Order Appointing Lead Plaintiff

Transcription

Case 4:10-md-02185 Document 79
Filed in TXSD on 12/28/10 Page 1 of 20
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
H OUSTON DIVISION
I
re
BP I
PLC
LnIT
I:GAJ
ON SECURITIES
CASENUMBER10-md-2185
M EM ORANDUM AND ORDER
PendingbeforetheCourtarethefollowing m otions:
M otion to Consolidate Cases and for Appointm ent as Lead Plaintiff and
ApprovalofChoiceofLead Counsel(Doc.No.23)filed by New York and
Ohioretirementfunds1(collectively, <sNew York & Ohio'').
M otion forAppointmentas lead Plaintiffs and ApprovalofChoice ofLzad
Counsel(Doc.No.22)filed by RobertLudlow,PeterD.Lichtman,D slieJ.
Nakagiri,andPaulHuyck(collectively,thetiudlow Plaintiffs').
Having consideredtheparties'tslingsand the applicable law,theCourtfindsthattheBP,
PLC securitiesfraud casespending in this Courtshould be consolidated;thatNew York
& Ohio should be appointed as lead plaintiffs; that the Ludlow Plaintiffs should be
appointed as lead plaintiffs of a subclass;and that the lead plaintiffs' choice of lead
counselshould beapproved.
1.
BACKG RO UND
Pending in this Courtare seven putative class action lawsuits againstBP,PLC
((% P'')alleging securitiesfraudrelatingtotheoilspillthatbeganonApril20,2010atthe
D eepw ater H orizon rig in the Gulf of M exico.A m ong other things,the plaintiffs allege
1The m otion is filed by Thom asP. DiN apoli,ComptrolleroftheState ofNew York,asAdm inistrative
Head of the New Y ork State and Local Retirem ent System and sole Trustee of the New York State
Com mon RetirementFund and Ohio A ttorney GeneralRichard A .Cordray,statutory litigation counselfor
theOhio PublicEmployeesRetirem entSystem,the State TeachersRetirem entSystem ofOhio,the School
Em ployeesRetirem entSystem ofOhio,andtheO hio Police& FirePensionFund.
1
that BP and its executives made fraudulent statem ents about the company's safety
m easures and aboutthe extentofthe GulfofM exico spill.Theproposed classesconsist
ofpurchasers ofAmerican Depository Receipts(tiADRs'')and ordinary shares ofBP
during various tim e periods betw een 2005 and 2010.The cases w ere filed in various
districts and transferred to this Courtby the JudicialPanelon M ultidistrictLitigation.
Tim ely notice w as published in business-oriented publications for atleast five of
the class actions,as required by the Private Securities Litigation Reform Actof 1995
(CTSLRA'').15U.S.C.j78u-4(a)(3)(A).2Severalgroupsofplaintiffsfiled motionstobe
appointed aslead plaintiffwithin thePSLRA'S sixty-day window,butallhavewithdrawn
exceptfor New Y ork & O hio and the Ludlow Plaintiffs.
ll.
M OTION TO CONSOLIDATE
As an initialm atter,the Courtfinds it appropriate to consolidate a11of the BP
securitiesclassactionspending in this Courtbecause they involve com mon questionsof
1aw and fact.See Fed.R.Civ.P.42(a).Although,as discussed below,there are
significant differences am ong the claim s in the various cases,there are also substantial
commonalities,andthey involvetûoverlapping (dlefendantsand acommon core offacts
and legalissues.''In reEnron Corp.Sec.Litig.,206 F.R.D.427,440 (S.D.Tex.2002)
(noting thatttconsolidation,atleastpretrial,servesto promotean orderly progression of
thisverycomplex litigation'').Accordingly,thefollowingcasesshallbeconsolidated:
Ludlow v.## PL C,Case No.10-cv-3043;
Johnson Inv.C ounselInc.v.BP PLC ,Case No.10-cv-3044;
2Noticew asprovided inLudlow v. BP PLC,CaseNo.10-cv-3043,foraclassperiodspanningfrom M arch
4,2009to April20,2010;in Yuenv.BP PLC,10-cv-3049,foraclassperiodspanning from A pril16,2009
toMay21,2009;inGreenheldv.BPPLC,10-cv-3448,foraclassperiodspanningfrom February27,2008
to M ay 12, 2010; and in Oklahom a Police Pension & Retirement System v.BP PLC, 10-cv-3452
(koklahomaPolice''j,andMcclurgv.BP PLC,10-cv-3449,foraclassperiodspanningfrom June30,2005
toJune1,2010.(Molumphy Declaration,Ex.E,Doc.No.22-3,at26;RossDeclaration.Ex.A,Doc.No.
47-2.)
2
Yuen v.BP PLC ,Case No.10-cv-3049;
Greenheld v.## PLC,CaseNo.10-cv-3448
M cclurg v.BP PLC,Case No.10-cv-3449;
OklahomaPolicePension t% Ret.uvys.v.BP PLC,Case No.10-cv-34529and
Safev.BritishPetroleum,CaseNo.10-cv-4675.
111.
