Tuesday, August 02, 2005

Eight Member Group Appointed Lead Plaintiff

Two lead plaintiff groups, "the so-called ‘Webster Group,’ consisting of eight investors, and "the so-called ‘Mayeri Group’ consisting of seven investors" both asked the court to be appointed Lead Plaintiff in the 51job securities class action. The Shanghai based human resource company, a Chinese "monster.com" if you will, with an executive staff with an average age of 36 (not that’s there’s anything wrong with that), managed to get itself embroiled in securities class action litigation just four months into its existence as a public company. Seems its CEO is pretty excited about the prospect of becoming the Far East’s next billionaire. But really, who isn’t, right? But let’s stay on track here.

Since the Webster Group had $311,710 in losses and the Mayeri Group had only $176,641 (and the Mayeri Group did not respond "to the Webster Group's calculations of losses"), veteran Judge Charles S. Haight (S.D.N.Y.) found that "the Webster Group has the larger (if not the largest) financial interest." As for the limited Rule 23 inquiry on adequacy and typicality, the court held that the Webster Group satisfies this test, noting that 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."

So you’re probably wondering at least two things. What’s the point of the Mayeri Group fighting for lead plaintiff if it’s not making any arguments against the other group that has almost twice its losses? And why did the court appoint a group with eight members? Well, as to the first question, who knows? The decision doesn’t say. The second question is an easy one though. The Webster Group argued that "the motion of the seven-member Mayeri Group should be denied because its membership far exceeds the number of movants recommended by the SEC." The judge mused that since the Webster Group "identifies eight investors as members," that "would seem to invite an et tu quoque response from the Mayeri Group." Sure seems like it. But looking deeper, Judge Haight noticed that "the answer may lie in the fact that the surname of three Group members is "Webster" and that of two others is "Rabhan." If one regards these apparent family members as single investor entity (much as churches regard the members of a parishioner family living together as a single "pledging unit'), the SEC-approved total of five 'persons' is achieved."

There you have it folks. Looks like this case is going to get rolling. Judge Haight ordered lead counsel "to move for class certification" "without undue delay," "not later than August 31, 2005."

You can read the decision, issued July 26, 2005, at 2005 U.S. Dist. LEXIS 15059.

Nugget: "The two groups of investors vie with each other for these procedural plums."

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