UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETT S. Memorandum in Explanation August 7, 200 1

Transcription

1 q. UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETT S IN RE PRI AUTOMATION, INC. SECURITIES LITIGATION CIVIL ACTION NO REK and ALL RELATED CASE S MEMORANDUM IN EXPLANATION AND PRACTICE AND PROCEDURE ORDER NO. 2 Memorandum in Explanation August 7, The next Case Management Conference is set for 2:00 p.m., January 22, Practice and Procedure Order No. 2 supplements and does not supercede Practice and Procedure Order No Filing s Relevant to the matters pending for decision are the following filings : (1) The Nomanbhoy Group's Motion for Appointment as Lead Plaintiffs and fo r Approval of Their Selection of Lead and Liaison Counsel (Docket No. 1. 1, filed January 19, in Civil Action No REK; Docket No. 11, filed in Civil Action No REK ; Docket No. 11, filed in Civil Action No REK; Docket No. 11, filed in Civil Action No REK ; and Docket No. 2, filed in Civil Action No REK) with ta~

2 0 r I Memorandum of Law in Support (Docket No. 12, filed January 19, 2001 in Civil Action No REK; Docket No. 12, filed in Civil Action No REK; Docket No. 12, filed in Civil Action No REK; Docket No. 12, filed in Civil Action No REK; and Docket No. 3, filed in Civil Action No REK) and Declaration of Samuel H. Rudman (Docket No. 16, filed January 19, 2001 in Civil Action No REK; Docket No. 16, filed in Civil Action No REK; Docket No. 16, filed in Civil Action No REK ; Docket No. 16, filed in Civil Action No REK; and Docket No. 7, filed in Civil Action No REK) ; (2) Defendants' Memorandum in Response or Opposition to the "Nomanbho y Group's" Motion for Appointment as Lead Plaintiff (Docket No. 18, filed February 2, 2001 in Civil Action No REK; Docket No. 18, filed in Civil Action No REK ; Docket No. 18, filed in Civil Action No REK; Docket No. 18, filed in Civil Action No REK; and Docket No. 13, filed in Civil Action No REK) ; (3) Plaintiffs' Memorandum of Law in Reply to Defendants' "Response o r Opposition" to the Nomanbhoy Group's Motion for Appointment as Lead Plaintiff (Docket No. 20, filed February 21, 2001 in Civil Action No REK; Docket No. 20, filed in Civi l Action No REK; Docket No. 20, filed in Civil Action No REK; Docket No. 19, filed in Civil Action No REK; and Docket No. 18, filed in Civil Action No REK) ; (4) Letter from Office of General Counsel, United States Securities and Exchang e Commission, dated March 23, 2001 (Docket No. 30, filed March 26, 2001 in Civil Action No REK) ; 2

3 9 (5) Defendants ' Memorandum Concerning Questions Set Fo rth in This Court' s Order of February 22, 2001 (Docket No. 31, filed March 27, 2001 in Civil Action No REK; Docket No. 19, filed in Civil Action No REK; Docket No. 19, filed in Civi l Action No REK; Docket No. 20, filed in Civil Action No REK; and Docket No. 19, filed in Civil Action No REK) ; (6) Letter by Defendants ' Counsel, John H. Henn, dated May 7, 2001 (Docket No. 34, filed May 8, 2001 in Civil Action No REK) ; (7) Plaintiffs' Memorandum Concerning Questions Raised in Court' s Memorandum and Order Dated February 22, 2001 (Docket No. 35, filed May 21, 2001 in Civi l Action No REK; Docket No. 21, filed in Civil Action No REK; Docket No. 21, filed in Civil Action No REK; Docket No. 21, filed in Civil Action No REK; and Docket No. 20, filed in Civil Action No REK) ; (8) Comments Concerning Questions Set Forth in the Court's Order of Februar y 22, 2001 submitted by member of the Bar of this court, Loretta M. Smith (Docket No. 36, file d May 18, 2001 in Civil Action No REK) ; (9) Letter from Office of General Counsel, United States Securities and Exchange Commission, dated July 17, 2001 (Docket No. 40, filed July 19, 2001 in Civil Action No REK) ; (10) Plaintiffs' Further Submission Regarding Appointment of Lead Plaintiffs, Selection of Lead and Liaison Counsel, and Other Issues Raised in the Court's Order (Docke t No. 41, filed July 20, 2001 in Civil Action No REK) ; and (11) Letter by Defendants' Counsel, John H. Henn, dated July 24, 2001 (Docket 3