M O TIONS FOR APPOINTM ENT AS LEA D PIA INTIFF
A . LegalStandard
The PSLRA sets forth the procedure for choosing a lead plaintiff in securities
classactions.15 U.S.C.j78u-4(a)(3)(B).Afternoticehasbeengiven to classmembers
andthecaseshavebeenconsolidated,theCourtistoappointaleadplaintiffççlalssoon as
practicable.''Id.atj 78u-4(a)(3)(B)(ii).ln choosing the lead plaintiff,lçthe courtshall
adopta presum ption thatthe m ostadequate plaintiff ...is the person orgroup ofpersons
that1)hasfiledthecomplaintormovedtobeleadplaintiff;''32)hasçtthelargestfinancial
interestin thereliefsoughtby theclass'';and 3)tfotherwisesatisfiestherequirementsof
Rule23oftheFederalRulesofCivilProcedure.''Id.atj78u-4(a)(3)(B)(iii)(I).
ts-f'he PSLRA doesnotdelineate aprocedure fordetermining the çlargestfinancial
interest' among the proposed class m embers.''Enron, 206 F.R.D. at 440; see also
Plumbers& PipehttersLocal562 Pension Fund v.M GIC Inv.Corp.,256 F.R.D.620,
623-24 (E.D. W is. 2009) (1i(Tjhe PSLRA appears to discourage (finely-calibrated
inquiriesintowhichplaintiffhasthelargestfinancialinterestjandpreferlslthatthecourt
make the determ ination based on whateverfactorsseem m ostappropriate underthefacts
ofthecasebeforeit.'').InEnron,JudgeHanmon used afour-factorinquirythatcourtsin
otherdistrictshad previouslyapplied,considering:$ç(1)thenumberofsharespurchased'
,
(2)thenumberofnetsharespurchased;(3)thetotalnetfundsexpendedbytheplaintiffs
3 In thiscase, both groupsm eetthe firstprong because the Ludlow Plaintiffsfiled the complaintand New
York& Ohio filed amotionforappointmentasleadplaintiffs.
3
during the classperiod;and (4)the approximatelossessuffered by the plaintiffs.''256
F.R.D.at 440.IIFIFO,or 'firstin,firstout' and LIFO,or 'last in,firstout,' are both
frequently em ployed methodologiesforthepurposesofloss calculation''in thiscontext.
CityofM onroeEmployees'Ret.Sys.v.HartfordFin.i'
crv.Group,Inc,269F.R.D.291,
295(S.D.N.Y.2010).4
W ith regard to the proper class period for purposes of selecting a lead plaintiff,
num erous courts have favored using the longest-noticed class period. See, e.g.,In re
DoralFin.Corp.Sec.Litig.,414 F.Supp.2d 398,402-03(S.D.N.Y.2006)(tûIfind that
the use ofthe longer,m ostinclusive class period ...isproper,asitencompasses more
potentialclassmembers ...'');M GIC,256 F.R.D.at624-25 (the llassumption thatlthe
class'...should be defined asthe broadest,mostinclusive potentialclass ...m akes
som e sense,because at the outsetof a case the court should view the facts in the light
m ostfavorable to the plaintiffs and should narrow the allegations only after the parties
havehad the opportunity to develop the record'');In re StarGasSec.Litig.,2005 W L
818617,at*7(D.Conn.Apr.8,2005)(ûtitwouldbeprematuretolimittheplaintiffclass
inthiswayatsuch an earlystageofthelitigation').Thereisarisk,however,to blindly
accepting the longest class period without further inquiry,as potential lead plaintiffs
w ould be encouraged to m anipulate the class period so they had the largest financial
interest. See M GIC, 256 F.R.D . at 625. As a result, although courts avoid fully
consideringthemeritsoftheclaimsatthisstage,see,e.g.,GrandLodgeofPennsylvania
v.Peters,2007 W L 1812641,at*2(M .D.Ra.June22,2007),theyhavedisagreed about
the appropriate levelof scrutiny to apply to the longest noticed class period. In M GIC,
4 isln aFIFO analysis, thefirststockstobesold are assum ed tobethestocksthatw ereacquired first,often
outside ofthe class period....LIFO ...assumesthatthe laststocksto be sold arethe stockspurchased
mostrecentlypriorto thatsale.''1d.
4
forexample,the courtfoundittlan adequate safeguard againstabuse ...to simply review
the com plaint and briefs to m ake sure that the allegations supporting the longest class
period arenotobviouslyfrivolous.''256F.R.D.at625(emphasisadded).ThecourtinIn
re Centerline Holding Co.Sec.Litig.,on the otherhand,applied a plausibility standard
identical to the one used in evaluating a m otion to dism iss.2008 W L 1959799,at *3
(S.D.N.Y.M ay 5,2008) (citing BellAtl.Corp.v.Twombly,550 U.s.544 (2007:.5
Importantly, ûsall courts agree that they should not make any binding determ inations
regarding the properclassperiod aspartofthelead-plaintiffanalysis.''M GIC,256 F.R.D.
at624(citing,interalia,Centerline,2008W L 1959799,at*3-4).
The Courtfindsitappropriate to adoptthe standard used in M GIC.Forpurposes
ofselecting a lead plaintiff,the Courtwilluse the longestnoticed class period unless the
factualallegations supporting thatperiod are itobviously frivolous.''256 F.R.D.at625.
This standard achieves a proper balance, discouraging plaintiffs from m anipulating the
classperiod so thatthey have the largestfinancialinterestbutsubstantially avoiding the
m erits of the claim s without the benefit of adversarial briefing.See id. at 625 n.7
(rejecting Centerline standard because ûtsomewhat superficial argument'' between
potentiallead plaintiffsçûprovidesm ewith apoorrecord formaking an inform ed finding
concemingplausibility'').TheCourtagreeswiththedistrictcourtscited abovewhohave
found itgenerally inappropriate to narrow the classperiod atthis stage ofthe litigation.
ttN arrow ing the class period is more appropriate at a later stage of litigation,with
participation from the Defendantlsq.'
