plaintiff andfor approval of lead counsel are denied without preju-dice . Bildstein's motion for consolidation is denied asmoot [Doe . No. 30-3] because the court has already en-tered an order consolidating the actions pending and anysubsequently filed related actions [Doc . No . 5] .

IT IS SO ORDERED .

DATED: 12/31,2003

JEFFREY T. MILLER


Case 5:O1-cv-21025-JF Document 28 Filed 01/2812002 Page 1 of 9

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M LBERG WEISS B SEADHYNES & LERACH LLP

JEFFREY W . LAWRENCE (166806)100 Pine StTec#, Suite 2600San Francisco, CA 9411 iTelephone: 4151288 -4545415/2U4534 (tax)

-and-WiLLIAM S . LERACH (68551)401 B Stre51, Suite 1700San Diego , CA 92101Tele : 619/231-1058619/'231-7423 (feu)

I AtWnney* for M. Richard Andrew s

BERNSTEN LITOWITZ BERGER &CTROSSMANN r.r.p

ALAN SCHULMAN (128661)12544 I Iigb Bluff Drive. Suite 150Sate Diego, CA 92130Telephone: 858/793-WO8581793.0323 (J'ax)

BE1 NSTEIN LITOWITZ BERGER &GROSSMANN LL P

DOUGLAS M . McKEIGE1285 Avenue of the Amcrk , 33rd floorNewYork ,NY 100)9Telephone : 212/554-14(X)212/554-1444 (fax)

Atl rneys for the Jacbonvilk Police & Fire Pension F mid

[P opasd) C4-cad Coanse1 for Plaintiffs


NORT RN DI'S'TRICT OF CALIFORNI A

SAN JOSE DIVISION

RUSSELL RALLATI, On Behalfof Himselfand ) No , C-01-21 029-7F(RS)All Ot em SiwilwlySauer, )

C S ACTIONPuff,

STIPUl ATION AND ORDERvs. ) APPOINTING LEAD PLATNTiFFS AND

APPROVING LEAD PLAIN11FFS'NEXTCARD, INC ., et al., ) SELECTION OF CO-LEAD COUNSEL

FORTE CLASSDefendants.

/'11VS. 1a V .d/ 1 . / Yv !JiJ avr aJ Ja+. v . aVVVa/v .v r

Case 5 ;01-ev-21029-JF Document 28 Filed 0112812002 Page 2 of 9

1 Jacksonville Policeand. Fire Pension FundandM . Richard A,IIdrewsby nndttu'oughtheir aXton eys,

2 nub to following stipulation

3 WHEREAS, on November 2, 2001, the above captioned complaint (the "Complaint)

4 was filed in this Court

S WHEmEAS, M. itichard A [ews ("ltadcews") 4iately filed a motion for lead plainaf3 and for

6 approval of his choice ofoounsel, the law firm of Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg

7 Weiss") ;

8 WHEREAS, the Jacksonville Police & Fire Pension Fund ("Jacksonville P&1 ") timely filed a

9 r noticm for lead plairiiff and for approval of its choice of caiuusel, the law firm of Bernstein Litowib Berger

10 & (3n sarnann LLP ("Bernstein Litowitz") ;

I L WEEREAS, the following seven cases, are currently pending in the Naathi n Dislriee of California :

12 AB ULAT D CASE NAME' CASE NDMBEI . LASE F!I F~

13 Ballad ti . Nertrard, Inc., et at. 01-CV-21029 JI' I 1 05/W

14 Sc:heiberv . Nerrcard, Inc., et at 01-CV-21184 if 11106101

15 Goodman v. Nexteard, Inc., et at 01-CV-04153 PJ"H 11/06101

16 Hofmann v. Nextcard, Inc., et at. 01-CV-04296 MJJ 11/16/01

17 Topton v. Nextcard, Inc ., et at. 02-.CV-00099PJH 11 116101

18 Yiaimberga v. Nexicard, Inc., et at . 01-CV-04318 PJH 11/19/01

19 Rose v. Nexicard, Inc ., et al. 01-CV-04705 CRB 12)0419 1

20 WHL•RLAS, the following two cases, asserting identical claims against substantially the saw

21 de.lendants as to cases pending in this NsWct, are euarently pending in the Norlheni Dislnct of Illinois

