Opinion
Civil Action No. 3:98-CV-1716-L (CONSOLIDATED ACTION). Consolidated With Civil Action No. 3:98-CV-1809-L; § Civil Action No. 3:98-CV-1827-L; § Civil Action No. 3:98-CV-1847-L; § Civil Action No. 3:98-CV-1978-L; § Civil Action No. 3:98-CV-2029-L; § Civil Action No. 3:98-CV-2109-L; § Civil Action No. 3:98-CV-1802-L; § Civil Action No. 3:98-CV-1828-L; § Civil Action No. 3:98-CV-1849-L; § Civil Action No. 3:98-CV-1885-L; § Civil Action No. 3:98-CV-1886-L; § Civil Action No. 3:98-CV-1958-L; § Civil Action No. 3:98-CV-2054-L; § Civil Action No. 3:98-CV-2087-L; § Civil Action No. 3:98-CV-2122-L; § Civil Action No. 3:98-CV-2196-L; § Civil Action No. 3:98-CV-2232-L; § Civil Action No. 3:98-CV-2538-L.
July 12, 2000.
MEMORANDUM OPINION AND ORDER
Before the court are the Netsky Plaintiffs Group's ("Netsky Group") Motion to be Appointed Lead Plaintiffs Pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act of 1934 and for Appointment of Lead Plaintiffs' Co-Lead Counsel, filed September 21, 1998; Motion of the Rozenfeld Group for Appointment of Lead Plaintiffs, Approval of Lead Counsel and Entry of [Proposed] Pre-Trial Order No. 1, filed September 21, 1998; Motion for Appointment of Med-Plan Inc. as Lead Plaintiff and for Approval of Lead Counsel, filed October 2, 1998; and the Joint Amended and Supplemental Motion for Appointment of Med Plan Inc. ("Med-Plan") and the United Brotherhood of Carpenters and Joiners of America Local 3127 Pension Fund (the "UBC Fund") as Lead Plaintiffs and for Approval of Lead Counsel, filed December 15, 1998. Upon consideration of the motions, responses, replies, evidence, and applicable law, the court, for the reasons that follow, grants in part and denies in part the Netsky Group's Motion for Appointment of Lead Plaintiffs and Appointment of Plaintiffs' Co-Lead Counsel. The remaining motions for appointment of lead plaintiff and approval/appointment of lead counsel are denied.
In its lead plaintiff motion, the Rozenfeld Group proposes, as an alternative, that the court appoint UBC Fund as lead plaintiff should the court decide to appoint a single person to represent the interests of the class. UBC Fund, however, has since joined with Med-Plan and now seeks to be appointed co-lead plaintiff with Med-Plan. Because the Rozenfeld Group has neither moved to withdraw its motion for appointment of lead plaintiff nor otherwise informed the court of its position, the court is uncertain whether the group's thirty-eight individual members desire to nevertheless be appointed lead plaintiff. The court, therefore, will consider the Rozenfeld Group's motion but only as it pertains to the thirty-eight individual members. As UBC Fund has requested that it be appointed co-lead plaintiff in this litigation, the court will consider its shares and financial losses independently from that of any other member of the purported class.
On December 15, 1998, Med-Plan and UBC Fund filed a joint motion to be appointed co-lead plaintiffs in this action. As Med-Plan no longer seeks to be appointed sole lead plaintiff in this litigation, its individual motion for appointment of lead plaintiff and approval of lead counsel is denied as moot.