'Dyadic Int1 Inc.,2008 W L 2465286, at *4.
M oreover,plaintiffs are further discouraged from m anipulating the class period by the
5 The Centerline courtnoted that, underthe PSLRA the scienter requirementwould require a showing
greaterthan plausibility atthem otion to dism issstage,butthattheplausibility inquiry wasappropriate for
lead plaintiffpurposes.1d.at*3 11.26.
possibility ofIésanctionsifafterfurtherlitigation thecourtleam sthatthe allegationswere
madeinbadfaith.''Id.at625 (citingLaxv.FirstMerchantsAcceptanceCorp.,1997W L
461036,at*5 (N.D.111.Aug.11,1997:;seealsoIn reStarGasSec.Litig.,---F.Supp.
2d---,2010 W L 3925202,at*6-11(D.Conn.Sept.30,2010)(finding sanctionsagainst
plaintiffsapptopriateforfrivolousfactualandlegalclaims).
To qualify as presumptive lead plaintiffs,a plaintiff orgroup ofplaintiffs must
also satisfy the requirements of Rule 23 in particular,lçthe claim s or defenses ofthe
representative parties are typical of the claims or defenses of the cl% s'' and tsthe
representativepartieswillfairly and adequately protectthe interestsoftheclass.''Fed.R.
Civ.P.23(a)(3)and (4)9seeEnron,206 F.R.D.at441(iTypicality and adequacy are
directlyrelevantto thechoiceofthe Izad Plaintiffaswellasoftheclassrepresentativein
securitiesfraudclassactions-');seealsoIn re Oxford HealthPlans,Inc.Sec.Litig.,182
F.R.D.42,49 (S.D.N.Y.1998)(tTypicality and adequacyofrepresentation aretheonly
provisions (of Rule 23(a)j relevant to a determination oflead plaintiff under the
PSLRA.'').çkAlthough the inquiry atthisstage of the litigation in selecting the Lzad
Plaintiff is not as searching as the one triggered by a subsequent m otion for class
certification,theproposed Lzad Plaintiffmustm akeatleasta prelim inary showing thatit
has claim s thatare typicalofthose ofthe putative classand hasthe capacity to provide
adequate representation for those class m embers.''Enron,206 F.R.D .at441;Gluck v.
CellstarCorp.,976 F.Supp.542,546 (N.D.Tex.1997)C$A comprehensive reading of
thestatuterevealsthat,atthisstageoftheproceedings,jtheproposedleadplaintiffjneed
only make a preliminary showing that it satisfies jthe typicality and adequacy)
requirements-'');D '
Hondtv.Digi1nt'1Inc.,1997 W L 405668,at*2 (D.M inn.April3,
1997) Ctlf Congress had intended an aggressive inquiry by the Court, into the
qualificationsofa claim antto serve as a Lead Plaintiff,itwas an intentthatCongress
chose notto express.'').To make such apreliminary showing,potentiallead plaintiffs
neednotsubm itevidentiaryproofoftypicalityoradequacy.Gluck,976 F.Supp.at546.
çT ypicality does not require a complete identity of claims.Rather,the critical
inquiry isw hetherthe classrepresentative's claim s have the sam e essentialcharacteristics
of those of the putative class.If the claim s arise from a sim ilar course of conduct and
sharethe sam e legaltheory,factualdifferenceswillnotdefeattypicality.''Jamesv.City
ofDallas,Ter,254 F.3d 551,571 (5th Cir.2001)(citing 5 JamesW m.Moore etal.,
Moore's Federal Practice !!23.24g41 (3d ed.2000:. W ith regard to the adequacy
requirement,'tldlifferences between named plaintiffs and class members render the
named plaintiffs inadequate representatives only if those differences create conflicts
between the named plaintiffs' interests and the class mem bers' interests-''M ullen v.
TreasureChestCasino,LLC,186F.3d620,626(5thCir.1999).
Ifa presumption iscreated thata party isthem ostadequate lead plaintiff,itllm ay
be rebutted only upon proof by a mem ber of the purported plaintiff class that the
presumptively mostadequateplaintiff'either 1)çtwillnotfairly and adequately protect
theinterestsoftheclass'';or2)Stissubjecttouniquedefensesthatrendersuch plaintiff
incapableofadequatelyrepresentingtheclass.''j78u-4(a)(3)(B)(iii)(1l).6
6Courtshavenoted the redundancy ofincluding theadequacy requirementofRule 23(a)twice in the
inquiry.SeeInreTclmn Corp.Sec.Litig.,67F.Supp.2d803,817n.23(N.D.Ohio 1999)Ctltisunclear
why the draftersofthePSLRA included thisprecise same prerequisite attwo differentstages in the lead
plaintiffanalysis.Perhapsitw asan oversight.Perhapsthefirstinquiryism erely athresholdinquiry and the
secondismeanttobeacomparativeinquiry (i.e.,whoamong theproposedleadplaintiffs,who mayhave
identicallosses,is the mostadequate).W hatever the reason,the factof its repetition evidencesthe
importanceoftheadequacyrequirement.'');Burkev.Ruttenberg,102F.Supp.2d1280,1338-39(N.D.Ala.
