Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 2 of 9 this matter, DJSP provides these services almost exclusively to the Law Offices of David J. Stern ( LODJS ), a law firm that handles foreclosures for most of the country s largest mortgage-servicing companies. Attorney David J. Stern, the sole owner of LODJS, is also the president, chief executive officer, and chairman of DJSP. Plaintiffs Stan Cooper and Neeraj Methi brought this action against DJSP, Stern, and Kumar Gursahaney, DJSP s executive vice president and chief financial officer (collectively, Defendants ). Plaintiffs allege that in the spring of 2010, Defendants made a series of positive public statements about DJSP s business and future prospects. But according to Plaintiffs, Defendants failed to disclose that DJSP was experiencing a significant downturn in its foreclosure-processing business, due to a system conversion by one of LODJS s largest clients and foreclosure-intervention programs by the federal government. When Defendants finally revealed these adverse events in late May 2010, DJSP s stock price dropped by nearly 30 percent. Plaintiffs claim that Defendants misrepresentations and omissions caused Plaintiffs to purchase DJSP s securities at artificially inflated prices, resulting in monetary losses when the truth was revealed. Plaintiffs Complaint pleads a securities-fraud claim against all Defendants under Section 10(b) of the Securities Exchange Act of 1934 ( the Act ) and Rule 10b-5, see 15 U.S.C.A. 78j(b) (West 2009), amended by Pub. L. No. 111-203, 762(d)(3), 124 Stat. 1376, 1761 (July 21, 2010); 17 C.F.R. 240.10b-5 (2010), as well as a controlling-persons claim against Stern and Gursahaney under Section 20(a) of the Act, see 15 U.S.C.A. 78t(a) (West 2009), amended by Pub. L. No. 111-203, 929P(c), 124 Stat. 1376, 1865 (July 21, 2010). In addition to their own claims, Plaintiffs seek to represent a class of all persons who purchased DJSP s securities between March 16, 2010, and May 27, 2010 ( the class period ), and were damaged thereby. 2
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 3 of 9 After filing their Complaint, Plaintiffs Cooper and Methi, along with Gary Curson and limited partnership Blue Lion Capital (collectively, the Cooper Plaintiffs ), moved for an order appointing them as lead plaintiff in this action and approving their selection of lead counsel [D.E. 7]. See 15 U.S.C.A. 78u-4(a)(3)(B)(i), (v) (West 2009) (requiring court, in proposed securities class action, to appoint lead plaintiff and approve lead counsel). The Cooper Plaintiffs claimed that during the class period, they purchased a total of $1,042,789.72 in DJSP common stock and warrants, 3 resulting in losses of $534,299.94. 4 The Cooper Plaintiffs are represented by the law firms of Strauss & Troy, LPA; Statman Harris & Eyrich, LLC; and Saxena White, P.A. Additionally, hedge fund Philadelphia Financial Management of San Francisco, LLC ( PFM ), moved the Court to appoint it as lead plaintiff and to approve its proposed lead counsel [D.E. 5]. PFM claimed that during the class period, it purchased $4,457,778.42 in DJSP common stock, leading to losses of $2,225,841.31. PFM purchased these shares in its role as general partner of two limited partnerships and as an investment advisor to a third entity that has assigned its claims to PFM. PFM is represented by the firms of Cuneo, Gilbert & LaDuca, LLP; Liddle & Robinson, LLP; and Shepherd, Finkelman, Miller & Shah, LLP. After submitting briefs on their competing motions, the Cooper Plaintiffs and PFM filed the Joint Motion. In the Joint Motion, the Cooper Plaintiffs and PFM advise the Court that they have reached an agreement to jointly prosecute the action (subject to the approval of the Court), determining that it would be in the best interests of the Class to amicably resolve their differences concerning the appointment of lead plaintiffs, and to pool their resources in the prosecution of this action. D.E. 35 at 2. The Joint Motion asks the Court to (1) appoint PFM as lead plaintiff, 3A warrant is [a]n instrument granting the holder a long-term (usu. a five- to ten-year) option to buy shares at a fixed price. Black s Law Dictionary 1724 (9th ed. 2009). 4The great majority of these investments and losses are attributable to Blue Lion Capital. 3