4 0 No. 42, filed July 24, 2001 in Civil Action No REK). II. Background In the Memorandum in Explanation and Practice and Procedure Order No. 1, I concluded that the 90-day provision of the PSLRA is an unconstitutional intrusion on the judicial functions of a United States District Court. See Docket No. 39 at 11. After explaining my reasoning, I concluded : On the record now before me, I do not have the information I need to make an informed decision whether the proposed lead plaintiffs can appropriately represent the putative class. Congress does not have the authority under the Constitution and laws of the United States to require a United States District Court to make a judicial decision without enough information before the court to make an informed and reasoned decision that can be candidly explained on the informed and reasoned grounds through which the decision was reached. Id. at 14. In these circumstances, I am not now able to make this required decision about an appropriate lead plaintiff. I need, and will invite again, the benefit of submissions on behalf of the Attorney General of the United States, the Securities and Exchange Commission, and the Bar. I will defer ruling on The Nomanbhoy Group's Motion for Appointment as Lead Plaintiffs and for Approval of Their Selection of Lead and Liaison Counsel (Docket No. 11) in order to allow time for additional submissions responding to the concerns I have expressed in this Memorandum. Since the filing of the Memorandum in Explanation and Practice and Procedur e Order No. 1, 1 have received three additional submissions : one from the Office of the Genera l Counsel of the United States Securities and Exchange Commission (Docket No. 40), one from the plaintiffs (Docket No. 41), and one from the defendants (Docket No. 42). 4

5 0 0 III. The Motion to be Appointed as Lead Plaintiffs and for Approval of Their Selection of Class Counsel A. Lead Plaintiffs The position taken by plaintiffs and the United States Securities and Exchang e Commission is that because I ordered consolidation of the five actions pending in this cour t against PRI Automation, Inc., the 90-day provision in 15 U.S.C. 78u-4(a)(3)(B)(i) does not apply to this case and instead 15 U.S.C. 78u-4(a)(3)(B)(ii) applies. See Docket No. 40 at 2 ; Docket No. 41 at l. No reason exists for my ruling on this statutory interpretation. Because I have held the 90-day provision unconstitutional, see In re PRI Automation, Inc. Securitie s Liti ag tion, 145 F. Supp. 2d 138 (D. Mass. 2001), I am not in noncompliance with the 90-da y provision even if it does apply to this case. In any event, I should proceed to resolve the matter as expeditiously as is reasonable, taking into account that it is not reasonable to do so until I hav e satisfied myself about what the appropriate order should be. For purposes of appointing a lead plaintiff or plaintiffs the court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that- (aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i) ; (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.