I. Factual and Procedural Background
This consolidated securities fraud class action is brought pursuant to the Securities Exchange Act of 1934 ("Exchange Act"), as amended by the Private Securities Litigation Reform Act of 1995 ("PSLRA") and Rule 10b-5 of the Securities Exchange Commission ("SEC") promulgated thereunder. Plaintiffs are either individual persons or entities that purchased or otherwise acquired the common stock of Defendant Capstead Mortgage Corporation ("Capstead" or "Company") between April 17, 1997 and June 25, 1998 (the "Class Period"). Capstead is a Dallas based corporation that invests in mortgage backed securities and serviced mortgage loans, and operates as a real estate investment trust. Defendants Ronn K. Lytle, Christopher T. Gilson, Julie A. Moore, Andrew F. Jacobs and William H. Rudluff ("Individual Defendants") are all officers and/or directors of Capstead or Capstead, Inc., the subsidiary which conduct's the Company's mortgage servicing operations.Plaintiffs allege that during the Class Period, Defendants issued false and misleading statements regarding Capstead's financial results, the strength of the Company's business, and the success of its investment strategy. Plaintiffs also allege that Defendants represented that Capstead was experienced in and uniquely well positioned to generate steady earnings with a stable dividend regardless of the direction of interest rates. Plaintiffs further allege that as a result of these representations and other positive statements disseminated by Defendants regarding the Company's ability to protect, and even enhance its portfolio of investments from fluctuations in interest rates, the price of Capstead's stock price was artificially inflated during the Class Period.
On June 26, 1998, Capstead announced that it would suffer a loss of $255 million. This loss was attributed to the Company's repositioning its mortgage securities portfolio, which entailed the sale of Capstead's Interest Only portfolio, as well as its Fannie Mae/Freddie Mac and Ginnie-Mae adjustable rate mortgages securities. Capstead also announced an anticipated impairment charge of $45 million on its mortgage servicing portfolio because of continued high mortgage prepayment rates, and cautioned that its third quarter dividend would be much lower than the Company had previously stated. Following these disclosures, the price of Capstead's stock fell sharply, and according to Plaintiffs, traded at $8-11/16 per share at the time this action was filed — well below the Class Period high of $27-11/16.
Over the next few months, a total of twenty-four putative class action lawsuits were filed against Defendants by various named Plaintiffs each alleging violations of the federal securities laws. Each of those lawsuits were subsequently consolidated into this action. The Netsky Group, the Rozenfeld Group, and Med-Plan and UBC Fund now move to be appointed lead plaintiff in this action and request approval of their choice of lead counsel.
The Netsky Group is comprised of 1,155 persons or entities who purchased or acquired in excess of 1.6 million shares of Capstead stock during the Class Period, and who collectively suffered a loss of $25 million. The Rozenfeld Group consists of thirty-nine investors, including UBC Fund, whose members collectively purchased approximately 64,671 shares of Capstead stock during the Class Period and allege an aggregate loss of approximately $899,764. Med-Plan and UBC Fund together purchased 80,000 shares of Capstead stock during the Class Period and collectively allege damages of approximately $879,000 to $904,000.
II. Legal Standard
The appointment of lead plaintiff in a securities class action is governed by the PSLRA, codified in relevant part at Section 21D(a) of the Exchange Act, 15 U.S.C. § 78u-4. Under the PSLRA, the court "shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members. . . ." 15 U.S.C. § 78u-4 (a)(3)(B)(i). Where consolidation of multiple cases has occurred, the court is directed to appoint the most adequate plaintiff as lead plaintiff for the consolidated actions. 15 U.S.C. § 78u-4(a)(3)(B)(ii). In determining whom should serve as lead plaintiff, the court is directed to adopt a presumption that the most adequate plaintiff is the person or group of persons that 1) filed the complaint or moved for appointment as lead plaintiff in response to a notice (of the pendency of the action) under § 78u-4(a)(3)(A)(i); 2) has the largest financial interest in the relief sought by the class; and 3) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). To rebut this presumption, a member of the purported plaintiff class must establish that the presumptively most adequate plaintiff will not fairly and adequately protect the interests of the class, or is subject to unique defenses that render such plaintiff incapable of adequately representing the class. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II).III. Appointment of Lead Plaintiff A. Analysis of Presumption's Requirements 1. The Notice Requirement
