Abrons v. Nicholas Financial, Inc. et al

Filing 40

ORDER: The Motion of Marvin Biver and Richard Abrons for Appointment as Lead Plaintiff, Approval of Selection of Co-Lead Counsel, and Consolidation of Related Actions 33 is GRANTED. The Clerk is directed to CONSOLIDATE Case No. 8:14-cv-250-T-33TGW and Case No. 8:14-cv-583-T-33TGW for all further proceedings. This action shall proceed under the lead case of 8:14-cv-250-T-33TGW, and all future pleadings shall be filed in that case. The Clerk is directed to CLOSE Case No. 8:14-cv-583-T-33TGW. Signed by Judge Virginia M. Hernandez Covington on 4/30/2014. (KNC)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
MARVIN BIVER, individually
and on behalf of all others
similarly situated,
Plaintiff,
v.

Case No. 8:14-cv-250-T-33TGW

NICHOLAS FINANCIAL, INC.;
PETER L. VOSOTAS; RALPH T.
FINKENBRINK; STEPHEN BRAGIN;
SCOTT FINK; ALTON R. NEAL;
PROSPECT CAPITAL CORPORATION;
WATERSHED ACQUISITION LP;
0988007 B.C., UNLIMITED LIABILITY
COMPANY; AND WATERSHED OPERATING
LLC,
Defendants.
_______________________________/
RICHARD ABRONS, individually
and on behalf of all others
similarly situated,
Plaintiff,
v.

Case No. 8:14-cv-583-T-33TGW

NICHOLAS FINANCIAL, INC.;
PETER L. VOSOTAS; RALPH T.
FINKENBRINK; STEPHEN BRAGIN;
SCOTT FINK; ALTON R. NEAL;
PROSPECT CAPITAL CORPORATION;
WATERSHED ACQUISITION LP;
0988007 B.C., UNLIMITED LIABILITY
COMPANY; AND WATERSHED OPERATING
LLC,
Defendants.
_______________________________/

ORDER
This cause comes before the Court in consideration of
the Motion of Marvin Biver and Richard Abrons for Appointment
as Lead Plaintiff, Approval of Selection of Co-Lead Counsel,
and Consolidation of Related Actions. (Case No. 8:14-cv-250
Doc. # 61; Case No. 8:14-cv-583 Doc. # 33).1

The Motion seeks

an Order (1) appointing Biver and Abrons as lead plaintiffs;
(2) approving their selection of Abbey Spanier, LLP and
Robbins Geller Rudman & Dowd, LLP as co-lead counsel; and (3)
consolidating Case No. 8:14-cv-583, filed on March 10, 2014,
with an earlier-filed action, Case No. 8:14-cv-250, filed on
February 3, 2014. For the reasons stated below, the Motion is
granted.
I.

Background
Defendant Nicholas Financial, Inc. is a Canadian holding

company incorporated under the laws of British Columbia, and
it

maintains

its

corporate

headquarters

in

Clearwater,

Florida. (Case No. 8:14-cv-250 Doc. # 1 at ¶ 13; Case No.
8:14-cv-583 Doc. # 1 at ¶ 10). On December 18, 2013, Nicholas
Financial announced that its Board of Directors entered into

1

Biver and Abrons filed the instant Motion in both Case No.
8:14-cv-250 and Case No. 8:14-cv-583. For clarity, the Court
will cite to the Motion as Doc. # 61, the docket number
assigned to the Motion in Case No. 8:14-cv-250.

2 

an “Arrangement Agreement” with Defendant Prospect Capital
Corporation. (Case No. 8:14-cv-250 Doc. # 1 at ¶ 41; Case No.
8:14-cv-583 Doc. # 1 at ¶ 56). As a result, “each Nicholas
Financial shareholder will be entitled to receive, for each
share of Nicholas Financial they currently hold, a number of
common shares of Prospect Capital determined by dividing (i)
$16.00 by the (ii) volume-weighted average price of Prospect
Capital stock on the NASDAQ exchange for the 20 trading days
prior to and ending on the trading day immediately preceding
the effective time. . . .” (Doc. # 61 at 4).
On January 14, 2014, Defendants filed a Registration
Statement with the Securities & Exchange Commission. (Case
No. 8:14-cv-250 Doc. # 1 at ¶ 55; Case No. 8:14-cv-583 Doc.
# 1 at ¶ 60). The Registration Statement describes the
purported process by which the Board of Directors agreed to
sell

