#124568
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
INDERPAL SINGH, Individually and on
Behalf of All Others Persons Similarly
Situated;
Plaintiff,
v.
YUHE INTERNATIONAL, INC., GAO
ZHENTAO, HU GANG, JIANG YINGJUN,
PETER LI, LIU YAOJUN, GREG HUETT,
HAN CHENGXIANG, CHILD VAN
WAGONER & BRADSHAW, PLLC, ROTH
CAPITAL PARTNERS, LLC, RODMAN &
RENHAW, LLC, and BREAN, MURRAY,
CARRET & CO.
Defendants.
No.11-CV-04526-JGK
ECF CASE
aAd PARTNERS LP’s MEMORANDUM OF POINTS AND
AUTHORITIES IN OPPOSITION TO COMPETING
MOTIONS FOR APPOINTMENT AS LEAD PLAINTIFF
Case 1:11-cv-04526-JGK Document 27 Filed 09/09/11 Page 1 of 11
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Institutional investor aAd Partners LP (“aAd Partners”), a pooled investment fund
operating as a limited partnership and headquartered in Solana Beach, California, respectfully
submits this memorandum of law in further support of its motion for appointment as Lead
Plaintiff, and approval of its selection of Lead Counsel, and in opposition to the competing
motion filed by MRMP-Managers LLC (“MRMP”). 1
I. PRELIMINARY STATEMENT
The Private Securities Litigation Reform Act of 1995 (the “PSLRA”), which governs the
pending motions in this case, directs the Court to “appoint as lead plaintiff the member or
members of the purported class that the court determines to be the most capable of adequately
representing the interests of [the] class members” in this litigation. 15 U.S.C. §77z-1(a)(3)(B)(i);
15 U.S.C. §78u-4(a)(3)(B)(i). Pursuant to the PSLRA, the presumptively most adequate plaintiff
is the investor who: (1) “has the largest financial interest in the relief sought by the class;” and
(2) “otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.” 15
U.S.C. §77u-1(a)(3)(B)(iii)(I)(bb)-(cc); 15 U.S.C. §78u-4(a)(3)(B)(iii)(I)(bb)-(cc).
aAd Partners has, by far, the largest financial interest of any movant, otherwise satisfies
the requirements of Rule 23 of the Federal Rules of Civil Procedure and accordingly it should be
appointed Lead Plaintiff and its selection of Lead Counsel should be approved. As set forth in
the certification filed in support of its motion, aAd Partners has lost in excess of $4.5 million on
its purchases of Yuhe International, Inc. (“Yuhe”) securities during the Class Period. As detailed
further herein, not only is this the largest loss reported by any movant, but it is nearly ten (10)
times larger than the losses of the sole remaining movant, MRMP:
1 Four movants filed papers seeking appointment as lead plaintiff: (1) aAd Partners; (2)
MRMP-Managers LLC (“MRMP”); (3); Daiwu Chen; and (4) Kevin Carroll. Recognizing that
aAd Partners has the largest loss and is an appropriate lead plaintiff, Daiwu Chen and Kevin
Carroll have withdrawn their motions for appointment as lead plaintiff. (Docket 25 and 26).
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Lead Plaintiff Movant Amount Of Claimed Loss
aAd Partners LP $4,558,080.75
MRMP-Managers LLC $ 459,290.21
The competing motion of MRMP should therefore be denied, as its loss is significantly
less than that of aAd Partners.
aAd Partners also has made the requisite “preliminary showing” of typicality and
adequacy under Rule 23, Fed.R.Civ.P., as provided in the PSLRA, 15 U.S.C. §77z-1(a)(3)(b); 15
U.S.C. §78u-4(a)(3)(b). The claims of aAd Partners are “typical” of the claims of the members
of the class, as they arise out of the same course of events and are predicated on the same legal
theories as the claims of all class members. aAd Partners satisfies the adequacy requirement
because their interests are aligned with those of the other class members. In addition, aAd
Partners has retained counsel, Gold Bennett Cera & Sidener LLP, who have proven experience in
successfully prosecuting securities class actions, and who are supported by able and effective
liaison counsel, Cohen Milstein Sellers & Toll PLLC.
The presumption in favor of aAd Partners can be rebutted only upon “proof” that they
“(aa) will not fairly and adequately protect the interest of the class; or (bb) [are] subject to unique
defenses that render such plaintiff incapable of adequately representing the class.” 15 U.S.C.
