Porzio v. Overseas Shipholding Group, Inc. et al
Filing
64
OPINION AND ORDER: The OSG Securities Actions and any action arising out of the same operative facts and alleging causes of action under the PSLRA hereafter filed are consolidated for pre-trial and trial purposes under the caption In re OSG Securitie s Litigation, Master File Number 12 Civ. 7948. The DSM Group is appointed Lead Plaintiff in the OSG Securities Actions. Robbins Geller Rudman & Dowd LLP is appointed Lead Counsel. A conference is scheduled for February 12, 2013 at 4:30 p.m. in courtroom 15C. The Clerk of the Court is directed to close these motions (documents no. 24, 27, 30, 33, 36, 39, 43, and 47 in 12 Civ. 7948; and documents no. 11, 14, and 17 in 12 Civ. 8547). (Signed by Judge Shira A. Scheindlin on 2/1/2013) (ft)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------- )(
ROBERT PORZIO, Individually and on
Behalf of All Others Similarly Situated,
Plaintiff,
OPINION AND ORDER
v.
12 Civ. 7948
OVERSEAS SHIPHOLDING GROUP, et aI.,
Defendants.
----------------------------------------------------- )(
----------------------------------------------------- )(
BRUCE MYATT, Individually and on Behalf
of All Others Similarly Situated,
Plaintiff,
v.
12 Civ. 8547
MORTEN ARNTZEN, et aI.,
Defendants.
----------------------------------------------------- )(
----------------------------------------------------- )(
INDIANA TREASURER OF STATE,
Individually and on Behalf of All Others
Similarly Situated,
Plaintiff,
v.
G. ALLEN ANDREAS III, et aI.,
Defendants.
----------------------------------------------------- )(
12 Civ. 9363
SHIRA A. SCHEINDLIN, U.S.D.J.:
I.
INTRODUCTION
Plaintiffs bring three related putative federal securities class actions
(“the OSG Securities Actions”) against Overseas Shipholding Group, Inc. (“OSG”
or the “Company”),1 various officers thereof, underwriters, and auditors (together,
“defendants”). Two of the actions are brought on behalf of purchasers of OSG
common stock and allege violations of Section 10(b) and Rule 10b-5 and Section
20(a) of the Exchange Act of 1934 (the “Exchange Act”).2 The third action is
brought on behalf of purchasers of “OSG debt securities sold pursuant and/or
traceable to [OSG’s] $300 million public offering of 8.125% Senior Notes Due
2018 conducted on March 24, 2010,” and alleges violations of Sections 11,
12(a)(2) and 15 of the Securities Act of 1933 (the “Securities Act”).3
Three groups of plaintiffs remain in contention for appointment as
1
On November 14, 2012, OSG filed for protection under the federal
bankruptcy laws. See In re Overseas Shipholding Group, Inc., et al., No. 12-20000
(Bankr. D. Del.).
2
See Porzio v. Overseas Shipholding Group, Inc. et al., 12 Civ. 7948,
Complaint (“Porzio Compl.”) (Dkt. No. 1) (suit by purchasers of OSG common
stock between April 28, 2008 and October 22, 2012); Myatt v. Arntzen et al., 12
Civ. 8547, Complaint (Dkt. No. 1) (suit by purchasers of OSG common stock
between March 1, 2010 and October 19, 2012).
3
Indiana Treasurer of State v. Andreas et al., 12 Civ. 9363, Complaint
(“ITS Compl.”) (Dkt. No. 1).
1
lead plaintiff. In addition, certain plaintiffs have moved to consolidate the actions.
For the reasons discussed below, the actions are consolidated, the OSG Investor
Group is appointed lead plaintiff group, and Robbins Geller Rudman & Dowd LLP
is appointed lead counsel.
II.
BACKGROUND
A.
Facts4
OSG is a major international shipping company focused on global
energy transportation markets, with leading positions in the crude oil tanker,
product carrier and U.S. Flag markets, as well as recently entering the liquefied
natural gas “LNG” business.5 On March 24, 2010, OSG conducted a $300 million
public offering of 8.125% Senior Notes due 2018.6 Noteholder plaintiffs allege
that the Offering Materials pursuant to which the Offering was conducted
materially misstated Overseas’ quarterly and annual financial statements for the
4
The facts in this section are taken from the Porzio and ITS Complaints
and are presumed true for purposes of this motion.
