Law School Case Brief
Krim v. pcOrder.com, Inc. - NO. A 00 CA 776 SS, NO. A 00 CA 831 SS, NO. A 01 CA 096 SS, 2001 U.S. Dist. LEXIS 6592 (W.D. Tex. May 14, 2001)
In determining, pursuant to the Private Securities Litigation Reform Act of 1995, which applicant should be named the lead plaintiff in a class action filed pursuant to Fed. R. Civ. P. 42, the court must adopt the presumption that the most adequate plaintiff in any private action is the person(s) who: (1) has either filed the complaint or made a motion in response to a notice, (2) in the determination of the court, has the largest financial interest in the relief sought; and (3) otherwise satisfied the requirements of Fed. R. Civ. P. 23. 15 U.S.C.S. §§ 77z-1(a)(3)(B)(iii) and 78u-4(a)(3)(B)(iii)(I).
Four related securities class action suits brought by four groups of purchasers of securities of pcOrder.com, alleging violation of the Securities and Exchange Act by pcOrder.com, Inc., members of the pcOrder board of directors, and Trilogy Software, Inc. The class actions were brought for allegedly issuing false and misleading registration statements filed in connection with pcOrder's Initial Public Offering (IPO) in March 1999, and its subsequent secondary offering in December 1999. Plaintiffs also alleged that the defendants deceptively misrepresented pcOrder.com's business plan, finances, and outlook, and that defendants acknowledged as much in November 2000 when Trilogy was attempting to acquire pcOrder.com. After the filing of these lawsuits, three groups filed competing motions to be appointed lead plaintiffs and lead counsel. The Burke/Petrick group owned the greatest number of shares of stock.
Should the court appoint the Burke/Petrick group as lead plaintiffs considering the group's ownership of the largest number of shares of stock and losses?
Applying the Private Securities Litigation Reform Act of 1995 and Fed. R. Civ. P. 23, the court appointed as lead plaintiffs the group whose members owned the greatest number of shares of stock. The court noted that this group that had the largest number of shares of pcOrder.com stock, as well as the greatest estimated loss of the three competing groups, and thus would presumably have the greatest financial interest in a positive outcome in this litigation. The court also approved that group's selection (Baskin and Coughlin) of co-lead counsel. In rejecting the first plaintiff group's chosen counsel, the court noted the other attorneys' allegations of misconduct and the withdrawal of several "members" of the first plaintiff group. In rejecting the third plaintiff group's choice, the court noted that their attorney's conduct in the lawsuit had "hardly been professional."
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