22 against the defendants:

23 ABBM AT}? CASE NAME CASE DATE PILE!]

24 Pate! v. Nexicard, Inc., el al. O1C-9409 11101!0 1

25 Market Sr. Sec ., Inc . v. N'exgcard, Inc., el at. OIC-8647 11109/01

26 WHEREAS, as more fully set forth in the Declaration of John $eano and M . Richard Andrews,

27 Jacksonville P&F and Andrews have spoken about the issues in the case and have discovered that, based

28 upon the fact that they arc the sole mavants in this District, have suffered similar losses, and understand the

STIP AND (PTLOYC)SLII] 01W APPOIN LEAD PLTFS AND APPROVING LEAD PLTFS 'SELMION OF C )-LKAT) COUNSEL FOR THE Ctgss. C-01-21029-JF(RS) - i -

Casa 5:01 •cv-21029-JF Document 28 Filed 01128/2002 Page 3 of 9

1 impo¢tance of supevviAng and monitoring the case, their intextsts are 9tibstantially similar and it would be

2 in the best iatcz st of all parties involved for both Jacksonville P&F and Andrews to act as co-lead plaintiffs

3 on behalf of to class in this action,

4 SAS, Jacksonville P&F and And w" have subn ih d a slipula iun in the Northern District

5 of Caliti►mia appointing them lead plaintiffs pLusuant to Secdan 21 D(a)(3)(13) of the Securitios Exc e

6 Act of 1934 ("Exchange Act"), 15 U .S .C. §78u-.(a)C3XB) and approving their selection ofBernsteirn

7 Lifowitz and Milberg Weiss as co-lead counsel for the class pursuant to Section 21D(a)(3)(B)(v) of the

8 Exchange Act, IS U .S .C . §76u-4(a)(3)(B)(v);

9 WHEREAS, both Bernstein Litowitz and Milberg Weiss have spoken with their clients,

10 Jacksonville P&F and Andrews, and have received authorization to enter into this Stipulation and

11 Agreement;

12 Wl-I REAS, because Jacksonville P&F aid Andrews have the largwt frnial intent in the relief

13 sought by the class and otherwise satisfy the requirements of Section 2ID(a)(3)(BXiii)(I) of the Exchange

14 Act, 15 U.S .C . §78u-4(a)(3)(BXiii)(T), they are the p tively the most adequate lead plaintiffs in this

15 Action;

16 NOW, THEREFORE, IT 19 HERBY STIPULATED AND AGRPFD, that :

17 T e undemgned)ointly request ft t, pursusutt to Section 21I7(a)(3)(B) of th e

18 Exxhange Act, 15 U.S.C . §78u-•4(aX3)(B), the Court appoint Jacksonville P&F and Andrews co-lead

19 plain S, for the class and, pursuant to Section 211XaX3XBXv) of the Exchange Act, 15 U,S .C. §78u-

20 4(aX3)(B)(v), a ove their selection of Bernstein Litowitz and Milberg Weise as co-

21 lead counsel for the class.

22 IT IS SO STIPULATED-

23 DATED: January 25, 2002 MILBERG WEISS BERSHAD24 HYNES & LERACC LLP

JEFFREY W. LAWRENCE

25

26 1e1 Ieffmu ~ °wrei!CP

27 JEFFREY W. LAWRENCE

28 100 ?Inc Stmet, Suite 2600

STIP AND (PROPOSED] ORD APPOIN LEAD PLUS AND AYPI(OVINU LLAL] PL rSELE)CfION OF C0-LEAD ClUNSJL FORT HE a-ASS- C-01-21029-IF(RS) -2-

Case 5.01-cv-21029-JF Document 28 Filed 0112 002 Page 4 of 9

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San .Francisco, (A 941) 1Telephone : 4 1 512 8 8-45454151'2884534 (fax)

ML.LBERG WEISS BERSHADRYNES & LERACH LLP

WII .LIAM S. LERAC H401 B Street, Suite 1700San Diego, CA 92101Telephone: 6191231-1058619,31-7423 (fax)