5
See Porzio Compl. ¶ 3. Defendant Morten Arntzen has been Chief
Executive Officer (“CEO”) and President of OSG since January 2004. See id. ¶
17. Defendant Myles R. Itkin, Jr. has been Chief Financial Officer (“CFO”) and
Treasurer of OSG since 1995 and was promoted to Executive Vice President in
2006. See id. ¶ 18.
6
See ITS Compl. ¶ 19.
2
year 2009.7
On October 3, 2012, OSG filed a Form 8-K with the Securities and
Exchange Commission (“SEC”) notifying the SEC that certain tax issues had come
to the Company’s attention and that it would make additional disclosures upon
review.8 OSG’s share price fell from a closing price of $7.08 on October 2, 2012,
to a closing price of $6.82 on October 3, 2012.9 On October 22, 2012, the OSG
filed another 8-K announcing that “the Company’s previously issued financial
statements for at least the three years ended December 31, 2011 and associated
interim periods, and for the fiscal quarters ended March 31 and June 30, 2012,
should no longer be relied upon.”10
Stockholder plaintiffs allege that in response to this announcement,
OSG’s stock price fell over sixty-two percent from a closing price of $3.25 on
October 19, 2012 to a closing price of $1.23 on October 22, 2012.11 Stockholder
7
See id. ¶¶ 22-25.
8
See Porzio Compl. ¶ 4; see also ITS Compl. ¶ 26.
9
See Porzio Compl. ¶ 5.
10
Id. ¶ 7. OSG also announced that it was considering “voluntary filing
of a petition for relief to reorganize under Chapter 11 of the Bankruptcy Code.” Id.
See also ITS Compl. ¶¶ 28-29.
11
See Porzio Compl. ¶ 9. Trading in the Company’s securities reached
its heaviest volume in at least five years on October 22, 2012. See id. OSG’s
credit ratings were also downgraded in response. See also ITS Compl. ¶ 29.
3
plaintiffs allege that the October 22 announcement will require restatement for the
relevant periods “in order to properly account for tax issues and other false and
misleading statements” and, as a result, putative class members “purchased OSG
common stock at artificially inflated prices and thereby suffered significant losses
and damages.”12 Noteholder plaintiffs allege that at the close of business on
November 20, 2012, the Notes were trading below twenty-five percent of their
initial par value or seventy-five percent below the Offering price.13
B.
Potential Lead Plaintiffs
Three groups of plaintiffs remain in contention for appointment as
lead plaintiff:14 (1) Abe Hedaya, Norma Hedaya, William Mills, Kristin Mondo
(together, the “OSG Investor Group”), who allege that Abe and Norma Hedaya
12
Porzio Compl. ¶ 10.
13
See ITS Compl. ¶ 32.
14
Two contenders for appointment as lead plaintiff have formally
withdrawn. See Notice of Withdrawal of Movant the Riley Group's Motion to be
Appointed Lead Plaintiff and Approval of Lead Counsel (Porzio Dkt. No. 52);
Notice of Non-Opposition of Paul Otto Koether IRA Rollover (Porzio Dkt. No.
56). Three other contenders have acknowledged that they do not hold the largest
financial interest and are therefore not presumptively proper lead plaintiffs. See
Response of Movant Lee McClennahan to Competing Motions for Appointment as
Lead Plaintiff (“McClennahan Rep.”) (Porzio Dkt. No. 57); [Irving Firemen’s
Relief and Retirement Fund’s] Response to Motion for Appointment as Lead
Plaintiff (Porzio Dkt. No. 53); See [Barrie Woolard and Steven Hyman’s]
Response to Motion for Appointment as Lead Plaintiff (Porzio Dkt. No. 54).