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 4 of 9 (2) approve PFM s attorneys as lead counsel, and (3) allow PFM until January 10, 2011, to file a proposed amended complaint that incorporates newly discovered facts. A. Appointment of Lead Plaintiff Discussion In response to the required public notice of a proposed securities class action, see 15 U.S.C.A. 78u-4(a)(3)(A) (West 2009), any member of the purported class may move the court to serve as lead plaintiff. Id. 78u-4(a)(3)(A)(i)(II). The court must then consider any [such] motion and 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. Id. 78u-4(a)(3)(B)(i). In particular, the court must presume that the most adequate plaintiff... is the person or group of persons who ([1]) has either filed the complaint or made a motion in response to a [published] notice... ; ([2]) in the determination of the court, 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. 15 U.S.C.A. 78u-4(a)(3)(B)(iii)(I) (West 2009). This presumption may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff either 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. 15 U.S.C.A. 78u-4(a)(3)(B)(iii)(II) (West 2009). Here, PFM meets the first requirement for the most-adequate-plaintiff presumption, having timely moved for appointment as lead plaintiff. See id. 78u-4(a)(3)(A)(i)(II). PFM also satisfies 4
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 5 of 9 the third requirement: compliance with the relevant provisions of Rule 23. See Fed. R. Civ. P. 23(a)(3), (4). PFM s claims are typical of the claims... of the class, Fed. R. Civ. P. 23(a)(3), because they arise from the same event or pattern or practice and are based on the same legal theory. Kornberg v. Carnival Cruise Lines, Inc., 741 F.2d 1332, 1337 (11th Cir. 1984). Like the members of the proposed class, PFM alleges that it purchased DJSP s securities at inflated prices due to Defendants misrepresentations and omissions, causing it to lose money. Further, it appears that PFM will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(4). The record reflects no substantial conflicts of interest between PFM and the putative class members, and PFM s filings demonstrate that it will adequately prosecute the action. See Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181, 1189 (11th Cir. 2003) (internal quotation marks omitted). 5 Regarding the presumption s second requirement, PFM has the largest financial interest of any plaintiff or group that otherwise qualifies for appointment as lead plaintiff. See 15 U.S.C.A. 78u-4(a)(3)(B)(iii)(I). Indeed, PFM s total investments in DJSP securities and its losses resulting from those investments are more than four times greater than the Cooper Plaintiffs investments and losses. See Manual for Complex Litigation (Fourth) 31.31 (2004) (explaining that [i]n identifying the plaintiff with the largest financial interest, courts have examined a variety of objective factors, including the net funds spent and approximate losses suffered by the plaintiff ). In opposing PFM s original lead-plaintiff motion, the Cooper Plaintiffs argued that even if PFM has the greater financial interest and thus is presumed to be the most adequate plaintiff PFM cannot adequately protect the interests of the proposed class because it lacks standing. The Cooper Plaintiffs claimed that PFM purchased DJSP securities solely as an investment 5 The Cooper Plaintiffs also meet the first two requirements for the most-adequate-plaintiff presumption. Because the Cooper Plaintiffs now support PFM s request for lead-plaintiff status, however, the Court focuses its analysis on PFM. 5
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 6 of 9 advisor to other entities, the true owners of those securities, and therefore did not suffer any injuryin-fact. See W.R. Huff Asset Mgmt. Co. v. Deloitte & Touche LLP, 549 F.3d 100, 111 (2d Cir. 2008) (holding that investment advisor that purchased securities on behalf its clients lack[ed] constitutional standing to bring suit... in its own name but on behalf of its clients, the beneficial owners of the relevant securities ), cert. denied, 129 S. Ct. 2011 (2009). The Court concludes, however, that PFM possesses standing to assert its claims. The record indicates that PFM acquired DJSP shares in its capacity as general partner for two limited partnerships. Thus, PFM had primary responsibility for and a financial interest in those investments. See id. at 108 (recognizing that the minimum requirement for an injury-in-fact is that the plaintiff have legal title to, or a proprietary interest in, the claim (citing Sprint Commc ns Co. v. APCC Servs., Inc., 554 U.S. 269 (2008))); Black s Law Dictionary 1229 (9th ed. 2009) (explaining that a general partner ordinarily takes part in the daily operations of the business, shares in the profits and losses, and is personally responsible for the partnership s debts and other liabilities ). Further, the third entity for which PFM purchased DJSP shares has assigned its claims to PFM, giving it standing to assert those claims. See Sprint Commc ns, 554 U.S. at 271 (holding that an assignee of a legal claim has standing to litigate that claim, even if the assignee has promised to remit all proceeds from the litigation to the assignor). In sum, PFM meets all the requirements to be presumed the most adequate plaintiff here. 15 U.S.C.A. 78u-4(a)(3)(B)(iii)(I). And the current record contains no evidence rebutting that presumption. See id. 78u-4(a)(3)(B)(iii)(II). The Court therefore concludes that PFM, as the plaintiff most capable of adequately representing the interests of class members, should be appointed as lead plaintiff. Id. 78u-4(a)(3)(B)(I). 6