Nicholas

Registration
financial

Financial
Statement

analyses

to

Prospect

also

Capital.

includes

performed

by

a

(Id.).

summary

Nicholas

of

The
the

Financial’s

financial advisor, Janney Montgomery Scott LLC, which the
Board

of

Directors

allegedly

relied

upon

in

making

its

determination. (Id.).
According to the Complaints, the Registration Statement
contains material misstatements and omits material facts,

3 

thus precluding Nicholas Financial shareholders from casting
an informed vote in connection with the proposed transaction
with Prospect Capital and its affiliates. (Case No. 8:14-cv250 Doc. # 1 at ¶ 56; Case No. 8:14-cv-583 Doc. # 1 at ¶ 60).
Biver filed Case No. 8:14-cv-250 on February 3, 2014,
and Abrons filed Case No. 8:14-cv-583 on March 10, 2014.
Thereafter, Biver and Abrons filed the present Motion, which
seeks an Order (1) appointing Biver and Abrons as lead
plaintiffs; (2) approving their selection of Abbey Spanier,
LLP and Robbins Geller Rudman & Dowd, LLP as co-lead counsel;
and (3) consolidating Case No. 8:14-cv-583 with an earlierfiled action, Case No. 8:14-cv-250.
The instant Motion was filed on April 11, 2014. Pursuant
to Local Rule 3.01(b) and Federal Rule of Civil Procedure
6(d), the deadline for a party in either action to file a
response in opposition to the Motion was, at the latest, April
28, 2014. No party filed such a response to the Motion within
the

time

provided

by

the

Rules.

Accordingly,

the

Court

considers the Motion to be unopposed. However, despite the
Motion being unopposed, this Court will review the request to
consolidate the actions and applications for the appointment
of

lead

plaintiffs

and

co-lead

counsel.

See

Burke

v.

Ruttenberg, 102 F. Supp. 2d 1280, 1329 (N.D. Ala. 2000)(citing

4 

to In re Nice Sys. Sec. Litig., 188 F.R.D. 206, 221 (D.N.J.
1999)(finding that in spite of the fact that the motion to
appoint lead plaintiff was unopposed, the court “bore an
obligation to review applications for the appointment of lead
plaintiff.”)).
II.

Consolidation
Federal

Rule

of

Civil

Procedure

42(a)

states:

“If

actions before the court involve a common question of law or
fact, the court may: (1) join for hearing or trial any or all
matters at issue in the actions; (2) consolidate the actions;
or (3) issue any other orders to avoid unnecessary cost or
delay.”
In Hendrix v. Raybestos-Manhattan, Inc., the Eleventh
Circuit noted that Rule 42 “is a codification of a trial
court’s inherent managerial power ‘to control the disposition
of the causes on its docket with economy of time and effort
for itself, for counsel, and for litigants.’” 776 F.2d 1492,
1495 (11th Cir. 1985)(quoting In re Air Crash Disaster at
Fla. Everglades, 549 F.2d 1006, 1012 (5th Cir. 1977)).
A trial court’s decision to consolidate similar cases is
purely discretionary. Id.

However, in determining whether to

employ the consolidation provisions of Rule 42(a), Fed. R.
Civ. P., the trial court must assess:

5 

[W]hether the specific risks of prejudice and
possible confusion are overborne by the risk
of inconsistent adjudications of common
factual and legal issues, the burden on
parties, witnesses and available judicial
resources posed by multiple lawsuits, the
length of time required to conclude multiple
suits as against a single one, and the
relative expense to all concerned of the
single-trial, multiple-trial alternatives.
Hendrix, 776 F.2d at 1495.
As Biver and Abrons explain, “[t]hese Actions present
virtually

identical

factual

and

legal

issues,

assert

identical claims under the securities laws, and name the same
defendants. Because these Actions are based on the same facts
and involve the same subject matter, the same discovery will
be

relevant

to

all

lawsuits.