Any class member seeking to serve as lead plaintiff must file a lead plaintiff motion within sixty days (60) of the date on which the notice advising of the pendency of the action is published. See 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). In cases where more than one action is filed, the time begins to run from the filing of the first-filed action, and the sixty day limitations period is calculated from the date on which notice for the first-filed action is published. See In re Telxon Corp. Sec. Litig., 67 F. Supp.2d 803, 818 (N.D. Ohio 1999). In this case, it is undisputed that the first-filed complaint in this litigation was filed on July 23, 1998, and styled Marvin J. Netsky, Marks Brothers, Inc. and Eric Beane, et al. v. Capstead Mortgage, et al., Civil Action No. 3:98-CV-1716-R. On that same date, the Netsky Group published a notice of the pendency of the action over the Business Wire, a widely circulated national business-oriented wire service. See Declaration of Kirk B. Hulett in Support of the Netsky Group's Motion to Be Appointed Lead Plaintiffs Under Section 21D(a)(3)(B) of the Securities Exchange Act of 1934 and For Appointment of Lead Plaintiffs' Co-Lead Counsel, Exhibit 4. Therefore, the deadline for filing motions for appointment of lead plaintiff was September 21, 1998. As both the Netsky Group and the Rozenfeld Group filed motions for appointment of lead plaintiff on September 21, 1998, the court concludes that these two groups satisfy the first requirement under the PSLRA's lead plaintiff provision.
The Business Wire is a business oriented wire service within the meaning of the PSLRA, and has been recognized as a suitable vehicle for satisfying the notice and publication requirements of the PSLRA. See In re Nice Sys. Sec. Litig., 188 F.R.D. 206, 216 n. 8 (D.N.J. 1999)( citing Greebel v. FTP Software, Inc., 939 F. Supp. 57, 62 (D.Mass. 1996).
Med-Plan and UBC Fund filed their joint amended and supplemental motion for appointment as co-lead plaintiffs on December 15, 1998, nearly three months after the deadline for filing motions for appointment of lead plaintiff had expired. Moreover, by the time Med-Plan and UBC Fund filed their joint motion, briefing on lead plaintiff motions had already been completed. Because Med-Plan and UBC Fund filed their joint motion for appointment as co-lead plaintiffs well after the deadline for filing lead plaintiff motions, the court concludes that their motion was not timely filed. Ordinarily, a plaintiff who fails to satisfy one or more of the statutory requirements may not be deemed the presumptively most adequate plaintiff. In this case, however, the court believes that such a determination would be unfair, given the length of time the lead plaintiff motions have been pending in this court. Under the circumstances, to wholly exclude Med-Plan, individually or in conjunction with UBC Fund, from consideration as the presumptively most adequate plaintiff would elevate form over substance and deprive an injured investor of an opportunity to be selected lead plaintiff Therefore, the court declines to disregard Med-Plan from consideration as the presumptively most adequate plaintiff at this stage of the analysis.
After the initial lead plaintiff motions were filed, Med-Plan, UBC Fund and the Netsky Group engaged in negotiations for establishing an agreed structure for lead plaintiff. When an agreement could not be reached among the three sets of plaintiffs, Med-Plan and UBC Fund filed a joint motion to be appointed co-lead plaintiffs.
Med-Plan contends that its initial motion for appointment of lead plaintiff was timely filed and therefore it has satisfied the first requirement under the PSLRA's lead plaintiff provision. The court disagrees. Prior to forming an alliance with UBC Fund, Med-Plan sought to be appointed as sole lead plaintiff in this action. See Motion for Appointment of Med-Plan Inc. as Lead Plaintiff and for Approval of Lead Counsel, filed October 2, 1998. Med-Plan argues that because the PSLRA directs the court to consider all motions for lead plaintiff filed by class members within 90 days of notice of the pendency of the lawsuit, and Med-Plan filed a complaint and motion within that time period, its motion should be considered timely filed. While the PSLRA requires the court to consider any motion made by a purported class member, the Act also requires that those motions be filed within sixty days of the publication of the published notice of the first-filed action. See In re Telxon Corp. Sec. Litig., 67 F. Supp.2d at 818. The PSLRA imposes strict time requirements to ensure that the lead plaintiff is appointed at the earliest possible time, and to expedite the lead plaintiff process. Id. As Med-Plan did not file its initial motion until October 2, 1998, eleven days after the deadline for filing motions for lead plaintiff, the court concludes that the motion was not timely filed.