Attornoys for M. Rioherd Androws

BERNSTEIN L1TOW17Z BERC3ER &GROSSMANN LLP

ALAN SCHULMAN12544 High Bluff Drive, Suite 150San Diego, CA 92230Telephone . 858!793-007085S/793-0323 (fax)

BERNS7 EIN LITOWITZ BERGER &GROSSMANN LLP

DOUGLAS M . McKEIGE

r-MCKejszDOUGLAS M . MCKEIG E

1285 Avenue of the Arrterieass33rd FloorNew York, NY 10019Telephone; 2121554-1400212/554-1444 (fax)

Attorncys for thus Jacksonville Police & Fire PensionFund

[Proposed] Co Lead Cotimcel for Plaintiffs

iT IS SO ORDERED

IS! ELECTRONIC SIGNATUREJUDGE JEREMY FOGE L

1/28/02

28 G-,CASESw ec„ d\aaaaa4i4.Mp

511? AND [PROPOSED] OKI APPOIN LEAD PLTFS AND APPROVING} LEAD PLTFS'SELECTION OF COA -FAM OUNSEL FOR THE CLASS- C-01-21029-JF(RS) -3 .

Casa 5:01-cv-21029-JF Document 28 Filed 01/28/2002 Page 5 of 9

1 PE IC_ LARA ,ON OZ,SF &VJCE BY FACSfMILE

23 1, the undersigned , declare;

41 . That declarant is and was , at all times herein mentioned , a citizen of the UAW States and

5 a resident of the County of San Francisco , over t o ago of 1 g years, and not a party to or interest in the

6within action ; tat h dec1arant' s business address is 100 Pine Sheet , Saute 2600, San Francisco, California

94T11 .7

2. 'that on ]anuary 25, 2002 , declaraont served by facsimile the STIPUL ATION AND89 (PROPOSED) ORDER APPOINTING LEAD PLAnv'IFFS AND APPROVIN (.; LEAD

PLAINTIFFS ` SELECTION OF CO-LEAD C OUNSEL FORTHE CLASS to the parties listed on the10

attached Service List.11

3. That there is a regular communication by facsimile between, the place of uri ;in and the1 213 places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 25th day14

of January , 2002. at San Francisco, California.i s16

f L I M11C MGT 117 DanW1ie McLeod

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s rip AND IMPOSED) O KU APPUEN LEAD PLT S AND APPRUV1NU LEAX FLATS'SELWnON of ca-raw COtThISEL FMTHE CLASS- G01 -21029-3F(RS)

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Case 5:01 -cv-21 029-J F Document 28 Filed 01128/2002 Page 6 of 9

NEXTCAr1D W .D . CAL?

Service Li8L 01/25/02Page Z

COUNSEL FOR PLAINTIFFS )

'Marc A . TopazSCMIFFRIN & BARROWAY, LLP

Three Bala Plaza East, Suite 400Bala Cynwyd, PA 19004

610/667-7706

610/667 - 7056 (fax)

•Joaeph J . Tabacco, Jr.

Chriatopher T, Heffel£inger

BERMAN DRVAT.V TO VF;AFR TARACCC.O

BURT & PUCILLO425 Califs is SL ., Suite 2025

San Fra fteimc:o, CA 941Q4-2205

415/433-3200415/433,6382 (fax)

*Jeffrey W . LawrenceMILSERG W9155 BERSHAL' HYNES

LRRACR LLP

100 Pine Street , Suite 2600

San 1'rariCiscn, CA 64111415/288-4545

415/288 -4524 (tax ?