Thus,

consolidation

is

appropriate here.” (Doc. # 61 at 11).
As there has been no response filed to the present
Motion, the Court only has the benefit of the arguments set
forth by Biver and Abrons. In accord with the arguments
provided

by

Biver

and

Abrons,

the

Court

agrees

that

consolidation is appropriate in this case, and as a result,
the Court determines that it is suitable to consolidate the
cases so that this entire matter will proceed under the first
filed action, Case No. 8:14-cv-250.

6 

III. Appointment of Lead Plaintiffs
Congress

enacted

the

Private

Securities

Litigation

Reform Act of 1995, 15 U.S.C. § 78u-4, “to remedy perceived
abuses in the securities class action litigation.” Vincelli
v. Nat'l Home Health Care Corp., 112 F. Supp. 2d 1309, 1313
(M.D. Fla. 2000). “Specifically, the PSLRA provides certain
guidelines for identifying the plaintiff or plaintiffs who
are the most strongly aligned with the class of shareholders,
and most capable of controlling the selection and actions of
counsel.” Id.
The movants seek the appointment of Biver and Abrons as
lead plaintiffs in the consolidated case. Pursuant to 15
U.S.C. § 78u-4(a)(3):
(a)

Private class actions
* * *

(3)

Appointment of lead plaintiff

(A)

Early notice to class members
(i) In general
Not later than 20 days after the date on which
the complaint is filed, the plaintiff or
plaintiffs shall cause to be published, in a
widely circulated national business-oriented
publication or wire service, a notice advising
members of the purported plaintiff class –

7 

(I) of the pendency of the action, the
claims
asserted
therein,
and
the
purported class period; and
(II) that, not later than 60 days after
the date on which the notice is
published, any member of the purported
class may move the court to serve as lead
plaintiff of the purported class.
(ii) Multiple actions
If more than one action on behalf of a class
asserting substantially the same claim or
claims arising under this chapter is filed,
only the plaintiff or plaintiffs in the first
filed action shall be required to cause notice
to be published in accordance with clause (i).
(iii) Additional notices may be required under
Federal rules
Notice required under clause (i) shall be in
addition to any notice required pursuant to
the Federal Rules of Civil Procedure.
(B) Appointment of lead plaintiff
(i) In general
Not later than 90 days after the date on which
a notice is published under subparagraph
(A)(i), the court shall consider any motion
made by a purported class member in response
to the notice, including any motion by a class
member who is not individually named as a
plaintiff in the complaint or complaints, and
shall 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 (hereafter in this paragraph referred
to as the “most adequate plaintiff”) in
accordance with this subparagraph.

8 

* * *
(iii) Rebuttable presumption
(I) In general
Subject to subclause (II), for purposes of
clause
(i),
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.
(II) Rebuttal evidence
The presumption described in subclause (I) may
be rebutted only upon proof by a member of the
purported
plaintiff
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
render such plaintiff incapable of
adequately representing the class.
15 U.S.C. § 78u-4(a)(3).
As set forth above, 15 U.S.C. § 78u-4(a)(3)(B)(iii)
allows the Court to adopt a rebuttable presumption that the

9 

most adequate “lead plaintiff” is the person or group of
persons that (1) has filed the complaint or made a motion in
response to the notice; (2) has the largest financial interest
in the relief sought by the purported class; and (3) otherwise
satisfies

the

requirements

of

Fed.

R.

Civ.

P.

23(a).

Accordingly, the Court will analyze whether Biver and Abrons
satisfy

these

requirements,

and

therefore,

whether

the

rebuttable presumption is appropriate in this case.
A. Notification Requirement
In the instant case, the notification requirement has
been met. The Biver action was the initial action filed.
Pursuant to 15 U.S.C. § 78u-4(a)(3)(A)(i), Biver, as the
plaintiff, was required to publish, “in a widely circulated
national business-oriented publication or wire service,” a
notice advising members of the purported class of (1) the
pendency of the action, the claims asserted therein, and the
purported class period and (2) their right to file a motion
to serve as lead plaintiff of the purported class.
On February 10, 2014, Biver published a notice regarding
the pendency of these actions on Business Wire, a national,
business-oriented newswire service. See (Doc. # 61-2). The
notice adequately apprised members of the proposed class of

10 

their right to move the Court to serve as lead plaintiff or
plaintiffs no later than 60 days from the date of publication.
Pursuant to 15 U.S.C. § 78u-4(a)(3)(A)(i), the time
period in which purported class members had to move to be
appointed lead plaintiffs expired on April 11, 2014. The
present Motion was filed on April 11, 2014.

