Friday, July 15, 2005

Judge Eyes Net Seller in Evaluating Lead Plaintiff Group

A group of investors in the Zix securities class action can claim victory over three other proposed groups in their bid for that highly coveted of all positions – Lead Plaintiff. In making their respective arguments, each competing group burst out of their bucking chutes so hard, even Little Yellow Jacket himself would be impressed. Fortunately, Judge Ed Kinkeade (N.D. Tex.) was there to score the rides.

In determining that a group of four stockholders (self titled as the Shinabarker Group) "has sufficiently shown they sustained a larger financial loss," Judge Kinkeade first recognized that "the evidence before the Court establishes the Shinabarker Group sustained the largest loss, with approximate losses of $563,185." However, another group (self-titled with the Siegel Group moniker), with approximate losses of $171,934, complained that the Shinabarker Group actually experienced a net gain, rather than loss." Specifically, they said that one of the Shinabarker Group’s members "was a net seller, thereby profiting from the alleged fraud." The judge rejected this though, finding that "the Siegel Group did not provide sufficient evidence supporting this claim" because "the Court cannot determine from the single document the Siegel Group cited… how they arrived at this conclusion." The court also found the point irrelevant, because if the alleged net seller was eliminated from the group, "the remaining Shinabarker Group members would still have sustained larger losses than any other group."

Moving to the limited Rule 23 inquiry, the court next found that Shinabarker Group met "the typicality and adequate representation requirements." Again however, "in its attempt to rebut the presumption that the Shinabarker Group is the most adequate to represent the class" another competing group (this one styled as the Brody Group) argued that the Shinabarker Group has failed "to establish its cohesiveness as a group." But the court again rejected the competing group’s position, holding that Shinabarker Group’s joint declaration (which said that the group decided to work together to prosecute this Action and, that in working together, they can fairly and adequately represent and protect the interests of the other class members) "sufficiently establish[es] for this Court the group's cohesiveness."

You can read the decision at 2005 U.S. Dist. LEXIS 13871.

Nugget: "Factual differences will not defeat typicality as there is no requirement the claims be identical."

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