2000)Clnlightofthetextofthestatuteanditspurpose,asinferredfrom thestructureofthestatuteandits
legislative history,thisCourtconcludesthat,ratherthan acting asasetofabsolute threshold requirem ents,
7
B. Analysis
1. LargestFinanciallnterestand A pplicableClassPeriod
ln this case, the determ ination of which group of plaintiffs has the largest
financialinterestin thecasedependsprim arily on which classperiod the Courtappliesat
thisstage.SeeM GIC,256F.R.D.at624(ftinthepresentcaseidentificationofthemovant
with the largestfinancial interestturns on the length of the class period,and m ovants
focus their argum ents on whether the courtshould calculate financialinterests undera
longerperiod'').New York& OhioarguethattheproperclassperiodisJune 30,2005to
June 1s2010 (the ûkNew York & Ohio Period''),the longestnoticed period,while the
Ludlow Plaintiffs arguethattheproperperiod isMarch 4,2009 to April20,2010 (the
tiLudlow Period'').The Ludlow Plaintiffs concede thatNew York & Ohio have the
largestfinancialinterestiftheCourtusesthe New York & Ohio Period.Ifthe Luélow
Period isused,thepartieseach contend thatthey havethe largestfinancialinterest,based
O11Vdrying calculation m ethods.?
Asthe longestnoticed classperiod,theNew York & Ohio Period should beused
forpurposesofthesem otionsunlesstheallegationssupporting itare obviouslyfrivolous.
SeeM GIC,256 F.R.D.at625.TheNew York & Ohio Period isclaim ed in the Oklahoma
Police andM cclurg com plaints.Forexample,thecomplaintsallege that:
subsection 21D(a)(3)(B)(iii)(l)isacomparativesubsection,obligating thecourtto weighthe factorsset
forththercinindetermininjleadylaintiff.A leadplaintiffmovant,tobepresumedmostadequateplaintiff,
need notdemonstratethatltsatisfleseach oftheprerequisites,butm erelythathe,she,oritbestsatisfiesthe
factorslisted'').
1Furtherm ore, the Ludlow Plaintiffs argue thatcom m on sharesof BP purchased on the London Stock
Exchange arenotcovered by federalsecuritiesfraud law sand thusshould notbecounted forpurposesof
these motions.SeeMorrison v.Nat'
lAustralia BankLdt,l30 S.
Ct.2869,2884 (2010)Ctsection 10(b)
doesnotpunish deceptiveconduct,butonly deceptive conducttinconnection with thepurchase orsale of
anysecurityregisteredonanationalsecuritiesexchangeoranysecuritynotsoregistered.''')(citing 15
U.S.C.978J(b)).TheCourtneednotdecidewhethercommonsharesshouldbecountedforpurposesofthis
m otion,astheresultisthesam ewhetherthcCourtconsidersthem ornot.
8
'EBP has for years maintained a corporate eulture where adherence to safety
protocolsand environm entallawswereignored in favorofproflts,''leading to
:<a 2005 explosion in Texas City,Texas ...and two oilspills in Alaska in
2006.5'(OklahomaPoliceCompl.,CaseNo.4:10-cv-3452,Doc.No.1,!14.)
BP's Annual Report filed on Jtme 30, 2005 contained
t:a pledgethatBP had im plem ented protocolsto ensure regulatory and safety
compliance by allem ployees''and t4stated thatitseeksto conductitsactivities
in such a mannerthatthere is no or minimum dnmage to the environment.''
(Oklahoma Police Compl.,!148;M cclurg Compl.,Case No.10-cv-3449,
Doc.No.1,!138.)
BP and its executives m ade materially false and m isleading statem ents
between 2006 and 2010 touting the company's focus on safety, including
im provem ents in response to a 2005 explosion at the BP refinery in Texas
City,Texasand implementation ofrecomm endationsofthe BP US Refineries
lndependent Safety Review Panel.(Oklahoma Police Compl., !1: 49-68;
M cclurg Compl.,ll!l51-70.)
BP and its executives m ade m aterially false and m isleading statem ents
between 2005 and 2010 discussing the GulfofM exico asan importantareaof
growth thatincorporated substantialsafety precautions.(Oklahoma Police
Compl.,!11148,51,56-58,60,62-63,66-679M cclurg Compl.,IN 50,53,56,
59,62,64-65,68-69.)
tlln the daysand weeksafterthe oilspillbegan,BP intentionally understated
theoilflow ratein an attemptto dim inish theperceived impactofthe spilland
thereby convince investors that the spillwould notsignificantly im pactthe
Company.''(OklahomaPoliceCompl.,!(69-72.)
The Courtfinds thatthe allegations in the Oklahoma Police and M cclurg complaints
give rise to claim s of securities fraud for the New Y ork & Ohio Period that are not
obviously frivolous.Accordingly,thatperiod should be applied forpum oses ofthe lead
plaintiff motions.Using thatperiod,it is undisputed that New York & Ohio have the
tilargest financial interest'' within the meaning of the PSLRA. 15 U.S.C. j 78u-
4(a)(3)(B).8
2. Typicality and Adequacy ofNew York & Ohio
ln addition to having the largestfinancial interest,N ew York & O hio m ustalso
m ake a ûtprelim inary showing''oftypicality and adequacy under Federal Rule of Civil
8Because theapplicableclassperiod isdeterm inativeofwhich group hasthe largestfinancialinterest, the
Courtneed notchoose which m ethod forcalculating the largestfinancialinterestw ould otherw ise apply.