4
suffered $2,077,291.13 in losses,William Mills suffered $9,413.44 in losses and
Kristin Mondo suffered approximately $33,260.45 in losses;15 (2) Robert Kawula,
Ben Reuben, Nikos Georgalakis, Patrick Cummins, and Douglas G. Fixter
(together, the “Overseas Investor Group”) who allege total losses of $809,773;16
and (3) Stichting Pensioenfonds DSM Nederland (“DSM”) and Indiana Treasurer
of State (“ITS”), joined by Lloyd Crawford (together with DSM and ITS, the
“DSM Group”), who allege approximately $1.3 million in losses.17 Four of the
original movants also ask the Court to consolidate the OSG Securities Actions.18
15
Memorandum of Law in Support of the Motion of the OSG Investor
Group for Appointment as Co-Lead Plaintiffs, Approval of Co-Lead Plaintiffs’
Selection of Co-Lead Counsel and Consolidating Related Actions at 3 (“OSG
Investor Mem.”) (Porzio Dkt. No. 31).
16
See Memorandum of Law in Support of the Motion by the Overseas
Investor Group to Consolidate the Related Actions, for Appointment as Lead
Plaintiff and Approval of Counsel at 3 (“Overseas Investor Group Mem.”) (Porzio
Dkt. No. 34).
17
See Memorandum of Law in Support of Motion of [Stichting
Pensioenfonds DSM Nederland and Indiana Treasurer of State] for Appointment as
Lead Plaintiff and Approval of Lead Plaintiff’s Selection of Lead Counsel at 2
(“DSM Mem.”) (Porzio, Dkt. No. 48).
18
See Memorandum of Law in Support of the Motion of Lee
McClennahan for Consolidation, Appointment as Lead Plaintiff and Approval of
His Selection of Lead Counsel and Liaison Counsel (Porzio Dkt. No. 25); OSG
Investor Mem.; Overseas Investor Group Mem.; Memorandum of Law in Support
of Motion of Barrie Woolard and Steven Hyman as Lead Plaintiffs, Appointment
of Counsel and Consolidation of Related Actions (Porzio Dkt. No. 37). No
movant opposes consolidation of the actions.
5
III.
LEGAL STANDARD
A.
Consolidation
Federal Rule of Civil Procedure 42(a) permits a court, in its
discretion, to consolidate actions involving common questions of law or fact. The
Private Securities Litigation Reform Act (“PSLRA”) states that “[i]f more than one
action on behalf of a class asserting substantially the same claim or claims arising
under this chapter has been filed, and any party has sought to consolidate those
actions . . . the court shall not make the [lead plaintiff] determination . . . until after
the decision on the motion to consolidate is rendered.”19
B.
Appointment of Lead Plaintiff
The PSLRA sets forth the required procedure for determining who
should be appointed lead plaintiff.20 The lead plaintiff should be the plaintiff “most
capable of adequately representing the interests of class members” as determined
by a two-step competitive process.21
The first step establishes as presumptive lead plaintiff the “person or
group of persons” who meet(s) the following three criteria: (1) the candidate must
19
15 U.S.C. § 78u-4(a)(3)(B)(ii).
20
See id. § 78u-4(a)(3)(B).
21
See id. § 78u-4(a)(3)(B)(i),(iii).
6
have “filed the complaint or made a motion in response to a notice;”22 (2) the
candidate must have “the largest financial interest in the relief sought by the
class,”23 and (3) the candidate must “otherwise satisf[y] the requirements of Rule
23 of the Federal Rules of Civil Procedure.”24
Once the presumptive lead plaintiff has been designated, members of
the class have the opportunity to rebut the chosen lead plaintiff’s presumptive
status by proving either that the presumptive lead plaintiff “will not fairly and
adequately protect the interests of the class” or that it “is subject to unique defenses
that render such plaintiff incapable of adequately representing the class.”25 If the
presumptive lead plaintiff is disqualified on these grounds, the candidate’s position
is forfeited and the court returns to the first phase to determine a new presumptive
lead plaintiff and the process repeats itself until a suitable lead plaintiff is found.
The lead plaintiff determination does not depend on the court’s judgment of which
party would be the best lead plaintiff for the class, but rather which candidate
22
Id. § 78u-4(a)(3)(B)(iii)(I)(aa). It is undisputed that all of the movants
meet this requirement for appointment as lead plaintiff.
23
Id. § 78u-4(a)(3)(B)(iii)(I)(bb).