As there has

been no objection to the timeliness of the Motion, the Court
finds that the present Motion was timely filed.
B. Largest Financial Interest Requirement
According to 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(bb), a
rebuttable presumption of adequacy arises where the “group of
persons” having the largest financial interest among the
named plaintiffs in the class action seeks appointment as
lead plaintiff. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(bb).
As

stated

in

their

signed

certifications,

the

movants

collectively hold 23,565 shares of Nicholas Financial common
stock. (Doc. # 61-3). “Upon information and belief, there are
no other movants with a larger financial interest in actions.”
(Doc. # 61 at 7). From review of the submissions, the Court
determines that Biver and Abrons, collectively, have the
largest financial interest in the instant litigation.
C. Fed. R. Civ. P. 23 Requirements

11 

15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(cc) also allows for
a rebuttable presumption of adequacy when the proposed lead
plaintiffs demonstrate that they “otherwise satisf[y] the
requirements

of

Rule

23

of

the

Federal

Rules

of

Civil

Procedure.” See 15 U.S.C. § 78u–4(a)(3)(B)(iii)(I)(cc).
Rule 23(a) provides:
One or more members of a class may sue or be sued
as representative parties on behalf of all members
only if:
(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 defense of the representative
parties are typical of the claims or defenses of
the class, and
(4) the representative parties will fairly and
adequately protect the interests of the class.
Fed. R. Civ. P. 23(a).
According to the present Motion,
Of the four prerequisites to class certification,
only two – typicality and adequacy – directly
address the personal characteristics of the class
representative. Consequently, in deciding a motion
to serve as lead plaintiff, the Court should limit
its inquiry to the typicality and adequacy prongs
of Rule 23(a), and defer examination of the
remaining requirements until the lead plaintiff
moves for class certification.

12 

(Doc. # 61 at 8).

As the present Motion is unopposed, the

Court only has the benefit of the movant’s position on this
matter. As a result, the Court adopts the movants’ contention
and will inquire only as to the typicality and adequacy prongs
of

Rule

23(a).

See

Vincelli,

112

F.

Supp.

at

1317-

18(addressing only the typicality and adequacy prongs and
finding

that

the

proposed

lead

plaintiffs

adequately

demonstrated each prerequisite).
In order to establish typicality, “there must be a nexus
between the class representative’s claims or defenses and the
common questions of fact or law which unite the class.”
Kornberg v. Carnival Cruise Lines, Inc., 741 F.2d 1332, 1337
(11th Cir. 1984). “A sufficient nexus is established if the
claims or defenses of the class and the class representative
arise from the same event or pattern or practice and are based
on the same legal theory.” Id. When the class representative’s
injury is different from that of the rest of the class, his
claim

is

not

typical

and

he

cannot

serve

as

the

class

representative. Murray v. Auslander, 244 F.3d 807, 811 (11th
Cir.

2001).

Moreover,

when

proof

of

the

class

representative’s claim would not necessarily prove the claims
of the proposed class members, the class representative does
not satisfy the typicality requirement. Brooks v. S. Bell

13 

Tel.

&

Tel.

Co.,

133

F.R.D.

54,

58

(S.D.

Fla.

1990).

“Typicality, however, does not require identical claims or
defenses.” Kornberg, 741 F.2d at 1337. “A factual variation
will

not

render

a

class

representative’s

claim

atypical

unless the factual position of the representative markedly
differs from that of other members of the class.” Id.
Furthermore, the adequacy prong requires that the class
representatives

have

representative

class

representatives
prosecute

the

common

interests

members

demonstrate
interests

of

and

that
the

with

requires
they

class

the
that

nonthe

will

vigorously

through

qualified

counsel. Piazza v. Ebsco Indus. Inc., 273 F.3d 1341, 1346
(11th

Cir.

2001).

