US District Judge Shira Scheindlin of the US District Court for the Southern District of New York, named the five-member group headed by Shabbir Adib rather than the Greater Pennsylvania Carpenters Pension Fund, the New York Law Journal reported.
Defendant in the case is the financial software company, eSpeed. Plaintiffs accused eSpeed of inflating its stock price by hiding negative information about the company’s prospects.
The lead plaintiff decision can be a significant one in a class action setting because the head plaintiff and its lawyers decide on much of the legal strategy to be employed and typically garner the richest pot of lawyers’ fees.
Scheindlin acknowledged in her ruling that that the
standards established in the 1995 Private Securities
Litigation Reform Act were designed to favor pension funds
and other institutional investors in choosing a lead
“Appointing a group of unrelated investors lead plaintiff could lead to fragmentation and the problem of determining whose voice reigns when the group cannot agree,” she wrote. “An institutional investor with substantial losses functioning as lead plaintiff is less likely to cause a ‘flurry of otherwise pointless activity’ in the form of disputes within the lead plaintiff group.”
She wrote that the contest for presumptive lead plaintiff hinged on whether the Adib group had larger losses than the pension fund. Two of the four factors used in determining which plaintiff had the greatest financial interest in the outcome of the litigation – net number of shares purchased during the class period and the total net funds expended – favored the Adib group, Scheindlin wrote. A third factor – the number of gross shares purchased during the class period – favored the pension fund.
The fourth factor required a measurement of the parties’ financial losses. The judge calculated that Adib group lost either $166,743 or $196,795, while the pension fund lost $121,264.
The case is In Re eSpeed, Inc. Securities Litigation , 05 Civ. 2091.
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