24
Id. § 78u-4(a)(3)(B)(iii)(I)(cc).
25
Id. § 78u-4(a)(3)(B)(iii)(II)(aa), (bb).
7
fulfills the requirements of the PSLRA.26
The lead plaintiff need not be an individual, but can comprise several
investors.27 The PSLRA does not specify whether the “members” must be related
in some fashion in order to qualify as an appropriate lead plaintiff group. I have
previously held that
a group of unrelated investors should not be considered as
lead plaintiff when that group would displace the
institutional investor preferred by the PSLRA. But where
aggregation would not displace an institutional investor as
presumptive lead plaintiff based on the amount of losses
sustained, a small group of unrelated investors may serve
as lead plaintiff, assuming they meet the other necessary
requirements.28
26
See In re Cavanaugh, 306 F.3d 726, 729 (9th Cir. 2002) (“While the
words ‘most capable’ seem to suggest that the district court will engage in a
wide-ranging comparison to determine which plaintiff is best suited to represent
the class, the statute defines the term much more narrowly.”).
27
See In re Oxford Health Plans, Inc. Sec. Litig., 182 F.R.D. 42, 46
(S.D.N.Y. 1998) (appointing a group of three individual investors as lead plaintiff).
28
In re eSpeed, Inc. Sec. Litig., 232 F.R.D. 95, 98-99 (S.D.N.Y. 2005).
Accord Vladimir v. Bioenvision, Inc., No. 07 Civ. 6416, 2007 WL 4526532, at *1011 (S.D.N.Y. Dec. 21, 2007) (quoting eSpeed, Inc.). See generally In re Star Gas
Sec. Litig., No. 04 Civ. 1766, 2005 WL 818617, at *5 (D. Conn. Apr. 8, 2005)
(“The majority of courts considering the issue . . . allow[] a group of unrelated
investors to serve as lead plaintiffs when it would be most beneficial to the class
under the circumstances of a given case.”).
8
In addition, the PSLRA provides that “[t]he most adequate plaintiff shall, subject
to the approval of the court, select and retain counsel to represent the class.”29
IV.
DISCUSSION
A.
The Actions Should Be Consolidated
The OSG Securities Actions are all based on the same public
statements and reports – in particular OSG’s October 2012 disclosures. The fact
that certain claims are brought under the Exchange Act and others under the
Securities Act does not outweigh the efficiency interest in consolidating securities
cases involving identical factual allegations.30 I therefore order consolidation
pursuant to Rule 42(a) of the OSG Securities Actions and any action arising out of
the same operative facts and alleging causes of action under the PSLRA hereafter
filed in or transferred to this Court.
29
15 U.S.C. § 78u-4(a)(3)(B)(v).
30
See, e.g., Kaplan v. Gelfond, 240 F.R.D. 88, 92 (S.D.N.Y. 2007)
(ordering consolidation where actions contained overlapping factual allegations
that “defendants’ statements to the investing public misrepresented or omitted to
state material facts about the financial status of [the defendants]”); Glauser v.
EVCI Center Colleges Holding Corp., 236 F.R.D. 184, 186 (S.D.N.Y. 2006)
(“Consolidation is particularly appropriate in the context of securities class actions
if the complaints are based on the same public statements and reports.”) (internal
quotation marks omitted); Weltz v. Lee, 199 F.R.D. 129, 131 (S.D.N.Y. 2001) (“In
securities actions where the complaints are based on the same ‘public statements
and reports,’ consolidation is appropriate if there are common questions of law and
fact and the defendants will not be prejudiced.”) (internal citation omitted).
9
B.
Lead Plaintiff
1.