6 U.S.C. 78u-4(a)(3)(B)(iii )(I). This presumption "may be rebutted only upon proof by a member of the purported class that the presumptively most adequate plaintiff-(aa) will not fairly and adequately protect the interests of the class; or (bb) is subject to unique defenses that rende r such plaintiff incapable of adequately representing the class." 15 U.S.C. 78u-4(a)(3)(B)(iii)(II). After considering the submissions and hearing arguments of counsel at the Cas e Management Conference of July 24, 2001, I determine that the proposed lead plaintiffs' group has met the statutory criteria for appointment of lead plaintiff. No other purported class member s have sought appointment or have rebutted the statutory presumption. Therefore, The Nomanbhoy Group ' s Motion for Appointment as Lead Plaintiffs (Docket No. 11) is ALLOWED in Practice and Procedure Order No. 2 below. I appoint Yunus Nomanbhoy, Harry Simon, John Cho, Joseph Lancer, and John Wilkins as lead plaintiffs for this consolidated action. This is no t a ruling in any way on the issue of class certification under Rule 23 of the Federal Rules of Civil Procedure. B. Lead Counse l The lead plaintiffs have selected two law firms to represent them as co-lead counsel and one firm to serve as liaison counsel in these proceedings. By statute they are authorized to select and retain counsel to represent the class, "subject to the approval of th e court." 15 U.S.C. 78u-4 (a)(3)(b)(v). At the Case Management Conference on July 24, 2001, defendants ' counse l brought to my attention potential conflicts of interest with respect to Spector, Roseman & Kodroff, P.C., one of the two firms selected by the lead plaintiffs to serve as co-lead counsel. 6

7 0 0 See also Letter by Defendants' Counsel, John H. Henn, dated July 24, 2001, Docket No. 42. After considering the submissions and hearing arguments of counsel, I determine that Milber g Weiss Bershad Hynes & Lerach, LLP is qualified to represent the putative class as lead counsel. See also Declaration of Samuel H. Rudman, Docket No. 1. 6, Exhibit E. I do not, however, approve the lead plaintiffs' selection of Spector, Roseman & Kodroff, P.C. as co-lead counsel. Accordingly, The Nomanbhoy Group's Motion for Approval of Their Selection of Lead Counse l (Docket No. 11) is ALLOWED in part and DENIED in part in Practice and Procedure Order No. 2 below. Milberg Weiss Bershad Hynes & Lerach, LLP is designated lead counsel, and the y may associate any other counsel with them as they see fit, as long as they do not put anybod y else into a position in which they would be representing conflicting interests without a report t o me and approval by me before the effectiveness of that use of other counsel as associate counsel. This is not a ruling in any way on the issue of class certification under Rule 23 ofthe Federal Rules of Civil Procedure. C. Liaison Counsel Also, I determine that Moulton & Gans, LLP is qualified to serve as "liaison " counsel as that term was defined at the July 24, 2001 Case Management Conference. See also Docket No. 16, Exhibit G. Accordingly, The Nomanbhoy Group's Motion for Approval of Thei r Selection of Liaison Counsel (Docket No. 11) is ALLOWED in Practice and Procedure Orde r No. 2 below to the extent that Moulton & Gans, LLP is designated liaison counsel. Moulton & Gans, LLP may serve as a local presence to make filings with the court, coordinate with the court, and receive the court's orders to distribute to other counsel in the case. Again, this is not a 7

8 1 1 ruling in any way on the issue of class certification under Rule 23 of the Federal Rules of Civi l Procedure. Practice and Procedure Order No. 2 August 7, For the foregoing reasons, it is ORDERED : 1. The Nomanbhoy Group's Motion for Appointment as Lead Plaintiffs and fo r Approval of Their Selection of Lead and Liaison Counsel (Docket No. 11, filed in Civil Action No REK ; Docket No. 11, filed in Civil Action No REK; Docket No. 11, filed in Civil Action No REK; Docket No. 11, filed in Civil Action No REK; and Docket No. 2, filed in Civil Action No REK) is ALLOWED in part and DENIED in part. Members of the Nomanbhoy Group, Yunus Nomanbhoy, Harry Simon, Joh n Cho, Joseph Lancer, and John Wilkins, are designated lead plaintiffs. Milberg Weiss Bershad Hynes & Lerach, LLP is designated lead counsel. Moulton & Gans, LLP is designated liaiso n counsel. This is not a ruling in any way on the issue of class certification under Rule 23 of the Federal Rules of Civil Procedure. 2. Plaintiffs may file a Consolidated Complaint on or before September 11, Defendants may file a Motion to Dismiss on or before October 30, Plaintiffs may file a response to any Motion to Dismiss on or before December 4,

9 l The next Case Management Conference is set for 2 :00 p.m., January 22, United States District Judge