An opinion issued late last week dealt with dueling motions to appoint lead plaintiff and counsel in the securities litigation filed by shareholders over Elon Musk’s failure to disclose the purchase of Twitter stock that put him over the 5% threshold, a Securities and Exchange Commission (SEC) requirement.
The Southern District of New York, per Judge Gabriel Gorenstein, chose the Oklahoma Firefighters Pension and Retirement System to be the lead plaintiff and counsel Bernstein Litowitz Berger & Grossmann LLP over Amalgamated Bank and its counsel The Rosen Law Firm P.A.
As previously reported, an April-filed suit alleged that Musk, supposedly the richest person in the world, had by March 14 purchased shares of Twitter that put him at 9.1% ownership in the company. However, Musk failed to file the SEC-required “Schedule 13” until April 4.
By failing to disclose his ownership, Musk was able to acquire shares at artificially low prices between March 24 and April 4, the complaint theorized. The plaintiff and other putative class members sold Twitter shares during this period, missing the resulting share price increase, and instead selling at artificially low prices.
Judge Gorenstein’s opinion dealt with lead plaintiff qualification under the Private Securities Litigation Reform Act of 1995, noting that in addition to a number of statutory prerequisites, financial loss is the most important consideration. Though both vying plaintiffs’ met the legal requirements, the opinion found that the Oklahoma Firefighter’s loss, almost 14 times more than Amalgamated Bank’s, tipped the decision in its favor.
Amalgamated Bank complained that the pension fund was a plaintiff too often, citing a rule that forbids plaintiffs from serving as lead in more than five securities class actions brought during a three-year period.
The court countered that the rule is subject to exceptions. The opinion explained that the judiciary still has flexibility to appoint plaintiffs like Okalahoma Firefighters, lead plaintiff in 14 securities actions, in view of the fact that institutional investors “‘benefit shareholders and assist courts by improving the quality of representation in securities class actions.’”
Amalgamated Bank could not overcome the presumption that Oklahoma Firefighters is best qualified to serve as lead plaintiff, Judge Gorenstein concluded. As to counsel, the opinion said both firms were well-qualified, but gave Bernstein Litowitz the nod because Oklahoma Firefighters is its client.