The OSG Investor Group Is Not Qualified to Act as Lead
Plaintiff31
The OSG Investor Group claims the largest financial interest in the
outcome of the litigation, with the Hedayas alone alleging losses of over two
million dollars on purchases of 95,000 shares of OSG Common Stock.32 However,
the Hedayas made their purchases in July, 2010 and sold in November, 2011,
which means that they sold their stock almost a year before the alleged fraud was
discovered in October of 2012.33 The Supreme Court confirmed the “judicial
consensus . . . that a person who ‘misrepresents the financial condition of a
31
Three lead plaintiff movants have opposed the appointment of the
OSG Investor Group on the grounds that the vast majority of its claimed financial
interest is unrecoverable. See McClennahan Rep. at 2, n.1 (recognizing that the
DSM Group appears to have the largest financial interest); Memorandum of Law in
Further Support of Motion for Appointment of [the DSM Group as] Lead Plaintiff
and Approval of Selection of Lead Counsel at 8 (“DSM Rep.”) (Porzio Dkt. No.
58); Memorandum of Law in Further Support of the Motion by the Overseas
Investor Group to Consolidate the Related Actions, for Appointment as Lead
Plaintiff and Approval of Counsel and in Opposition to Competing Motions
(“Overseas Group Rep.”).
32
See Overseas Shipholding Group, Inc. Loss Chart, Ex. 3 to
Declaration of Lawrence P. Kolker in Support of OSG Investor Group’s Motion
for Appointment as Co-Lead Plaintiffs (“Kolker Decl.”) (showing Hedayas’
losses).
33
See id.; Certification of Abe and Norma Hedaya, Ex. 2 to Kolker Decl.
10
corporation in order to sell its stock’ becomes liable to a relying purchaser ‘for the
loss’ the purchaser sustains ‘when the facts . . . become generally known’ and ‘as a
result’ share value ‘depreciate[s].’”34 The Court rejected the notion that plaintiffs
could prevail “where a misrepresentation leads to an inflated purchase price but
nonetheless does not proximately cause any economic loss.”35
Because the Hedayas are “in and out” traders, meaning that they
purchased the stock at the allegedly fraudulently inflated price and sold it before
the corrective disclosure, there is a strong likelihood that their entire claimed losses
will be unrecoverable, at least under the theory of fraud set forth in the various
complaints, which is based entirely on the October 2012 disclosures.36 No partial
corrective disclosures are alleged that would render use of the LIFO methodology
34
Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 344 (2005) (quoting
Restatement (Second) of Torts § 548A, Comment b, at 107 (1976)). Dura gave
rise to the “last-in-first-out” or “LIFO” methodology which considers only “the
number of shares purchased during the class period that are retained at the end of
the class period.”
35
Id. at 346.
36
See Bo Young Cha v. Kinross Gold Corp., No. 12 Civ. 1203, 2012
WL 2025850, at *13 (S.D.N.Y. May 31, 2012) (because LIFO method of
calculating financial interest “excludes ‘in-and-out’ transactions . . . [a]ny gain or
loss due to such transactions . . . should be excluded from the PSLRA loss
calculus.”).
11
of loss improper.37 Even if the alleged losses could, on some theory, establish the
greatest financial interest, the OSG Investor Group cannot make the requisite
“preliminary showing” that it will satisfy the typicality and adequacy requirements
of Rule 23.38 At the very least, the OSG Investor Group is subject to “unique
37
See In re General Elec. Secs. Litig., No. 09 Civ. 1951, 2009 WL
2259502, at *4 (S.D.N.Y. Jul. 29, 2009) (declining to disqualify lead plaintiff
based on Dura/LIFO calculation because “[l]oss causation ‘does not require full
disclosure and can be established by partial disclosure during the class period
which causes the price of shares to decline.’”) (quoting Montoya v. Mamma.com
Inc., No. 05 Civ. 2313, 2005 WL 1278097, at *2 (S.D.N.Y. May 31, 2005).
Although the OSG investor group alleges in its reply that OSG issued a press
release in August 2, 2011 announcing Second Quarter results and the decision to
reduce the annual dividend rate in order to “preserve the strength of [OSG’s]
balance sheet,” see Reply Memorandum of Law in Support of Motion to Appoint
[the OSG Investor Group] Lead Plaintiff at 7 (“OSG Investor Group Rep.”) (Myatt
Dkt. No. 25), these are not part of the allegations in the Complaints on which this
Court’s decision is based.
38
Typicality is established where each class member’s claim “arises
from the same course of events, and each class member makes similar legal
arguments to prove the defendant’s liability.” Davidson v. E*Trade Fin. Corp.,
No. 07 Civ. 10400, 2008 U.S. Dist. LEXIS, at *14 (S.D.N.Y. July 16, 2008)
(quoting In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 291 (2d Cir.