2. Largest Financial Interest Requirement
As previously stated, the presumptively most adequate plaintiff is, inter alia, the person or group of persons having the largest financial interest in the relief sought by the class. While the PSLRA neither defines "largest financial interest" nor explains how such a determination should be made, courts have found the following factors relevant to this inquiry: 1) the number of shares purchased during the class period; 2) the number of net shares purchased during the class period; 3) the total net funds expended by the plaintiffs during the class period; and 4) the approximate losses suffered during the class period. See In re Olsten Corp. Sec. Litig., 3 F. Supp.2d 286, 295 (E.D.N Y 1998) (citing Lax v. First Merchants Acceptance Corp., 1997 WL 461036, at *5 (N.D.Ill. Aug. 11, 1997); see also Gluck v. Cellstar Corp., 976 F. Supp. 542, 546 (ND. Tex. 1997) (although not specifically enumerated, same factors were considered in determining plaintiff having largest financial interest in the relief sought by the class).
In its lead plaintiff motion, the Netsky Group requests that the court appoint an assemblage of 1,155 persons or entities who purchased various quantities of Capstead securities during the Class Period, contending that altogether they have the largest financial interest in the relief sought by the class. The Netsky Group has since requested that the court appoint the following persons and entities as lead plaintiff: (1) Glenn and Betty MacDonald and the MacDonald Family Trust (the "MacDonalds"); (2) Paul Jacobs and the Paul Jacobs Trust; (3) KilPatrick Life Insurance Co.; (4) Robert McKee and the McKee Trust; (5) George and Mizue O'Hara; (6) Zin Capital Corp.; (7) Phillip and Mary Ann Woodard; and (8) Francis Yans (the "Netsky Subgroup"). See The Netsky Groups' Response to Med-Plan's and Rozenfeld Group's Amended and Supplemental Petition or Appointment of Lead Plaintiff (sic), filed January 4, 1999, at pp. 7-8, 11. The Netsky Group contends that collectively, these members purchased 199,158 shares of Capstead stock and suffered losses of $3.69 million. The Rozenfeld Group contends that its members have the greatest financial loss having purchased approximately 64,671 shares of Capstead stock during the Class Period (30,000 shares are attributable to UBC Fund), and collectively suffered losses of approximately $899,764 ($328,987.50 of the total loss amount is attributable to UBC Fund). Med-Plan and UBC Fund contend that as the two institutional investors with the largest financial interest, they should be appointed lead plaintiff. Specifically, Med-Plan and UBC Fund allege that combined they purchased 80,000 shares of Capstead stock during the Class Period and have suffered damages attributable to the alleged fraud of approximately $879,000 to $904,000.
The Act's presumption is applied according to the "financial interest" of the "group of persons" proposed as lead plaintiff. See 15 U.S.C. § 78u-44(a)(3)(B)(iii)(I); See In re the Baan Co. Sec. Litig., 186 F.R.D. 214, 217 (D.D.C. 1999). Because the Netsky Group now proposes that its eight member subgroup be appointed lead plaintiff, the court will limit its analysis to whether the Netsky Subgroup has the largest financial interest of the relief sought by the class.