§77z-1(a)(3)(B)(iii)(II); 15 U.S.C. §78u-4(a)(3)(B)(iii)(II). Because no other movant can present
such proof, aAd Partners should be appointed as Lead Plaintiff and its selection of counsel
should be approved.2
2 aAd Partners has moved for lead plaintiff appointment in the other jurisdictions where Yuhe
related class actions have been filed and, if appointed, will seek to consolidate all such actions in
a single forum. The movants who have filed lead plaintiff motions in this Court are also the only
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II. ARGUMENT
A. The Procedures Required by the PSLRA for Appointment of Lead Plaintiff
Sections 27 and 21D of the PSLRA provides that in securities class actions, courts “shall
appoint as lead plaintiff the member or members of the purported plaintiff class that the court
determines to be the most capable of adequately representing the interests of the class members.”
15 U.S.C. §77z-1(a)(3)(B)(i); 15 U.S.C. §78u-4(a)(3)(B)(i). In determining which class member
is “the most adequate plaintiff,” the PSLRA provides that:
[T]he court shall adopt a presumption that the most adequate
plaintiff in any private action arising under this Act is the person or
group of persons that:
(aa) has either filed the complaint or made a motion in response to
a notice . . .;
(bb) in the determination of the court, has the largest financial
interest in the relief sought by the class; and
(cc) otherwise satisfies the requirements of Rule 23 of the Federal
Rules of Civil Procedure.
15 U.S.C. §77z-1(a)(3)(B)(iii)(I); 15 U.S.C. §78u-4(a)(3)(B)(iii)(I). (Emphasis added.)
The PSLRA establishes a rebuttable presumption that the most adequate plaintiff is the
person or entity with the largest financial interest in the relief sought. In order to rebut that
presumption, the competing movants must offer proof that aAd Partners is not adequate or
typical to represent the Class. See In re Cardinal Health Inc. Sec. Litig., 226 F.R.D. 298, 302
(S.D. Ohio 2005) (“To determine which candidate should be Lead Plaintiff, the Court engages in
a two-step inquiry, calculating which candidate has the largest financial interest, and then
determining whether the candidate meets the typicality and adequacy requirements of Rule
such movants in Feyko v. Yuhe International, et al., No. 11-cv-0551 DDP (C.D.Cal.) and Wilson
v. Yuhe International, et al., No. 11-cv-22305-PAS (S.D. Fla.)
Case 1:11-cv-04526-JGK Document 27 Filed 09/09/11 Page 4 of 11
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23(a).”). As set forth herein, aAd Partners is the presumptive Lead Plaintiff and none of the
other movants can offer any type of proof to rebut that presumption.
1. aAd Partners Has the Largest Financial Interest in This Litigation
While the PSLRA does not specify how to decide which plaintiff has the “largest
financial interest” in the relief sought, it is often determined most simply by which potential lead
plaintiff has suffered the greatest total losses. See In re eSpeed, Inc. Sec. Litig., 232 F.R.D. 95,
100 (S.D.N.Y. 2005). The size of a movant’s losses are either calculated using the “first-in/first-
out” (“FIFO”)3 method or the “last-in/first-out” (“LIFO”)4 method. Using either methodology
that the Court chooses to employ, aAd Partners has by far the largest financial interest in this
litigation.
In addition to the size of the movant’s losses, courts have also looked at other factors in
determining a movant’s financial interest, the so-called four factor test. See Lax v. First
Merchants Acceptance Corp., No. 97 C 2715, 1997 WL 461036, at *5 (N.D. Ill. Aug. 11, 1997).
The four factors are: (1) the number of shares purchased; (2) the number of net shares purchased;
(3) the total net funds expended by the plaintiffs during the class period; and (4) the approximate
loss suffered by the plaintiffs. See In re Fuwei Films Litig., 247 F.R.D. 432, 436-437 (S.D.N.Y.
2008); see also, e.g., Baydale v. American Exp. Co., No. 09-3016, 2009 WL 2603140, at *2
(S.D.N.Y. Aug 14, 2009). Most courts consider the fourth factor – approximate losses suffered –
to be the most important in making the lead plaintiff determination. See, e.g., In re Orion Sec.
3 Under the “first-in/first-out” (“FIFO”) method, shares sold during the Class Period are
matched with the first share held or purchased at the beginning of the Class Period, whichever
comes first.
4 Under the “last-in/first-out” (“LIFO”) method, a plaintiff’s sales of the defendant’s stock
during the Class Period are matched against the last shares purchased, resulting in an off-set of
Class Period gains from a plaintiff’s ultimate losses.