1992))) (emphasis added). Accord In re Flag Telecom Holdings, Ltd. Sec. Litig.,
574 F.3d 29, 39-40 (2d Cir. 2009) (question whether “in-and-out traders will be
able to show loss causation is relevant to Rule 23(a),” which requires a court to
show that a class representative “is both an adequate and typical representative of
the class and not subject to any ‘unique defenses which threaten to become the
focus of the litigation’”). See also Bensley v. FalconStor Software, Inc., 277
F.R.D. 231, 241 (E.D.N.Y. 2011) (holding that “the Fund has failed to demonstrate
that it will be an adequate lead plaintiff because it was a total in-and-out trader and
may be unable to demonstrate loss causation”); In re SLM Corp. Sec. Litig., 258
F.R.D. 112, 116 (S.D.N.Y. 2009) (holding that an investor does not satisfy the
12
defenses that render [them] incapable of adequately representing the class,” thus
rebutting any presumptive lead plaintiff status.39 The OSG Investor Group is
therefore disqualified as lead plaintiffs in the OSG Securities Actions.40
2.
The DSM Group Is Qualified to Act as Lead Plaintiff
The movant with the next largest financial interest is the DSM Group,
which alleges a financial interest of approximately one million dollars. The group
is composed of DSM and Indiana, two institutional investors whose alleged losses
arise out of their purchase of OSG Notes, and Lloyd Crawford, an individual
investor whose alleged losses resulted from his investment in OSG stock.41 DSM’s
alleged losses alone total approximately $640,000.42 The DSM Group alleges that
Crawford’s purchase of OSG common stock resulted in losses in excess of
adequacy or typicality requirements of Rule 23 when “it faces unique legal issues
that other class members do not”).
39
In re Vecco Instruments, Inc., 233 F.R.D. 330, 333-34 (S.D.N.Y.
2005) (investor who sold stock prior to any corrective disclosure would “at the
very least, [be] subject to a unique defense”).
40
Once the Hedayas’s losses have been excluded from the OSG Investor
Group’s alleged loss the financial interest is reduced to less than $43,000. See
OSG Investor Mem. at 2.
41
See DSM Rep. at 8
42
See id. at 3.
13
$500,00043 although his LIFO losses are only $68,000.44
The DSM Group has made a preliminary showing that it satisfies the
adequacy and typicality requirements of Rule 23 for the purposes of appointment
as lead plaintiff. The DSM Group, which is comprised of both noteholders and
stockholders, does not appear to “have interests that are antagonistic to the class
that [it] seeks to represent and has retained counsel that is capable and qualified to
vigorously represent the interests of the class.”45 The DSM Group alleges that its
members “purchased OSG securities and were harmed by the omitted and/or
misrepresented material facts.”46 Its claims arise from the factual predicates that
form the basis for the OSG Securities Actions. The DSM Group also avers that it
is committed to “maximizing the recovery for the class consistent with good faith
advocacy.”47
No evidence has been presented that the DSM Group is subject to
43
See Joint Declaration [of the DSM Group] in Further Support of
Motion for Appointment as Lead Plaintiff at 2, Ex. B to DSM Rep. (“DSM Decl.”).
44
See Overseas Investor Group Rep. at 5.
45
Sgalambo v. McKenzie, 268 F.R.D. 170, 173-74 (S.D.N.Y. 2010)
(citations omitted). See also infra Part III.B.3.
46
DSM Mem. at 3.
47
DSM Rep. at 8.
14
unique defenses or anything that otherwise rebuts its presumptive status as lead
plaintiff. Therefore, the DSM Group is appointed lead plaintiff of the OSG
Securities Actions and its choice of Robbins Geller Rudman & Dowd LLP is
approved.
3.