It appears that the Netsky Subgroup has the largest financial interest in the relief sought by the class. None of the moving plaintiffs questions whether a random assortment of persons is a "group" within the meaning of the PSLRA's lead plaintiff provision, or whether a group of persons may aggregate their shares for purposes of assessing the financial interest at stake. In assessing which candidate has the largest financial interest in the relief sought, the Netsky Group contends that the determination should be based on the plaintiffs' respective losses. In determining its losses, the Netsky Group has taken the amount of shares purchased minus the sales price, or if not sold, the stock's price after the alleged fraud was revealed. Specifically, the Netsky Group states that for Capstead securities not sold by the group before the end of the Class Period, the loss is calculated by multiplying the number of shares held by the average-share price during the trading days after the end of the Class Period. The prices used were $3.80 (common stock), $15.13 (Preferred A stock) and $8.84 (Preferred B stock). Med-Plan and UBC Fund, on the other hand, contend that the largest financial interest should be measured by the damages attributable to the alleged fraud. Med-Plan and UBC Fund contend that a preliminary analysis of damages shows that Capstead shares had less inflation from the alleged fraud at the time the Netsky Group's single largest investor (the MacDonald Charitable Trust) purchased its shares than at the time Med-Plan and UBC Fund purchased their shares. Because the combined damages of Med-Plan and UBC Fund are approximately $879,000 to $904,000 and the combined damages of the MacDonalds are $542,000 to $669,000, Med-Plan and UBC Fund contend that they have the largest financial interest in the litigation. Whether calculated by the aggregate losses or economic damages attributable to the alleged fraud, the court finds that the Netsky Subgroup has the ' largest financial interest in the relief sought by the class.
Although the Netsky Group states that KilPatrick Life Insurance Company purchased 18,100 shares of Capstead stock, 9,000 of those shares were purchased outside the Class Period. Therefore, those shares will not be considered in determining the financial interest of the Netsky Subgroup.
Med-Plan and UBC Fund initially argued that the Netsky Group was too large to act as lead plaintiff and therefore should not be allowed to aggregate its members' damages to form the largest financial interest in the litigation for purposes of qualifying for the presumptively most adequate plaintiff. In response to this argument, the Netsky Group requested the court to appoint certain members of its entire group as lead plaintiffs. White Med-Plan and UBC Fund challenge the adequacy of the Netsky Subgroup, they do not object to these persons and entities aggregating their losses for purposes of determining who has the largest financial interest in the litigation.
Med-Plan and UBC Fund also contend that they should be appointed co-lead plaintiffs in this litigation because they are the types of lead plaintiffs Congress intended to put in control of securities fraud class actions. The Netsky Group, however, challenges whether Med-Plan and UBC Fund are institutional investors at all. Although it disputes the status of both Med-Plan and UBC Fund as institutional investors, the Netsky Group primarily focuses on Med-Plan's status as an institutional investor. The Netsky Group contends that Med-Plan, contrary to its assertion that it is an insurance company, states its business purpose as "Business Services — Credit Bureaus and Collection Agencies; Personal Supply Services; Management, Consulting and Public Relations; Detective and Protection Agencies, etc." See The Netsky Group's Response to Med-Plan's and Rozenfeld Group's Amended Supplemental Petition or Appointment of Lead Plaintiff, filed January 4, 1999 at p. 9. The Netsky Group further asserts that Med-Plan lists total capital of $1,000 and authorized shares of common stock at 100. Med-Plan responds that it is an institutional investor as contemplated by the Act, asserting that it was formed in 1984 to provide medical care insurance for the workers of several small related businesses. According to Med-Plan, the related businesses contributed monies to Med-Plan to fund the medical care benefits for their workers and Med-Plan invested those contributions and administered the payment of benefits. See Reply to the Netsky Group's Response to the Motion for Appointment of Med-Plan Inc. and the United Brotherhood of Carpenters and Joiners of America Local 3127 Pension Fund as Lead Plaintiffs and for Approval of Lead Counsel, filed January 19, 1999 at pp. 9-10.