Andrew M . SchatzPatrick A . xlingman

SCHATZ & NOBEL330 Main StraQt

Hd.Lrurd, CT 06106

860/493-6292860/493 -6290 (fax )

Bruce 0 . Murphy

LAW OFFICES OF BRUCE O . Mu1PHY265 L1wy9a Lan e

Vnsu E c:h, FL 32963

561/231-4202

561/231 - 4042 (fax)

Alan Schulman

BERNSTEIl7 LITOWITZ BERGER &©ROSSMANN LL P

12544 HiVh Bluf Dr ., Suite 150

San Diego, CA 921308SS/793-007 0

858/793-0313 (fax )

*Laurence D . KingKAPLAN FOX & KILEHSIMBR LLP601 M0=g0me1y Street, Suite 300

San Prancisco, CA 94111

415/772-4700

415/772-4707 (Eax~

*Pau) J . Geller

CAULEY, . DELLER, BOWMAN &COATES, LLP

2255 4aladee Road, Suits l21A

Boca Raton , FL :33x33561/750-300 0

$61/750-3364 (fare )

*Patrick V . DahlstromPOMERANTZ HAUDBK BLOCK

GRO3BMAU & GROSS LL ►'

One North LaSalle StreetSuite 2225Chicago, IL 60602-3908

312/377-1163

312/782.4485 (fax )

*Lawxetlce Posen

THE RQSEN LAW FIRM P .A .232 NadieCTh Avenue . Suite 906

New York, NY 10016

212/532-7299

425 /962-6626 (fax)

*williara S. LGraoh *Jeffrey C . Block

MILBERO WEISS BERSHAD HYNES & Alicia M. Duf f

I,BRACH LLP BEAMAN DEVALERIO PHASE TABACCO

401 B Street , Suite 1700 BURT & PUCILLO

San Diego, CA 92101-5050 One Liberty Square

619/231 - 1058 30ston, MA 021096 .19/231-'1423 (fax, 617/542-830 0

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Case 5:O 1-cv-21029-JF Document 28 Filed 01/2812002 Page 7 of 9

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STW ASD 1PROPOSED1 ORD AFPOIN LAD FLTP5 AND APFKOVINC} Lj AL) FL7'Yj 'SF:IY,C TiON OF CO-LEAD COUNSEL FOR THE CLASS- C-O 1-21029-JF (RS) -6-

Case 5:01-cv-2102"F Document 28 Filed 01/28/2002 Page 8 of 9

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NEXTCARD (H.D, CALIService Liar- • 01/ 75/02

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COT3NSUL FOR PLAINTIFF (S)

Douglas M . McKeige

ARRNF.TF.TN T,TTAWTTZ aWU R

0ROSS .t NN LL?11lf5 Ave of the Americas, 33rd P .New York, NY 1001 9

212I5S4-1400222/554 1444 (fox)

-Ira K . preas

KTRAY, MC1NRRNRY & SQUIRS, LLF830 Third Avenue, 10th Floor

New Yolk, N1 10022

2121371-6600

212/7!i1-2540 (fax)

*Lionel Z . Glancy

Michael Goldberg

GLANCY C. EINKOW LLP1801 Avenue of the stare

suite 311

Los Angeles, CA 90067

310/201-9150310/201-9140 (tax)

*Jonathan K . Levine

Christine M . FOxKAPLAN FOX 6+ KYLSHEIMHR T,T,P

805 Tniro AvInue, 22iid FloorNew York, NY 10022

212/697-1980

212/687 7714 (lax ;

*Marvin Frank

RABIN & PECKEL . LLP275 Madi8Qlt AvwnUaNUw York, NY 1001 6

212/682 .1816

2721682-1892 ( fhx)

COT.W$EL FOR DEP W DALgTS

Paul CollinsJonathan C . DickeyJohn van Loben galsG1BSON, DLUNN & CRUTCHER LLF1530 Page Mill P-oadPalo Alto. CA 94304

650/849-5300

650/849 - 5333 (fax )

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Case 5:41-cv-21029-JF Document 28 Filed 0112812002 Page 9 of 9

NRCTCARr1 (N . L1 . CAL)ServleQ List: - 01./ 2. 5/02Fa9G 3

COUWTk8Y COPIES

Mary Jane FairAdair J . Levity.

WOLF ahLDENSTZIN ADLER FREEMAN& HERZ, LLC

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Chicago, IL 60661

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*' Qenotee Service Via U_5 . Mail

Fred T. laquIthWOLF RALDRNS1EIN A1,]LZR FREEMAN

a. IERZ, IT P270 Madiaon 7weflitNaw York, NY 10016

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