It Is Not Necessary to Appoint a Separate Lead Plaintiff for
OSG Common Stock Purchasers
The group with the third largest claimed financial interest in the case –
$810,000 – is the Overseas Investor Group. While they acknowledge that they do
not have the largest financial interest in the case, they argue that “[i]n light of
OSG’s bankruptcy filing, there are clear conflicts between bondholders and
stockholders, as bondholders have rights to the assets of the estate, in contrast to
the defrauded shareholders whose interests are wholly opposed to those of the
estate.”48 They argue further that “when there are questions as to ‘whether the
plaintiffs share legal theories and whether potential conflicts exist between a
potential lead plaintiff and absent class members,’” courts should appoint separate
lead plaintiffs to represent the divergent interests.”49
Courts have frequently found that a stockholder can adequately
48
Overseas Group Rep. at 3.
49
Id. at 6 (quoting In re BP, PLC Sec. Litig., 758 F. Supp. 2d 428, 438
(S.D. Tex. 2010)).
15
represent a bondholder and vice versa, even where one set of claims arises under
the Securities Act and another under the Exchange Act.50 The Overseas Investor
Group has not argued convincingly that the bondholders’ interest in OSG’s
bankruptcy estate will undermine their ability or willingness to forcefully advocate
the PSLRA claims at issue in this litigation.51 Moreover, the DSM Group contains
a stockholder – Lloyd Crawford – whose net loss of approximately $68,000 under
the LIFO formula – is sufficient to ensure that he will adequately represent the
50
See e.g., In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. 13,
20 (D.D.C. 2006) (rejecting argument that subclass should be created because
options purchasers “might perhaps seek a different litigation strategy to maximize
their recovery”); In re Priceline.com Inc. Sec. Litig., 236 F.R.D. 89, 98 (D.Conn.
2006) (rejecting argument that because one lead plaintiff had traded almost
exclusively in put options, he was an unsuitable representative for members who
traded in common stock ); In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d. 392,
422 (S.D.N.Y. 2003) (holding that the lead plaintiff, a stockholder, had standing to
assert Section 11 claims on behalf of investors in WorldCom’s note offerings
where “claims addressed specifically to the [note] offerings rely on the same
course of conduct that underlies the claims addressed more generally to
WorldCom’s securities . . . .”); In re Enron Corp. Sec. Litig., 206 F.R.D. 427, 445
(S.D.Tex. 2002) (“[C]ourts have repeatedly concluded that stock purchasers can
represent purchasers of debt instruments and vice versa in the same action.”).
51
See OSG Investor Group Rep. at 9 (The Overseas Investor Group
“advances a series of generic and speculative allegations concerning the potential
for intra-class conflict between OSG common stock and bondholders;
considerations which are wholly inappropriate at this stage and should be left for
class certification.”).
16
stockholders in the litigation.52 Finally, no other stockholder has raised concerns
about being represented largely by noteholder institutional investors.53 Absent a
clear threat that the DSM group would not adequately represent the stockholders,
creation of a subclass with a separate lead plaintiff would undermine the PSLRA’s
goal of centralizing control over and responsibility for the litigation.54
V.
CONCLUSION
For the foregoing reasons, the OSG Securities Actions and any action
arising out of the same operative facts and alleging causes of action under the
PSLRA hereafter filed are consolidated for pre-trial and trial purposes under the
caption “In re OSG Securities Litigation,” Master File Number 12 Civ. 7948. The
DSM Group is appointed Lead Plaintiff in the OSG Securities Actions. Robbins
52
See Overseas Investor Group Rep. at 5. The greatest LIFO loss
suffered by a single plaintiff in the Overseas Investor Group is $162,000. See id.
Crawford’s net loss is $520,567. See id.
53
In fact, one stockholder appeared to put his support behind DSM
Group as lead plaintiff over the OSG Investor Group. See McClennahan Mem. at 2
(raising problems with the OSG Investor Group, and stating that, in his view, the
DSM Group was the group with the greatest financial loss and therefore, the
presumptive lead plaintiff).
54
See e.g., In re Enron Corp. Sec. Litig., 206 F.R.D. at 451 (rejecting
several proposals for subclasses in Enron on the grounds that the PSLRA
“authorizes the appointment of one Lead Plaintiff or small cohesive group for a
single class”); In re Cendant Corp. Litig., 182 F.R.D. 476, 479–80 (D.N.J. 1998)
(reasoning that creating a subclass “would injure the purpose of the PSLRA by
fragmenting the plaintiff class and decreasing client control”).