Although disputed by the Netsky Group, Med-Plan contends that it is a private medical insurance company. See Memorandum of Law in Support of Amended and Supplemental Motion for Appointment of Med-Plan, Inc. and the United Brotherhood of Carpenters and Joiners of America Local 3127 Pension Fund as Lead Plaintiffs and for Approval of Lead Counsel, filed December 15, 1998 at p. 3. UBC Fund is a labor pension fund that provides pension benefits to the members of Local 3127 of the United Brotherhood of Carpenters and Joiners of America. Id.
Med-Plan does not at this time provide medical care benefits but is still set up to provide such benefits and continues to invest the remaining contributions. See Reply to the Netsky Group's Response to the Motion for Appointment of Med-Plan Inc. and the United Brotherhood of Carpenters and Joiners of America Local 3127 Pension Fund as Lead Plaintiffs and for Approval of Lead Counsel, filed January 19, 1999 at p. 10.
As noted by Med-Plan and UBC Fund, the PSLRA does not define institutional investor; however, in support of its position, the two rely on SEC Rule 144A, which pertains to Private Resales of Securities. Because insurance companies and private employee benefit plans are considered "qualified institutional buyers" under SEC Rule 144A, Med-Plan and UBC Fund assert that they may be classified as institutional investors under the Act. That Rule, however, also requires that such entities own and invest in the aggregate at least $100 million in securities of issuers. See Rule 144A(a)(i). As neither Med-Plan nor UBC Fund has shown that it individually invested at least $100 million in Capstead or any other securities, it appears that neither meets the definition of a "qualified institutional buyer" under SEC Rule 144A; nevertheless, the court is satisfied that Med-Plan and UBC Fund are institutional investors as contemplated by the Act, as both indicate that they invest in issuers securities on behalf of others.
Med-Plan and UBC Fund argue that the Act establishes a preference that institutional investors act as class representatives, and in support of their position cite Gluck v. Cellstar Corp., 976 F. Supp. 542, 548 (N.D. Tex. 1997). In Gluck, a group of individual investors brought a securities fraud class action and moved for appointment as lead plaintiff. In aggregate, the group owned 58,000 shares of stock and estimated losses of less than $900,000. Also vying to be appointed lead plaintiff was an institutional investor that purchased at least 1 million shares of the defendant company's stock and estimated its losses at over $10 million. Concluding that the financial interest of the group of individual investors was significantly smaller than that of the institutional investor, the court found the institutional investor the presumptive lead plaintiff and appointed it rather than the group of individual investors.
In this case, the Netsky Subgroup purchased over 190,000 shares of Capstead stock during the class period and allege losses in excess of $3 million. Moreover, the MacDonalds alone purchased 71,375 shares of Capstead stock during the Class Period and allege losses in excess of $1.26 million. With the exception of KilPatrick Life Insurance Company, the remaining investors individually purchased Capstead stock ranging from 10,000 to 27,000 during the Class Period, and allege losses in the amount of $224,170 to $498,161. While Congress has expressed its preference for securities fraud litigation to be directed by large institutional investors, it also recognized that class members with large amounts at stake will represent the plaintiff class more effectively than class members with small amounts at stake. See Conference Report on Securities Litigation Reform, H.R. Rep. No. 369, 104th Congress, 1St Sess. 31, reprinted in 1995 U.S.C.C.A.N. 679, 733; Gluck, 976 F. Supp. at 548. As no other member of the purported class has submitted any evidence demonstrating that his, her or its financial interest exceeds that of the Netsky Subgroup, the court concludes that the Netsky Subgroup has the largest financial interest in the relief sought by the class.