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Litig., No. 08-1238, 2008 WL 2811358, at *5 (S.D.N.Y. July 8, 2008) (“This Court, like many
others, ‘shall place the most emphasis on the last of the four factors: the approximate loss
suffered by the movant.’”) (quoting Kaplan v. Gelfond, 240 F.R.D. 88, 93 (S.D.N.Y. 2007));
Fuwei Films, 247 F.R.D. at 437 (same). Applying the four factor test, aAd Partners clearly has
the largest financial interest:
Movant # of Shares
Purchased
# of Net Shares
Purchased
Net Funds
Expended
Loss5
aAd Partners 850,000 shares 450,000 shares $4,962,273.88 $4,558,080.756
MRMP 62,769 shares 62,769 shares $ 531,474.56 $ 459,290.217
Accordingly, it is the presumptive lead plaintiff.
2. aAd Partners Satisfies the Requirements of Rule 23
Under the PSLRA, once a court finds that a movant has the largest financial interest in
the litigation and is otherwise adequate and typical, as is the case with aAd Partners here, the
court must appoint that plaintiff as lead plaintiff unless the court finds that the movant has not
made a prima facie showing of adequacy and typicality. See Ferrari v. Impath, Inc., No 03 Civ.
5667, 2004 WL 1637053, at *4 (S.D.N.Y. July 20, 2004) (“At this stage in the litigation, one
need only make a ‘preliminary showing’ that the Rule’s typicality and adequacy requirements
have been satisfied.”); In re Cavanaugh, 306 F.3d 726 (9th Cir. 2002). In this regard, the court
in Cavanaugh stated:
5 This loss is the same whether computed on a FIFO or LIFO basis.
6 The retained shares were assigned a value of $1.10, the closing price on August 22, 2011, the
day before the lead plaintiff motions were filed.
7 The retained shares were assigned a value of $1.15, the 90-day post Class Period share price
average as of August 22, 2011.
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[A] straightforward application of the statutory scheme, as outlined
above, provides no occasion for comparing plaintiffs with each
other on any basis other than their financial stake in the case. Once
that comparison is made and the court identifies the plaintiff with
the largest stake in the litigation, further inquiry must focus on that
plaintiff alone and [should] be limited to determining whether he
satisfies the other statutory requirements.
306 F.3d at 732.
aAd Partners satisfies the typicality and adequacy requirements of Rule 23. The claims
of aAd Partners are typical of the claims of the rest of the Class because, just like all other Class
members, it purchased Yuhe securities during the Class Period in reliance upon the allegedly
materially false and misleading statements issued by defendants, and suffered damages thereby.
Thus, aAd Partners’ claims are typical of those of other class members since its claims and the
claims of the other Class members arise out of the same course of events. See Fuwei Film, 247
F.R.D. at 436 (“Typicality is satisfied if each class member’s claim arises from the same course
of events, and each class member makes similar legal arguments to prove the defendant’s
liability.”) (internal citations omitted). Additionally, it is not subject to any unique defenses.
aAd Partners is also an adequate representative of the Class. As evidenced by the injuries
suffered by aAd Partners, which purchased Yuhe securities at prices allegedly artificially inflated
by defendant’s materially false and misleading statements, the interests of aAd Partners are
clearly aligned with the interests of the members of the Class, and there is no evidence of any
antagonism between aAd Partners’ interests and those of the other members of the Class.
Additionally, aAd Partners is precisely the type of institutional investor that Congress
sought to summon and empower when it enacted the PSLRA. See Ferrari, 2004 WL 1637053,
at *3 (holding that the purpose behind the PSLRA is best achieved by encouraging institutional
investors to serve as lead plaintiffs). Moreover, as an institutional investor, aAd Partners is
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accustomed to acting as a fiduciary and its experience in legal and financial matters, which will
substantially benefit the Class.
Congress, in passing the PSLRA, expressed a strong preference for plaintiffs such as aAd
Partners to be appointed lead plaintiff. The legislative history of the PSLRA demonstrates this
clear Congressional intent:
The Conference Committee seeks to increase the likelihood that
institutional investors will serve as lead plaintiffs.... The
Conference Committee believes that ... with pension funds
accounting for $4.5 trillion or nearly half of the institutional assets
[of the equity market] ... [i]nstitutional investors and other class
members with large amounts at stake will represent the interests of
the plaintiff class more effectively than class members with small
amounts at stake.
House Conf. Rep. No. 104-369, 104th Cong. 1st Sess. at 34 (1995); In re Adelphia
Communications Corp. Sec. & Derivative Litig., No. 03 MD 1529, 2005 WL 2126157 at *2
(S.D.N.Y. Sept. 1, 2005). In keeping with that Congressional intent, courts in this Circuit
routinely appoint institutional investors, such as aAd Partners, as lead plaintiffs pursuant to the
PSLRA. See Glauser v EVIC Career Colleges Holding Corp., 236 F.R.D. 184 (S.D.N.Y. 2006)
(appointing an institution as lead plaintiff); In re Veeco Instruments, Inc., Sec. Litig., 233 F.R.D.