17
Geller Rudman & Dowd LLP is appointed Lead Counsel. A conference is
scheduled for February 12,2013 at 4:30 p.m. in courtroom 15C. The Clerk of the
Court is directed to close these motions (documents no. 24, 27, 30, 33, 36, 39, 43,
and 47 in 12 Civ. 7948; and documents no. 11, 14, and 17 in 12 Civ. 8547).
SO ORDERED:
)
Dated:
New York, New York
February 1, 2013
18
- Appearances For Plaintiff Robert Porzio:
Giti Baghban, Esq.
11 Camelia Court
Lawrenceville, NJ 08648
(212) 545-4747
Gregory M. Nespole, Esq.
Malcolm T. Brown, Esq.
Lawrence P. Kolker, Esq.
Wolf Haldenstein Adler Freeman & Herz LLP
270 Madison Avenue
New York, NY 10017
(212) 545-4657
Jason M. Leviton, Esq.
Berman DeValerio
One Liberty Square, 8th Floor
Boston, MA 02109
(617) 542-8300
Jeffrey C. Block, Esq.
Block & Leviton LLP
155 Federal Street, Suite 1303
New York, NY 10013
(617)-398-5600
Joseph P. Guglielmo, Esq.
Scott Scott, L.L.P.
405 Lexington Avenue
New York, NY 10174
(212) 223-6444
Steven P. Harte, Esq.
Jones Day
222 East 41st Street
19
New York, NY 10017
(212) 326-3687
For Plaintiff Bruce Myatt and Indiana Treasurer of State:
Samuel H. Rudman, Esq.
David A. Rosenfeld, Esq.
Robbins Geller Rudman & Dowd LLP
58 South Service Road, Suite 200
Melville, NY 11747
(631) 367-7100
For Movant Lee McClennahan:
Curtis Victor Trinko, Esq.
Law Offices of Curtis V. Trinko, LLP
16 West 46th Street, Seventh Floor
New York, NY 10036
(212) 490-9550
For Movant OSG Investor Group:
Lawrence Paul Kolker, Esq.
Wolf Haldenstein Adler Freeman & Herz LLP
270 Madison Avenue
New York, NY 10016
(212) 545-4600
For Movant Overseas Investor Group:
Phillip C. Kim, Esq.
The Rosen Law Firm P.A.
350 5th Avenue, Suite 5508
New York, NY 10118
(212) 686-1060
20
For Movants Barrie Woolard and Steven Hyman:
Kenneth Mark Rehns, Esq.
Cohen Milstein Sellers & Toll P.L.L.C.
88 Pine Street
New York, NY 10005
(212) 838-7797
For Movant the Riley Group:
Thomas James McKenna, Esq.
Gainey & McKenna, LLP
440 Park Avenue, South 5th Floor
New York, NY 10016
(212) 983-1300
For Movant Paul Otto Koether IRA Rollover:
John Christopher Browne, Esq.
Bernstein Litowitz Berger & Grossmann LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 554-1398
For Movant the DSM Group:
David Avi Rosenfeld, Esq.
Robbins Geller Rudman & Dowd LLP
58 South Service Road, Suite 200
Melville, NY 11747
(631) 367-7100
For Movant Irving Firemen’s Relief and Retirement Fund:
PRO SE
21
For Defendant Overseas Shipholding Group, Inc.:
Lewis J. Liman, Esq.
Elizabeth Vicens, Esq.
Cleary Gottlieb Steen & Hamilton, LLP
One Liberty Plaza
New York, NY 10006
(212) 225-2000
For Defendant Morten Arntzen
Scott B. Schreiber, Esq.
Craig A. Stewart, Esq.
Arnold & Porter
Thurman Arnold Building
555 Twelfth Street, N.W.
Washington, DC 20004-1206
(202) 942-5000
For Defendant Myles R. Itkin:
David H. Kistenbroker, Esq.
Joni S. Jacobsen, Esq.
Ashley J. Burden, Esq.
Dechert LLP
115 S.Lasalle Street
Chicago, IL 60661
(312) 646-5800
22
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