The court grants the Netsky Group's alternative request that certain of its members serve as lead plaintiffs. To appoint a group of 1,155 persons as lead plaintiffs would certainly contravene one of the legislative purposes of the PSLRA — preventing lawyer-driven litigation. In re Donnkenny Inc. Sec. Litig., 171 F.R.D. 156, 157 (S.D.N.Y. 1997). The purpose behind the PSLRA is to empower investors so that they, not their lawyers, control private securities litigation by allowing the court to ensure the transfer of primary control of private securities litigation from lawyers to investors. See In re Nice Sys. Sec. Litig., 188 P.R.D. 206, 215 (D.N.J. 1999) (citing Chill v. Green Tree Financial Corp., 181 F.R.D. 398, 407 (D.Minn. 1998). Congress intended to increase the likelihood that parties with significant holdings in issuers, whose interests are more aligned with the class of shareholders, will participate in the litigation and exercise control over the selection of plaintiff's counsel. See Gluck, 976 F. Supp. at 544 (citing Conference Report on Securities Litigation Reform, H.R. Rep. No. 369, 104th Congress, 1st Sess. 31, reprinted in 1995 U.S.C.C.A.N. 679, 731). A group of 1,155 lead plaintiffs would not be able to have the type of meaningful participation in the conduct of the litigation as contemplated by the Act. The court, however, believes that a smaller select group of investors with significant holdings who have suffered significant losses will satisfy the statutory goal of the PSLRA.
Med-Plan and UBC Fund argue that the Netsky Subgroup has neither moved for appointment as lead plaintiff or filed a complaint. The court disagrees. The court finds that, although the members comprising the Netsky Subgroup were not specifically named in the Netsky Group's motion, they were included in the 1,155 members seeking to be appointed lead plaintiff. In addition, each has signed a certification establishing his, her or its financial interest in the relief sought by the class, and attesting to the member's eligibility as enunciated in 15 U.S.C. § 78u-4(a)(2)(A). These certifications were attached as exhibits to the Netsky Group's motion.
3. Rule 23 Requirements
As for the third requirement, the PSLRA requires that in addition to having the largest financial interest in the outcome of the litigation, the lead plaintiff also satisfy the requirements of Fed.R.Civ.P. 23. Pursuant to Rule 23, a plaintiff may sue as a representative party on behalf of the class if 1) the class is so numerous that joinder of all members is impracticable, 2) there are questions of law or fact common to the class, 3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and 4) the representative parties will fairly and adequately protect the interests of the class. While the court must conduct a rigorous analysis of the Rule 23 requirements for purposes of determining class certification, Castano v. American Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996), a wide ranging analysis of the rule is not necessary for purposes of appointing a lead plaintiff See Gluck, 976 F. Supp. at 546. The only provisions relevant at this stage of the litigation are typicality and adequacy of representation. Id. The typicality requirement focuses on the similarity between the named plaintiffs' legal and remedial theories and the theories of those whom they purport to represent. See Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620, 625 (5th Cir. 1999), cert. denied, 120 S.Ct. 1169, 145 L.Ed.2d 1078 (2000). In determining whether one can adequately represent the interest of the class, the court considers the Plaintiff's ability to vigorously prosecute the class claims and an absence of conflict or antagonismbetween the interests of the named plaintiffs and the interest of the class. See Kalodner v. Michaels Stores, Inc., 172 F.R.D. 200, 204-205 (N.D. Tex. 1997).
In this case, investors traded millions of shares of Capstead securities during the Class Period. Common questions of law and fact, such as whether federal securities laws were violated, whether Defendants acted recklessly in omitting and misrepresenting material facts, and whether members of the class have sustained damages, predominate over questions solely affecting individual members of the class. The claims asserted by the Netsky Subgroup are typical, if not identical, to the claims of the class because, like each class member, its members purchased Capstead securities during the Class Period and allegedly suffered damages as a result of Defendants' alleged conduct. In addition, there is no evidence of any apparent conflicts between the Netsky Subgroup and the other class members. For these reasons, the court concludes that the Netsky Subgroup satisfies both the typicality and adequacy requirements. Accordingly, the court finds that the Netsky Subgroup is the presumptively most adequate plaintiff because it satisfies each of the requirements under the PSLRA's lead plaintiff provision. Specifically, members of the Netsky Subgroup, in conjunction with the Netsky Group, timely moved to be appointed lead plaintiffs in this litigation; its members have established that they possess, in the aggregate, the largest financial interest in the relief sought by the class; and its members otherwise satisfy the requirements of Fed.R.Civ.P. 23.