Thus,

the

adequacy

of

representation

analysis involves two inquiries: “(1) whether any substantial
conflicts of interest exist between the representatives and
the

class,

and

(2)

whether

the

representatives

will

adequately prosecute the action.” Valley Drug Co. v. Geneva
Pharm., Inc., 350 F.3d 1181, 1189 (11th Cir. 2003)(quoting In
re HealthSouth Corp. Sec. Litig., 213 F.R.D. 447, 460–61 (N.D.
Ala. 2003)). “The existence of minor conflicts alone will not
defeat a party’s claim to class certification.” Valley Drug
Co., 350 F.3d at 1189. Rather, “the conflict must be a

14 

fundamental one going to the specific issues in controversy.”
Id.
Upon review, the movants have sufficiently demonstrated,
at this preliminary stage, that they meet the typicality and
adequacy prongs. The movants have satisfied the typicality
requirement by: (1) demonstrating that they held common stock
in Nicholas Financial at the time the proposed transaction
was

announced,

providing

that

as

did

they

the

will

purported
suffer

the

class
same

members;

(2)

harm

the

as

prospective class members as a result of Defendants’ alleged
misconduct; and (3) maintaining that their claims and the
claims of other prospective class members arise out of the
same

course

of

events

and

are

based

on

the

same

legal

theories. (Doc. # 61 at 9).
Furthermore, the movants have satisfied the adequacy
prerequisite by providing that “the interests of the movants
are clearly aligned with the members of the Class, and there
is no evidence of any antagonism between [m]ovants’ interests
and those of the other members of the Class.” (Id.). Moreover,
“[m]ovants have taken significant steps demonstrating that
they will protect the interest of the [C]lass: they have
retained competent and experienced counsel to prosecute these
claims” and shown the willingness and ability to vigorously

15 

prosecute the actions. (Id. at 9-10). Therefore, at this
preliminary stage, this Court finds that Biver and Abrons
have adequately demonstrated the typicality and adequacy
requirements of Fed. R. Civ. P. 23(a).
As set forth above, the Court has determined that Biver
and Abrons have satisfied the elements necessary to give rise
to

the

rebuttable

presumption

that

they

are

the

“most

adequate” lead plaintiffs. This presumption has not been
rebutted by proof that the movants “will not fairly and
adequately protect the interests of the class” or “[are]
subject to unique defenses that render such plaintiff[s]
incapable

of

adequately

representing

the

class.”

See

15

U.S.C. § 78u-4(a)(3)(B)(iii)(II). Therefore, for the reasons
stated above, the Court appoints Biver and Abrons as lead
plaintiffs in the consolidated action.
IV.

Lead Counsel
15 U.S.C. § 78u-4(a)(3)(B)(v) vests authority in the

lead plaintiff to select and retain lead counsel, subject to
Court

approval.

See

15

U.S.C.

§

78u-4(a)(3)(B)(v).

The

movants seek approval of their selection of Abbey Spanier,
LLP and Robbins Geller Rudman & Dowd, LLP as co-lead counsel.
According

to

the

Motion,

“[b]oth

firms

have

extensive

experience in the area of securities litigation and have

16 

successfully

prosecuted

numerous

securities

actions on behalf of injured investors.

fraud

class

Thus, the Court may

be assured that by granting this Motion, the Class will
receive the highest caliber of legal representation.” (Doc.
# 61 at 10)(internal citation omitted). As this Court has not
been provided with any reason to doubt the skill, experience,
and qualifications of chosen counsel, the Court approves the
movants’ selection of Abbey Spanier, LLP and Robbins Geller
Rudman & Dowd, LLP as co-lead counsel for lead plaintiffs and
the potential class.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
(1)

The

Motion

of

Marvin

Biver

and

Richard

Abrons

for

Appointment as Lead Plaintiff, Approval of Selection of
Co-Lead Counsel, and Consolidation of Related Actions
(Case No. 8:14-cv-250 Doc. # 61; Case No. 8:14-cv-583
Doc. # 33) is GRANTED.
(2)

The Clerk is directed to CONSOLIDATE Case No. 8:14-cv250-T-33TGW and Case No. 8:14-cv-583-T-33TGW for all
further proceedings.

(3)

This action shall proceed under the lead case of 8:14cv-250-T-33TGW, and all future pleadings shall be filed
in that case.

17 

(4)

The Clerk is directed to CLOSE Case No. 8:14-cv-583-T33TGW.
DONE and ORDERED in Chambers in Tampa, Florida, this

30th day of April, 2014.

Copies: All Counsel of Record

18