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TOC_CH1 Regulations:
SECTION 4 |
B. Factual Basis for Hypothetical 2
(Selecting Lead Plaintiff/Counsel) FOLLOW ALL LINKS IN SEQUENCE 2. Plaintiff certification [section 21D(a)(2)][discussion] We do not have the specific certification included with the initial or other complaints that Milberg Weiss filed in connection with the Enron litigation. But all of the cases it lists as new or pending on its Internet site include a link on the Notice of Opportunity to Serve as a Lead Plaintiff to a form that when completed includes the information necessary to complete such certification. Click HERE Keep in mind what the Conference Committee had to say about the procedure for selecting lead plaintiff/counsel as a means of ending the race to the courthouse and protecting "investors who join class actions against lawyer-driven lawsuits by giving control of the litigation to lead plaintiffs with substantial holdings of the securities of the issuer." The Committee, relative to attracting institutional investors to come forward and seek the role of lead plaintiff, was influenced greatly by a law review article (Elliott J. Weiss and John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions," 104 Yale L.J. 2053 (1995), which, if nothing else, illustrates that law professors sometimes do have an impact on the direction of the law. Keep in mind the three objectives as we examine these provisions in action – (1) end race to courthouse; (2) end lawyer-drive litigation; (3) put shareholders with large losses (presumed to be institutional investors) in charge. Enron was not the first big case and it may or may not match Cendant in a number of respects. Seventy complaints were filed in Cendant and the major, but not only, aspect of the case settled for over $3.2 billion. We will come back to it in due course. 3. Let the race to be lead plaintiff/lead counsel begin. Click HERE. 4. Publishing the Notice to Class Members. [section 21D(a)(3)(A) (i))] [discussion] This is one area in which counsel have learned from experience. The Notice used by Milberg Weiss [click HERE] informs members of the class that the complaint is available at the named court in which the action is filed and includes a link to the Milberg Weiss Internet site at which the complaint is also available. That link takes one to the Notice of Opportunity to Act as Lead Plaintiff, which in turn includes a link to the complaint. The Notice continues to serve as a recruiting of plaintiffs device, referring to the $30 billion in recoveries for which the firm claims credit. This is up from the claim of $3 billion in some earlier notices although the earlier notices were limited to claims alleging violations of the securities laws. 5. The motion to be named and selection of lead plaintiff. [section 21D(a)(3)(A) (i)(II))][section 21D(a)(3)(B))][discussion]. See also § 2.04. Worthy of note at the outset for our purposes is what Stanford Class Action Clearinghouse lists as the first identified complaint in its database (actually the second case filed). The COMPLAINT was filed on October 22, 2001 in the Southern District of Texas by local counsel and included as counsel at least three recognizable class action firms, including Milberg Weiss. The plaintiffs are two named individuals, Seth Abram and Steven Frank. On December 4, 2001, Milberg Weiss filed another complaint with Amalgamated Bank as Trustee for Longview Collective Investment Fund, Longview Core Index Bond Fund named as plaintiff , with different Texas local counsel and sans the class action and other firms included in the Abram/Frank complaint. The COMPLAINT [click on amended class action complaint under Court Documents] included several additional defendants BUT when it came to filing the motion to name lead plaintiff, Milberg Weiss filed the motion on behalf of Amalgamated Bank and four institutional investors, including the Regents of the University of California, none of whom had filed a complaint. Before Judge Harmon ruled, however, Milberg Weiss dropped all of the prospective lead plaintiffs other that of the Regents of th Board of California.. Judge Harmon's OPINION relating to consolidation and naming of lead plaintiff/lead counsel is an important but lengthy one and we need to focus on only parts of the opinion. Note at the outset the large number of separate cases brought by plaintiffs against various defendants, none of which included the four additional institutional investors that Milberg Weiss included in its motion to have them named as lead plaintiff. Glance at the long list of attorneys making appearances. Judge Harmon followed the view in the Southern District of Texas with respect to the aggregation of plaintiffs. For her discussion of the law in this respect go to the Applicable Law, Court's Decision, Remaining Applicants, Court's Decision of her opinion. For other views, see § 2.08. 6.Selection of lead counsel. [section 21D(a)(3)(B)(v))][discussion]. Judge Harmon took the straight-line suggested by PSLRA and approved counsel selected by the successful lead plaintiff. See Selection of Lead Counsel. A number of courts have found in their authority to approve counsel reason to impose an auction process for selecting lead counsel, generally with the right of counsel selected by the lead plaintiff to meet the bid approved by the court as part of the auction process. The Third Circuit in Cendant put a damper on the use of an auction, but left the door slightly ajar. Judge Walker in the Northern District of California, the patron saint of the auction selection process, attempted to make the arrangement negotiated by prospective and presumptive most adequate plaintiff a test of whether such plaintiff could adequately represent the class. A Ninth Circuit panel rejected this approach. The last word probably has not been written as to the latitude of the district court in approving the selection of lead counsel and/or taking into account the arrangement between the would be lead plaintiff and its choice as lead counsel in determining whether the plaintiff is the most adequate plaintiff. See § 2.10-2.12. 7. Certification of Class Representative. See § 2.13. |