9
Procedure 23(a)in orderto beentitled to apresumption thatthey arethemostadequate
lead plaintiffs.See 15 U.S.C.j 78u-4(a)(3)(B)(iii)(I)(cc).The typicality and adequacy
inquiriesare related in thiscontext,asaparty'slack ofltthe sam eessentialcharacteristics
ofthose oftheputative class,''James,254 F.3d at571,m ay resultin itconflicts between
thenam ed plaintiffs'interestsand the classm embers'interests.''M ullen,186 F.3d at626.
For exam ple, if such a party w ere appointed lead plaintiff, there would be potential
conflicts between the party and the other class m embers in drafting the consolidated
complaint,in defending a m otion to dismiss,and in conducting discovery the party
would have an interestin pursuing its specific claim sto the potentialexclusion ofother
classnxernbers'clairns.
Even under the limited inquiry appropriate at this stage of the litigation,see
Enron,206 F.R.D.at441;Gluck v.Cellstar Corp.,976 F.Supp.at546,the Court is
concerned thatNew York & Ohio's claim s differ from those ofthe class in ways that
could m ake them atypicaland inadequate representatives.ltisclearfrom the briefing and
from oralargum entthatNew York & Ohio'stheory ofthecasedifferssigniticantly from
thatofthe Ludlow Plaintiffs.C/ Mullen,186 F.3d at625 (çtthe testfortypicality ...
focuses on the sim ilarity between the named plaintiffs'legaland remedialtheories and
the theoriesofthose whom theypurportto represenf')(quotation marksomitted).First,
whereas the Ludlow Plaintiffs'claims center on BP's statem ents aboutthe safety ofits
drilling operations in the Gulf of M exico in the thirteen months leading up to the
Deepw ater H orizon explosion,N ew Y ork & Ohio argue m ore generally that BP m ade
fraudulent statem ents betw een 2005 and 2010 about its safety precautions both in the
Gulf of M exico and elsew here.Second,in extending the class period to June 1,2010,
10
New York & Ohio focus a good dealofattention on fraud allegedly committed after
April20,2010,such as statem ents aboutthe rate atw hich oilw as escaping from the rig
and aboutBP's attempts to stop the tlow.A substantialportion ofNew York & Ohio's
lossesderivefrom purchasesofBP ADR'Sby one ofthe Ohio funds on M ay 3 and M ay
25, 2010, several weeks after the Deepwater Horizon explosion. (See Second
Supplemental Nettesheim Declaration, Doc. No.71-2,!( 11.) Under at least some
m ethodsofcalculation,New York & Ohio are netsellersofBP ADRSduring the Ludlow
Period.(SeeSupplementalNetteshiem Declaration,Doc.No.48-1,!r4.)
Because ofthesedivergenttheories,New York & Ohio m ightnothave an interest
in vigorouslyplzrslzing the claim scentralto the Ludlow Plaintiffs'shorterclassperiod,in
favor of emphasizing arguments about fraud based on conduct before and after the
Ludlow Plaintiffs'thirteen-monthwindow.Absentclassmemberscouldbeprejudicedby
New York & Ohio'smannerofdrafting a consolidated complaint,defending motionsto
dism iss,and conducting discovery.A ccordingly,the Courtcannotw ith confidence find
thatNew York & Ohio's claim s have the içsame essential chracteristics''as those of
otherclassm em bers,orthatno significantconflictsexistbetween N ew Y ork & Ohio and
other class m em bers as a result of differences in their claim s.W hile it is by no m eans
certain thatsuch conflictsw ould preventN ew Y ork & O hio from adequately representing
the class,the Courtfinds itparticularly im portantatthisearly stage ofthe case to avoid
prejudicing the claims of absent class members through the appointment of a lead
plaintiffw ho cannotfully and fairly representthem .Because N ew Y ork & Ohio's losses
areconcentrated outside ofthe Ludlow Period,and because thatconcentration leadsNew
York & Ohio to presentdifferentlegaltheories than otherplaintiffs,they have notm ade a
11
prelim inary show ing of typicality and adequacy.Therefore,N ew Y ork & O hio are not
entitled to a presum ption thatthey are the m ostadequate lead plaintiffs.
A sdiscussed furtherbelow ,the Courtfinds itappropriate to exercise its discretion
çûto ensurethatallclassm emberswilladequately berepresented in the prosecution ofthis
action,''In re Cable & Wireless,PLC Sec.Litig.,217 F.R.D.372,376 (E.D.Va.2003)
(citingGcgzv.Cal
pineCorp.,2002WL 32818827,at18(N.D.Cal.Aug.19,2002$;see
alsoFed.R.Civ.P.23(d),by appointingNew York& Ohio asleadplaintiffsoftheclass
generally but creating a subclass consisting of purchasers of BP A D RS and com m on
stock betw een M arch 4,2009 to A pril20,2010,inclusive.
The Court acknowledges that this holding is potentially in tension with the
holdingthatthecasesshouldbeconsolidated.See,e.g.,Enron,206F.R.D.at451(noting
thatfactorsfavoring consolidation and appointmentofsinglelead plaintiffare similar).