B. Analysis of Rebuttal Evidence
The court now considers whether the Rozenfeld Group or Med-Plan and UBC Fund have rebutted the statutory presumption in favor of the Netsky Subgroup. As previously stated, the presumption of most adequate plaintiff can only be rebutted by showing that the presumptively most adequate plaintiff either 1) will not fairly or adequately protect the interests of the class, or 2) is subject to unique defenses that render the plaintiff incapable of adequately representing the interests of the class. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). Neither the Rozenfeld Group nor Med-Plan and UBC Fund have presented evidence that the Netsky Subgroup will not fairly or adequately protect the interests of the class or are subject to unique defenses that render them incapable of adequately representing the class. As the presumption has not been rebutted, the court appoints the Netsky Subgroup as lead plaintiff in this litigation.
IV. Defendants' Objections
Defendants object to the Netsky Group, Rozenfeld Group and Med-Plan on a number of grounds, including attempts by the Netsky Group to thwart discovery, the number of persons and entities originally selected by the Netsky Group for appointment as lead plaintiff, the Rozenfeld Group's failure to file certifications of two members with its complaint, and deficiencies in Med-Plan's certification. Defendants also object to the appointment of Milberg Weiss Bershad Hynes Lerach, LLP, as co-lead counsel in this litigation. Defendants lack standing at this stage of the litigation to oppose a motion for the appointment of lead plaintiff. See Gluck, 976 F. Supp. at 550 (only potential plaintiffs may be heard regarding the appointment of lead plaintiff). Defendants, however, retain the right to challenge the Rule 23 requirements at the class certification stage. Defendants concede that they lack standing to challenge the selection of lead plaintiff or lead counsel but contend that they should be allowed to address matters that are beyond the scope of the appointment of lead plaintiff/lead counsel. To the extent that Defendants attempt to address matters concerning the selection of lead plaintiff or lead counsel, their objections are overruled. With respect to those objections which Defendants contend address matters outside the lead plaintiff/lead counsel selection process, the court finds that they are now moot in light of the court's ruling today.
V. Lead Counsel
The PSLRA requires the lead plaintiff to select lead counsel to represent the class subject to the court's approval. See 15 U.S.C. § 78u-4(a)(3)(B)(v). The Netsky Group moves for approval of four law firms as its choice of counsel: Milberg Weiss Bershad Hynes Lerach, LLP, Spector Roseman, P.C. and Berger Montague, P.C. as co-lead counsel, and Stanley, Mandel Iola, L.L.P. as liaison counsel. The court has reviewed the resumes of these firms and is satisfied that they have the necessary competence, qualifications, and experience to represent the interests of the plaintiff class. Given the size of the putative class, the court will allow these firms to serve as co-lead counsel and liaison counsel. The court, however, cautions the firms that representation of the putative class should be performed in such a way that there is not duplication of efforts, and that costs and expenses are not unnecessarily incurred for the representation of plaintiffs. Accordingly, the law firms of Milberg Weiss Bershad Hynes Lerach LLP, Spector Roseman, P.C. and Berger Montague, P.C. are appointed co-lead counsel, and the law firm of Stanley, Mandel Iola, L.L.P. is appointed local liaison counsel.
VI. Conclusion
For the reasons previously stated, the Netsky Group's motion for appointment of lead plaintiff and approval of lead counsel is granted in part and denied in part, and the motions of the Rozenfeld Group and Med-Plan and UBC Fund are denied. The Netsky Subgroup is hereby appointed lead plaintiff in this litigation. The law firms of Milberg Weiss Bershad Hynes Lerach LLP, Spector Roseman, P.C. and Berger Montague, P.C. are appointed co-lead counsel, and the law firm of Stanley, Mandel Iola, L.L.P. is appointed local liaison counsel.