Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 1 of 7 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA NORTHUMBERLAND COUNTY RETIREMENT SYSTEM and OKLAHOMA LAW ENFORCEMENT RETIREMENT SYSTEM, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, vs. NO. CIV-11-520-D GMX RESOURCES, INC., et al., Defendants. ORDER Before the Court is the motion [Doc. No. 78] of Plaintiffs Northumberland County Retirement System and Oklahoma Law Enforcement Retirement System ( Plaintiffs ) to be appointed lead plaintiffs in this putative class action case. Plaintiffs also seek the Court s approval of their selection of the law firms of Kessler Topaz Meltzer & Check, LLP and Nix Patterson & Roach, LLP to serve as lead counsel. The time period for objecting to the motion has expired, and no objection has been filed. 1 I. Background: Plaintiffs filed this lawsuit pursuant to Fed.R.Civ.P. 23, asserting a class action on behalf of Plaintiffs and all persons who purchased or otherwise acquired GMX Resources Inc. ( GMX ) 1 Timothy Berbenich, Kristy Berbenich, and Thomas Janowitz (the Berbenich group ) also filed a motion seeking appointment as lead plaintiffs, and Plaintiffs timely opposed that motion. The Berbenich group did not oppose Plaintiffs motion. On April 27, 2012, the Court entered an Order [Doc. No. 91] noting that Plaintiffs motion was unopposed and could be deemed confessed pursuant to Local Civil Rule 7.1(g). The Court directed the Berbenich group to file a response notifying the Court and the parties if they oppose Plaintiffs motion for appointment. On June 20, 2012, the Berbenich group notified the court of the withdrawal of its motion [Doc. No. 93]. Accordingly, the Court deems Plaintiffs motion to be unopposed.
Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 2 of 7 common stock pursuant or traceable to GMX stock offerings on July 17, 2008, May 13, 2009, and October 22, 2009 ( the Offerings ). Plaintiffs allege violations of Sections 11, 23(a)(2) and 15 of the Securities Act of 1933 ( Securities Act ) against GMX, certain GMX officers, the underwriters of the Offerings, and GMX s registered public accounting firm. II. Selection of lead plaintiff: As acknowledged by Plaintiffs motion, this action is governed by the provisions of the Private Securities Litigation Reform Act of 1995 ( PSLRA ), 15 U.S.C. 77z-1(a). The PSLRA sets forth a procedure for the selection of a lead plaintiff and lead counsel. 15 U.S.C. 77z-1(a)(3); see also In re SemGroup Energy Partners, L.P. Securities Litig., 2008 WL 4826318, at *1 (N.D. Okla. Oct. 27, 2008) (discussing the PSLRA process for selecting a lead plaintiff). Pursuant to the PSLRA, selection of a lead plaintiff requires first that the party filing the lawsuit publish notice to the class within 20 days of the Court s order informing prospective class members of their right to file motions for appointment as lead plaintiff. 15 U.S.C. 77z- 1(a)(3)(A)(I). No later than 60 days following publication of the notice, persons interested in being appointed lead counsel must file a motion seeking appointment. Id. at 77z-1(a)(3)(A)(i)(II). Third, within 90 days of the publication notice, the Court is to consider any motion for appointment. Id. at 77z-1(a)(3)(B)(I). The record in this case establishes that these procedural requirements are satisfied. No party has disputed that Plaintiffs timely published notice of this action and informed prospective class members of their right to seek appointment as lead plaintiff, and Plaintiffs timely filed the instant motion within 60 days after notice was published. Although more than 90 days has passed since the notice was published, this Court s local civil rules establishing deadlines for the filing of briefs and 2
Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 3 of 7 objections thereto did not permit full briefing of the motions within the 90 day period. Furthermore, the lack of opposition by the Berbenich group to Plaintiffs motion delayed the Court s consideration of this issue. Under such circumstances, courts have held the formal appointment need not occur within 90 days of the publication of the notice. See, e.g., Vandevelde v. China Natural Gas, Inc., 2011 WL 2580676, at *3 n.6 (D. Del. June 29, 2011) (unpublished opinion)(citing Raftery v. Mercury Finance Co., 1997 WL 529553, at *1 (N.D. Ill. Aug. 15, 1997) (unpublished opinion)). Where, as here, the Court finds these preliminary requirements satisfied, it must then determine whether Plaintiffs satisfy the statutory requirements necessary to conclude that they are the most adequate plaintiff to serve as lead plaintiff. The statute provides: [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)(I). In this case, Plaintiffs satisfy the initial statutory requirement in part (aa), as they filed this lawsuit and timely filed their motion for appointment as lead plaintiffs. With respect to the second requirement regarding their financial interest, Plaintiffs submit evidence that they incurred losses of approximately $187, 261 in connection with their purchases of GMX common stock pursuant to the Offerings, and they contend they have the largest financial interest in the relief sought by the class. See Declaration of Jason Roselius [Doc. No. 80]. The most capable plaintiff to represent the class is the one who has the greatest financial stake in the outcome of the case, so long as he meets the requirements of Rule 23. In re Bard Associates, Inc., 2009 WL 4350780, at *2 (10th Cir.
Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 4 of 7 Dec. 2, 2009) (unpublished opinion) (quoting In re Cavanaugh,306 F.3d 726, 729 (9th Cir. 2002)). The PSLRA sets up a rebuttable presumption that the plaintiff with the largest stake in the controversy will be the lead plaintiff. Cavanaugh, 306 F.3d at 729 n. 2. So long as the plaintiff with the largest losses satisfies the typicality and adequacy requirements, he is entitled to lead plaintiff status, even if the district court is convinced that some other plaintiff would do a better job. Id. at 732. In this case, no party or prospective class claimant has objected to Plaintiffs contention that their losses represent the largest financial interest in the relief sought by the class, and there is no evidence before the Court that any other person or entity has a greater financial interest than that of Plaintiffs. Accordingly, the evidence before the Court establishes that Plaintiffs satisfy the second statutory prerequisite for appointment as lead plaintiffs. The Court must next determine whether Plaintiffs satisfy the requirements of Rule 23 of the Federal Rules of Civil Procedure, to wit: 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 members; and 4) the representative parties will fairly and adequately protect the interests of the class. Although Rule 23 prescribes four requirements, where the issue before the Court is the appointment of a lead plaintiff, only the requirements of typicality and adequacy of representation need be established. Friedman v. Quest Energy Partners LP, 261 F.R.D. 607, 612 (W.D. Okla. 2009) (citing In re Oxford Health Plans, Inc. Securities Litig., 182 F.R.D. 42, 49 (S.D.N.Y. 1998)). Typicality for purposes of Rule 23 exists where the representative party s claims arise from the same event, practice or course of conduct that provides the basis for the class claims and are 4
Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 5 of 7 grounded in the same legal or remedial theory. Friedman, 261 F.R.D. at 612 (citing Adamson v. Bowen, 855 F.2d 5668, 676 (10th Cir. 1988). Typicality does not require that every class member s claim be identical to the claims of the prospective lead plaintiff. Id. (citing Anderson v. City of Albuquerque, 690 F.2d 796, 800 (10th Cir. 1982)). In this case, Plaintiffs contention that their claims satisfy the typicality requirement is not contested. In any event, the Court finds that, based on the allegations in the Complaint and the submissions of Plaintiffs, their claims are typical of those in the class because the claims are based on the purchase of GMX common stock in connection with the Offerings. Furthermore, the claims to be asserted by the class involve the contention that GMX and the other defendants violated federal securities law in connection with the information in the Offerings by misrepresenting the accuracy of GMX s financial statements and the adequacy of its internal controls regarding financial reporting, allegedly resulting in materially untrue statements and representations regarding GMX s financial condition. The Court has reviewed the allegations related to the claims asserted by Plaintiffs, and concludes the allegations reflect that their claims are typical of those that can be asserted by other prospective class claimants. With respect to the adequacy of representation requirement, [a]dequacy, for purposes of the lead plaintiff determination, is contingent upon both the existence of common interests between the proposed lead plaintiff and the class, and a willingness on the part of the proposed lead plaintiff to vigorously prosecute the action. In re Nice Sys. Securities Litig., 188 F.R.D. 206, 219 (D. N.J. 1999). The evidence before the Court provides no basis for challenging the adequacy of Plaintiffs representation of the class members. There is no allegation that Plaintiffs have a conflict of interest with other class members, and the record in this case establishes that Plaintiffs have demonstrated 5
Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 6 of 7 their willingness to vigorously prosecute this action on behalf of all claimants. The Court thus finds that, on the record before it, Plaintiffs satisfy the adequacy of representation criteria required for appointment as lead plaintiffs. The Court concludes that Plaintiffs are entitled to a presumption that they are the most adequate candidates for appointment as lead plaintiffs, as contemplated by the statute. See 15 U.S.C. 77z-1(a)(3)(B)(iii)(I). Furthermore, they have presented sufficient evidence to make a prima facie showing regarding the requirements of Rule 23. Having made that showing, any party opposing Plaintiffs selection must present evidence sufficient to overcome the presumption that they are the most adequate candidates to serve as lead plaintiffs. SemGroup, 2008 WL 4826318, at *1. In this case, no party has opposed Plaintiffs appointment, and there is no evidence to suggest they are not qualified to serve as lead plaintiffs in this action or that their representation will be inadequate. Finally, as Plaintiffs also note, their status as institutional investors has been recognized as a factor warranting their appointment as lead plaintiffs. According to the United States Supreme Court, the PSLRA s lead plaintiff provision is aimed to increase the likelihood that institutional investors parties more likely to balance the interests of the class with the long-term interests of the company would serve as lead plaintiffs. Telltabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 321 (2007); see also In re espeed, Inc. Securities Litig., 232 F.R.D. 95, 99 (S.D.N.Y. 2005). Accordingly, the Court GRANTS Plaintiffs motion [Doc. No. 78] to serve as lead plaintiffs in this action. III. Selection of lead counsel: Plaintiffs also ask the Court to approve their selection of the law firms of Kessler Topaz Meltzer &Check, LLP and Nix Patterson & Roach, LLP to serve as co-lead counsel. The Court has 6
Case 5:11-cv-00520-D Document 94 Filed 07/03/12 Page 7 of 7 received no objection to this request. The PSLRA vests authority in the lead plaintiff to select and retain lead counsel, subject to the Court s approval. 15 U.S.C. 77z-1(a)(3)(B)(v). The Court should not alter a lead plaintiff s selection of counsel unless doing so is necessary to protect the interests of the class. Id. at 77z- 1(a)(3)(B)(iii)(II)(aa). As Plaintiffs argue, the record before the Court reflects that Plaintiffs have selected two law firms with extensive experience in securities litigation, particularly in class action securities cases. Both have considerable success in prosecuting class action securities claims. Declaration of Jason Roselius, Exhibits D and E. Furthermore, Plaintiffs note that the two firms have previously successfully served as co-counsel in class action litigation. Having reviewed the record, the Court finds that Plaintiffs request to approve their selection of co-lead counsel should be, and is, GRANTED. IV. Conclusion: For the foregoing reasons, Plaintiffs motion for appointment as lead plaintiffs [Doc. No. 78] is GRANTED. Northumberland County Retirement System and Oklahoma Law Enforcement Retirement System are hereby appointed lead plaintiffs in this action. Their motion for approval of lead counsel is also GRANTED. Kessler Topaz Meltzer & Check, LLP and Nix Patterson & Roach, LLP are approved as co-lead counsel. Plaintiffs request that Nelson, Roselius, Terry & Morton serve as liaison counsel is also approved. IT IS SO ORDERED this 3 rd day of July, 2012. 7 TIMOTHY D. DEGIUST1 UNITED STATES DISTRICT JUDGE