H ow ever,w hereasthe consolidation determ ination isbased on w hethercom m on issuesof
law and factare present,thetypicalityand adequacy determ inationsarebased on whether
theplaintiffsshare legaltheoriesandwhetherpotentialconflictsexistbetween apotential
lead plaintiff and absent class m em bers.See, e.g.,M iller v. Ventro Corp., 2001 W L
34497752,at *4 (N.D.Cal.Nov.28,2001) (ûtthe argumentof potentialconflict of
interests would appear more applicable in determining whether a particularplaintiff or
group of plaintiffs should be appointed lead plaintiff. The critical question for
consolidation iswhetherthecasesaresubstantially related.'').In thiscase,consolidation
isappropriate because there is substantialoverlap betw een the factualand legalclaim s of
the various plaintiffs,and itw ould be highly inefficientto conductthe cases separately.
Despitethese comm onalities,however,New York & Ohio'sclaimsreston differentlegal
theories from other class members (including the Ludlow Plaintiffs), and these
differences give rise to a substantial risk of conflict w ith the interests of absent class
m em bers.
3. Typicality and Adequacy ofLudlow Plaintils
The CourtnextconsiderswhethertheLudlow Plaintiffs should be appointed lead
plaintiffs of the subclass.The Ludlow Plaintiffs' claim s are typical of those of the
subclass, and they w ill fairly and adequately protect the interests of the subclass
m em bers. A1lfour of the Ludlow Plaintiffs purchased A DRS in BP between M arch 4,
2009 and April20,2010.Theirclaim s are based on allegedly fraudulentrepresentations
made by BP and itsofficialsduring thatperiod resulting in inflated stock pricespriorto
the Deepw ater H orizon explosion.The Courtsees no reason why these are notthe Slsam e
essential characteristics''of the claim s of other m embers of the subclass,and sees no
signitk antpotentialforconflictbetween the Ludlow Plaintiffs'interestsand thoseofthe
othersubclass m em bers.
4. Creation ofa Subclass
However,theCourtdoesnotbelieve thatthe Ludlow Plaintiffsby them selveswill
best represent a11 of the class m em bers.First, the dual theories of the case cut against
reliance on the Ludlow Plaintiffs alone to representthose w ho purchased stock before or
after the Ludlow Period.A s w ith N ew Y ork & O hio, the Ludlow Plaintiffs m ight not
have an interest in vigorously pursuing claims based on conductoutside the Ludlow
Period,instead focusing on conduct in the thirteen m onths leading up to the Deepw ater
Horizon explosion. This creates a serious potential conflict of interest betw een the
Ludlow Plaintiffsandmembersofthebroaderclass.C/ Wenderhold v.CylinkCorp.,188
13
F.R.D.577,586 (N.D.Cal. 1999) (approving aggregation of unrelated plaintiffs if
'énecessary to addressthe existence ofintra-class periods''because otherwise lsthe court
wouldbe forced to appointaslead plaintiffan individualplaintiffwhose limited interest
in the litigation renders him incapable offairly and adequately protecting the interests of
the class as a whole'');Star Gas,2005 W L 818617,at *5 (ûçf'
he majority of courts
considering the issue have ...allowledjagroup ofunrelated investorsto serveaslead
plaintiffs when itwould be mostbeneficial to the class under the circum stances of a
given case,butselecting only a few lead plaintiffs from w ithin a larger group proposed
bycounsel.').
Second, the PSLR A expresses a strong preference for institutional investors to
serve as lead plaintiffs.See H.R.Rep.No.104-369,at 3 (1995) (Conf.Rep.) (lt-f'
he
Conference Com mittee seeks to increase the likelihood thatinstitutional investors will
serve as lead plaintiffs ....'');Gluck,976 F.Supp.at 548 Csthrough the PSLRA,
Congress hasunequivocally expressed itspreference forsecurities fraud litigation to be
directedbylargeinstitutionalinvestors').Thatisbecauselçgilnstitutionswithlargestakes
in class actions have m uch the sam e interests as the plaintiff class generally;thus,courts
could be m ore confident settlem ents negotiated under the supervision of institutional
plaintiffs were (tlair and reasonable than is the case with settlements negotiated by
tmsupervised plaintiffsg')attorneys.''H.R.Rep.No.104-369,at5 (1995)(Conf.Rep.).
Asaresult,severalcourtshave used theirdiscretion to m ake an institutionalinvestorcolead plaintiff w ith an individual in order to provide the added benefits of institutional
investors identified by Congress. W'cfyz v. Calpine Corp., 2002 W L 32818827, at *8
(N.D.Cal.Aug.l9,2002)($çTheCourtfindsthatappointingboth an institutionaland an
individualinvestorto serve as co-lead plaintiffs willensure thatallclass members will
adequately be represented in the prosecution ofthis action'');In re Cable tt Wireless,
PLC Sec.Litig.,217F.R.D.372,376(E.D.Va.2003)(same);Youseh v.LockheedMartin
Corp.,70 F.Supp.2d 1061,1071(C.D.Cal.1999)(Etwith the appointmentofonelead
plaintiffwho isan individualprivateinvestorand onelead plaintiffthatisan institutional
investor,the lead plaintiffswillrepresenta broaderrangeofshareholderinterests than if
the Courtappointed an individualoran institutionalinvestoralone'';see also Oxford
HealthPlans,182F.R.D.42,45-49 (S.D.N.Y.1998)(appointingthreegroupspetitioning
separately forleadplaintiffstatustogetherasco-lead plaintiffs).Thesamelogic applies
to appointing institutionalinvestorsin addition toindividualsin the contextofasubclass.
The Court recognizes that som e courts have view ed the creation of subclasses
with disfavor.Forexample,one districtcourtrejected a requestto create asubclassof
those w ho had purchased stock after a certain date because there w as no affirm ative
dem onstration that the party with the largest financial interestwould not adequately
representa1lstockholders.In re CendantCorp.Litig.,182 F.R.D.476,479-80 (D.N.J.