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 7 of 9 B. Approval of Lead Counsel The Joint Motion also seeks approval of PFM s selection of lead counsel to represent the proposed class. See 15 U.S.C.A. 78u-4(a)(3)(B)(v). As indicated above, PFM has retained three firms: Cuneo, Gilbert & LaDuca, LLP; Liddle & Robinson, LLP; and Shepherd, Finkelman, Miller & Shah, LLP. Additionally, these firms have reached an agreement to work with the Cooper [Plaintiffs] and their counsel in the future prosecution of this action. D.E. 35 at 3. Courts normally take a deferential approach in reviewing the lead plaintiff s selection of class counsel. See In re Cendant Corp Litig., 264 F.3d 201, 274 (3d Cir. 2001). Here, the record indicates that the three firms PFM proposes as lead counsel have significant experience representing plaintiffs in securities cases and other complex litigation. These firms are fully qualified to represent the proposed class. The Court s only concern in approving these firms as lead counsel is the possible inefficiency and resulting expense of having three firms direct the litigation instead of just one. See, e.g., In re Milestone Scientific Sec. Litig., 183 F.R.D. 404, 418 (D.N.J. 1998) ( The potential for duplicative services and the concomitant increase in attorneys fees works against the approval of multiple lead counsel. ); see also 15 U.S.C.A. 78u-4(a)(6) (West 2009) (specifying only that class counsel s fee award shall not exceed a reasonable percentage of recovery paid to the class). The Court recognizes, though, that the proposed class may benefit from the combined expertise and shared resources of the three firms. Indeed, the Joint Motion assures the Court that [c]ounsel intend to pool their resources and work cooperatively, and not redundantly, to achieve the best result for the Class. D.E. 35 at 3. At this point, the Court cannot say that representation by multiple firms will be contrary to the interests of the putative class members, especially given the expertise of the firms retained here. Nevertheless, the Court emphasizes counsel s responsibility to work efficiently in representing the 7
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 8 of 9 proposed class. Based on counsel s recognition of this obligation and expressed commitment to work efficiently, the Court approves PFM s selection of lead counsel. C. Filing of Proposed Amended Complaint Last, the Joint Motion asks the Court to allow PFM until January 10, 2011, to seek leave to file an amended complaint. According to the Joint Motion, the proposed amendments relate to an abundance of new information about DJSP, its operations and business prospects that has become public since the filing of the initial Complaint. D.E. 35 at 3. The Court finds it appropriate to grant the time requested in order for PFM to seek leave to amend its complaint. See Fed. R. Civ. P. 15(a). Consequently, the Court grants PFM until January 10, 2011, to file its proposed amended complaint. Conclusion For the reasons stated above, the Joint Motion for Order Appointing Lead Plaintiff, Approving Selection of Counsel, and Scheduling the Filing of an Amended Complaint [D.E. 35] is GRANTED. Accordingly, it is hereby ORDERED as follows: 1. The Court appoints Philadelphia Financial Management of San Francisco, LLC, to serve as lead plaintiff in this action. 2. The Court approves PFM s selection of Cuneo, Gilbert & LaDuca, LLP; Liddle & Robinson, LLP; and Shepherd, Finkelman, Miller & Shah, LLP, to serve as lead counsel. 3. The Motion for Appointment of Philadelphia Financial Management of San Francisco, LLC, as Lead Plaintiff and Approval of Selection of Counsel [D.E. 5], and the Motion of Stan Cooper, Neeraj Methi, Gary Curson and Blue Lion Capital for Appointment as Lead Plaintiff and Approval of Lead Plaintiffs Selection of Lead Counsel and Liaison Counsel [D.E. 7], are DENIED AS MOOT. 8
Case 0:10-cv-61261-WJZ Document 36 Entered on FLSD Docket 11/24/2010 Page 9 of 9 4. PFM is granted until January 10, 2011, to file a proposed amended complaint. DONE and ORDERED at Fort Lauderdale, Florida this 24th day of November, 2010. cc: Honorable William J. Zloch counsel of record 1* IAWA ROBIN S. ROSENBAUM United States Magistrate Judge 9