Wednesday, August 17, 2005

Group of Six Unrelated Investors Appointed Lead Plaintiff

Ah, six. A unitary perfect number, the answer to the kissing number problem, and now the number of what Judge Richard J. Holwell (S.D.N.Y.) calls "seemingly unrelated parties" that have been appointed as Lead Plaintiff in the Elan Corporation securities class action. Judge Holwell did chastise the so-called "Institutional Investor Group" a bit before appointing them, saying that the Group "fails to address a concern raised by a number of courts, namely, that the aggregation of large, unrelated ‘groups’ of investors defeats the purpose of choosing a lead plaintiff." However, "despite these concerns, there can be no doubt that the PSLRA contemplates that some ‘groups’ can serve as lead plaintiff," and at least "preliminarily, the Court is unconcerned with the size of the group, and finds that six members is not too unwieldy a number to effectively manage the litigation." "This is not, in other words, a group so large that the PSLRA's express purpose of placing the control of securities class action with a small and finite number of plaintiffs (as opposed to their counsel) becomes wholly undermined by its sheer size." "Indeed, even were the Court to deconstruct the Group, two of its individual members would still have the largest financial interest."

In sum, Judge Holwell said that "this is simply not a case where a group of unrelated investors has been cobbled together as a ‘group’ to displace a single competing institutional investor, or a smaller, closely-related group of investors. If it were, the Court would be reluctant to recognize the group under the statute."

You can read Barnet v. Elan, issued August 8, 2005, at 2005 U.S. Dist. LEXIS 16388.

Nugget: "There is also no doubt that not all groups qualify -- consider the reductio ad absurdum of a ‘group’ consisting of the entire class."

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