1998).The courtreasoned thatcreating a subclass tEwould injure the pumose ofthe
PSLRA by fragm enting the plaintiff class and decreasing client control.,.9Id. at4y().
Likewise,Judge Harmon rejected several proposals for subclasses in Enron on the
grounds thatthe PSLR A çiauthorizes the appointm ent of one Lead Plaintiff or sm all
cohesivegroup forasingleclass.''206F.R.D.at451;seealso id.at448(rejectingclaims
thatcomm on stock shareholders itwould have ino incentive to presentan explanation of
dmnages suffered by bond purchasers'and iwillhave every incentiveto omitaltogether,
9Inthesam ecase.however, theCourthadalready appointed separate leadplaintiffsforasubclassofthose
holding one type ofsecuritieson the groundsthatthe lead plaintiffofthe overallclass had a conflictof
interestinvolvingoneofthedefendants.InreCendantCorp.Litig.,182F.R.D.144,149-50(D.N.J.1998).
15
or m inim ize, the dam ages suffered by Bond Purchasers''' as lûgeneric allegations,
unsupported byspecific factsorlaw''and %çunpersuasive'l;M illerv.VentroCorp.,2001
W L 34497752,at*10 (N.D.Cal.Nov.28,2001)(ûtcourtshavefoundthatdifferencesin
class periods,pleading and evidentiary standards or differences in nam ed defendants do
notprecludeconsolidationornecessitatethecreationofco-leadplaintiffsorsubclasses');
InreXM SatelliteRadioHoldingsSec.Litig.,237F.R.D.13,20 (D.D.C.2006)(rejecting
arp lmentthatsubclassshould be created becauseoptionspurchaserstim ightperhapsseek
adifferentlitigationstrategytomaximizetheirrecoverf);Aronsonv.M cKessonHBOC,
Inc-,79 F.Supp.2d 1146,1151 (N.D.Cal.1999)(holding thatparties'itspeculations
aboutpossible conflictsdo notrebutthe statutory presumption thatonelead plaintiffcan
vigorously pursue allavailable causes of action againsta1lpossible defendants under all
availablelegaltheories'').
However,asthecourtinOxfordHealthPlansnoted:
The rebuttable presumption created by the PSLRA which favors the
plaintiffwith the largestfinancialinterestwas notintended to obviate the
?rincipleofprovidingtheclasswiththemostadequaterepresentationand
lngeneraltheAd mustbeviewedagainstestablishedgrinciplesregarding
Rule23 classactions.Allowing fordiverserepresentatlon ...ensures that
the interests of a11 class m em bers w ill be adequately represented in the
prosecution of the action and in the negotiation and approval of a fair
settlem ent, and that the settlem ent process w ill not be distorted by
differing aim s ofdifferently situated claim ants.
182 F.R.D.42,45-49 (S.D.N.Y.1998);see also M iller,2001 W L 34497752,at *11
(appointing one stockholderand one bondholder co-lead plaintiffs,with each having
decision-making power for their subclass on issues only concerning them);In re
PeregrineSystems,Inc.Sec.Litig.,2002 W L 32769239,at*11-12 (S.D.Cal.Oct.11,
2002)(appointing Sfco-leadplaintiffs,oneto leadlitigationwithrespectto thesection 11
(oftheSecuritiesActof19331plaintiffsand anothertolead litigationwithrespectto the
section 10(b)(oftheSecuritiesExchangeActof1934)plaintiffs');HaroldRoucherTrust
UlA DTD 09/21172 v.FranklinBank Corp.,2009W L 1941864 (S.D.Tex.July 6,2009)
(Ellison, J.) (appointing separate lead plaintiff after lead plaintiff did not include
prefen'
ed stockholdersin Consolidated Amended Complaintbecause ûsitdgidlnothave
standing to pursue theirclaims'').Furthennore,contrary to those courtsthathave held
thatco-lead plaintiffs and subclasses should be avoided,the PSLRA clearly envisions the
appointmentofmultipleleadplaintiffsin somecases.15 U.S.C.j78u-4a(3)(B)(i)(court
tishall appoint as lead plaintiff the m em ber or m em bers of the purported plaintiff class
that the courtdeterm ines to be m ost capable of adequately representing the interests of
classmembers'')(emphasisadded);seealso H.R.Rep.No.104-369 at32 (1995)(Conf.
Rep.) (lead plaintiff provisions are ûçintended to encourage the most capable
representatives of the plaintiffclassto participate in class action litigation and to exercise
supervision and controlofthe lawyersforthe class'')(emphasisadded);Oxford HeaIth
Plans,182 F.R.D.at45-47;PeregrineSystems,2002 W L 32769239,at*11-12.
In thiscase,the Court'sforem ostconcern atthisstage isto preserve the claim sof
allpotentialclass members.SeeM iller,2001 W L 34497752,at*11 (tlthe question is
whethera subclassisnecessary to protectthe bondholdersinterests'');seealso Fed.R.
