NY Judge Taps Individual Investors as Class Action Chief Plaintiff
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
plaintiff.
“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.