330 (S.D.N.Y. 2005).
Further, aAd Partners has taken significant steps which demonstrate that it will protect
the interests of the Class; it has retained highly qualified and experienced counsel to prosecute
these claims. aAd Partners has selected the law firm of Gold Bennett Cera & Sidener LLP
(“GBCS”) as Lead Counsel, and Cohen Milstein Seller & Toll PLLC (“CMST”) as Liaison
Counsel. Both of these firms have substantial experience in the prosecution of shareholder and
securities class actions and possess the requisite skill and experience to prosecute this action
effectively and efficiently. aAd Partners “possesses sufficient interest to pursue vigorous
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prosecution of their claims,” and GBCS and CMST are sufficiently “qualified, experienced, and
generally able to conduct the litigation.” Sczesny Trust v. KPMG LLP, 223 F.R.D. 319, 324-25
(S.D.N.Y. 2004). Accordingly, the adequacy of representation requirement is satisfied at this
stage of the proceedings.
Thus, aAd Partners satisfies the typicality and adequacy requirements of Rule 23 for the
purposes of this motion. Accordingly, aAd Partners should be appointed as Lead Plaintiff
because its losses are significantly larger than any other Lead Plaintiff movant, and it is
otherwise adequate and typical for the purposes of this motion.
B. The Competing Motions Should Be Denied
As set forth above, the sole remaining movant, MMRP, claims a far smaller loss than aAd
Partners and thus does not possess the largest financial interest in the relief sought by the Class.
Additionally, MMRP does not possesses claims arising under Sections 11, 12(a)(2), and
15 of the Securities Act of 1933, 15 U.S.C. §§77k, 77l(a)(a), and 77(o) (“Securities Act Claims”)
claims that are in the complaint in this case. On the other hand, aAd Partners does have
Securities Act Claims based on its purchase of Yuhe securities pursuant to a registration
statement and prospectus in Yuhe’s public offering, commencing in October 2010 (the “October
Offering”). aAd Partners purchased 150,000 shares in the October Offering at $7 per share and
therefore has standing to pursue the Securities Act Claims. See In re IndyMac Mortgage-Backed
Sec. Litig., 718 F.Supp.2d 495, 502 (S.D.N.Y. 2010). This is significant, as Section 11 imposes
strict liability on an issuer of securities for any materially misleading statements in a registration
statement, and has no scienter element. Herman & MacLean v. Huddleston, 459 U.S. 375, 381-
82 (1983). Accordingly, the class will be benefited by having aAd Partners as a lead plaintiff
because it has standing to pursue the Securities Act Claims.
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III. CONCLUSION
For all the reasons stated herein, aAd Partners’ motion for consolidation, appointment as
Lead Plaintiff and for approval of its selection of Lead Counsel and Liaison Counsel should be
granted and the competing motions should be denied.
Dated: September 9, 2011 Respectfully submitted,
COHEN MILSTEIN SELLERS & TOLL PLLC
By: /s/Kenneth M. Rehns
Kenneth M. Rehns (krehns@cohenmilstein.com)
88 Pine Street, 14th Floor
New York, NY 10005
Tel: (212) 838-7797
Fax: (212) 838-7745
Proposed Liaison Counsel
GOLD BENNETT CERA & SIDENER LLP
Solomon B. Cera (scera@gbcslaw.com)
(Pro Hac Vice forthcoming)
Thomas C. Bright (tbright@gbcslaw.com)
(Pro Hac Vice forthcoming)
595 Market Street, Suite 2300
San Francisco, California 94105
Tel: ( 415) 777-2230
Fax: (415) 777-5189
Attorneys for aAd Partners LP
Proposed Lead Counsel for the Class
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CERTIFICATE OF SERVICE
I, Kenneth M. Rehns, liaison counsel for the Plaintiff, hereby certify that on September 9,
2011, I filed the foregoing with the Clerk of the Court using the Court’s CM/ECF system which
will send electronic notification of such filing to all counsel of record in the within action.
Furthermore, a copy of the foregoing was delivered to all counsel of record in the related actions
via electronic mail.
/s/Kenneth M. Rehns
Kenneth M. Rehns
Case 1:11-cv-04526-JGK Document 27 Filed 09/09/11 Page 11 of 11