Civ.P.23(a)(3)and (4).Thestark differencebetween thetwo groups'classperiodsand
theirtwo distincttheoriesofthecasecreateasignificantrisk ofconflictandprejudiceto
class membersifthey are notseparated.See Enron,206 F.R.D.at444 (klthe Courtis
requiredto insure thatindependentclasseswith conflictsareprotectedby subdivision and
separate representation'').The appointment of two lead plaintiffs and creation of a
subclass forthispurpose does notconflict with the PSLRA'S primary goalof shifting
controlof securities class actions from law yers to investors.See G luck,976 F.Supp.at
549;see Peregrine Systems,2002 W L 32769239,at*11-12 (appointmentof co-lead
plaintiffsappropriateltwherethe goalsofthe PSLRA arenotundermined'').Appointing
both groups does notincrease the numberof decision-makers (and thus the risk that
decision-making willfall de facto to their attorneys)bCCaUSC the groups represent
differentinterests- New Y ork & Ohio the class overall and the Ludlow Plaintiffs only
the subclass.Compare Gluck,976 F.Supp.at549 (expressing concern thatcreating
subclass would çidelegate m ore control and responsibility to the law yers forthe class and
maketheclassrepresentativesmorereliantonthelawyers'').10Thecourtisconfidentthat
the lead plaintiffs themselveswillcontrolthe litigation and representtheirclassesfully.
The Court is also confident that the presence of a subclass w illnotprevent the parties
from efficiently and civilly pursuing all viable claim s and proceeding through the
discovery process.SeeEnron,206 F.R.D.at451 (expressing concern aboutefficiency
andcivilitywithmultipleleadplaintiffs).
A ccordingly,the Courtfinds it appropriate to appointNew Y ork & O hio as lead
plaintiffsofthe classin general(i.e.purchasersofADRSandcommon stock during the
New York & Ohio Period11)and to appointtheLudlow Plaintiffsasleadplaintiffsofthe
10Moreover,theLudlowPlaintiffshaveestablishedthatthejwillactivelyandcohesivelygarticipateinthis
litigation.(SeeJointDeclarationofRobertLudlow,PeterLlchtman,PaulHuyck,andLeslleNakagiri,Doc.
No.48-3.)
11Itwould be logistically difficultforNew York & Ohio to exclude from itsclassthose who purchased
duringtheLudlow Period,sotheCourtfindsitapprojriateforNew York& Ohiotorepresentpurchasers
during the entire New York & Ohio Period, includlng the Ludlow Period.The Court recognizes the
potentialinefficiency caused by thisoverlap butfinds itnecessary due to practicalconcernsand hopes it
can be minim ized.
subclass(i.e.purchasersofADRSandcommon stock during theLudlow Periodl.lzEach
group m ustfairly and adequately representthe class m embers itrepresents.The Court
expects the lead plaintiffs to work together as needed to prevent inefficiencies in
discovery and other stages of the litigation.For example,the Court expects that no
yvitness should nted to be deposed nlore than once sinaply because of the presence of
multiple lead plaintiffs.New York & Ohio and the Ludlow Plaintiffs m ay each file a
com plaintno laterthan 45 days afterissuance ofthisorder.lS
lV.
M O TIO NS FO R APPR OVAL OF CH OICE O F LEAD COUNSEL
The PSLRA provides that ûtrl'he most adequate plaintiff shall, subject to the
approvalofthecourt,selectand retain counselto representtheclass.''15 U.S.C.j78u-
4(a)(3)(B)(v).New York & Ohio and the Ludlow Plaintiffs are both represented by
experienced localand non-locallaw firm s thatthe Courtisconvinced are fully capable of
litigating this case skillfully and zealously.14 Accordingly,the Courtfinds itappropriate
foreach group ofplaintiffs'chosen counselto continue to representthatgroup.However,
this is done w ith the understanding that the presence of num erous law firm s as co-lead
counsel w ill not in any way increase the percentage of the class m em bers' potential
recoverythatwillgo to attorney'sfees.SeeOxfordHealthPlans,182 F.R.D.at50;Star
Gas,2005W L 818617 at*8(%lduplicativeworkwillnotbeapprovedforpaymentbythe
Court').
CONCLUSIO N
12In so doing, the Courtexpressesno opinion asto whethereitherorboth classescan orw illbe certified
underRule23.Furtherm ore,theCourtreservesthe right,asitm ust,to collapsetheclassand subclassinto
oneclass,to choose aclassperiod differentfrom theperiodsproffered by theleadplaintiffs,orto find that
noclassshouldbecertified.
13Ifpossible,ofcourse, t
hetwosetsofleadplaintiffsmayfileajointcomplaint.
14N e:/York & Ohio are represented by YetterColeman LLP, Cohen M ilstein Sellers& TollPLLC, and
Berm an Devalerio.The Ludlow Plaintiffsare represented by Cotchett,Pitre & M ccarthy and the M ithoff
Iwaw Firm.
Accordingly,the Court GRANTS the M otion to Consolidate the BP securities
fraud casespending in thisCourt;APPOINTS New York & Ohio aslead plaintiffsofthe
class ofpurchasers of BP A D RS and com m on stock betw een June 30,2005 and June 1,
2010,inclusive;A PPO INTS the Ludlow Plaintiffs as lead plaintiffs of the subclass of
purchasers of BP A D RS and com m on stock betw een M arch 4,2009 to A pril20,2010,
inclusive;and A PPRO VES New York & Ohio's and the Ludlow Plaintiffs'respective
choicesofcounselas lead counsel.
IT IS SO ORDERE .
SIGNEDthi YdayofDecember,2010.
.
#
KEITH . LLISON
UNITED STATES DISTRICT JUDGE
20
>

Order Appointing Lead Plaintiff

Transcription

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