Ash v. Powersecure International, Inc. et al

Filing 22

ORDER denying 10 Motion to Consolidate Cases; granting 13 Motion to Appoint Counsel, Motion to Consolidate Cases; and, denying 14 Motion to Consolidate Cases, APPOINTMENT AS LEAD PLAINTIFFS AND, Motion to Appoint Counsel - The court GR ANTS Maguire's motion, to consolidate the actions, to be appointed lead plaintiff, and to approve Maguire's choice of lead counsel and liaison counsel. The three actions are consolidated and shall proceed under the caption at case numbe r 4:14-CV-92-D. The court DENIES Higgins's and the PowerSecure Investors' motions, to the extent that they each request to be appointed lead plaintiffs and to have their respective counsel chosen as lead counsel and liaison counsel. Signed by Chief Judge James C. Dever III on 10/10/2014. (Tripp, S.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
LEONARD C. ASH, Individually and on
Behalf of All Others Similarly Situated,
Plaintiffs,
v.
POWERSECURE INTERNATIONAL,
INC., SIDNEY HINTON, and
CHRISTOPHER T. HUTTER,
Defendants.

SANDRA TAYLOR, et al.,
Plaintiffs,
v.
POWERSECURE INTERNATIONAL,
INC., et al.,
Defendants.

BRANDON IDGGINS, et al.,
Plaintiffs,

v.
POWERSECURE INTERNATIONAL,
INC., et al.,
Defendants.

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No. 4:14-CV-92-D

No. 5:14-CV-385-D

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No. 5:14-CV-388-F

ORDER
Three members of the purported class have filed motions to consolidate these three actions,
to be appointed lead plaintiff, and to have their choice oflead counsel and liaison counsel approved.

As explained below, the court grants Maguire Financial, LP's ("Maguire") motion, Ash v.
PowerSecure Int'l. Inc. et al., No. 4:14-CV-92-D [D.E. 13], to consolidate these actions, to be
appointed lead plaintiff, and to have its choice of counsel approved.

I.
PowerSecure International, Inc. ("PowerSecure") develops and markets energy technology
products, services, and data management systems to industrial and commercial users and suppliers
of natural gas and electricity. Taylorv. PowerSourcelnt'l.Inc. etal., No. 5:14-CV-385-D (filed July
8, 2014), Compl. [D.E.1] ~ 2. 1 PowerSecure has three operating segments: its Distributed
Generation products and services segment ("DG"), its Utility Infrastructure products and services
segment ("UI"), and its Energy Efficiency products and services segment ("EE"). Id. Sidney Hinton
is PowerSecure's CEO. Id.

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1. Christopher Hutter is PowerSecure's CFO. ld.

Between August 8, 2013, and May 7, 2014, defendants reported several quarters of record
revenues, increasing earnings, and record backlog. ld.

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3. Defendants also claimed that it would

achieve gross margins in the "mid to high 20s" and would meet its "goal of implied EPS [of] $1.10$1.30 in 2015." ld. During this time, PowerSecure issued and sold over 2.5 million shares of stock,
and Hinton received and sold significant numbers ofPowerSecure securities. Id.

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4.

During the same time period, PowerSecure encountered significant operational issues with
its UI segment that increased costs, and longer-than-expected sales cycles in its DG segment that
failed to produce the expected levels of revenue. ld.

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5. On May 7, 2014, when PowerSecure

disclosed these operational problems and the resulting impact on first quarter results, its stock price
1

For purposes of this order, the court adopts the relevant facts from the Taylor complaint.
The factual allegations in the complaints of the other two pending cases are substantially similar.
See Ash, No. 4:14-CV-92-D (filedMay22, 2014), Compl. [D.E. 1] ~2--4; Higgins v. PowerSecure
Int'l. Inc. et al., No.5: 14-CV-388-F (transferred from the Middle District ofNorth Carolina on July
9, 2014), Compl. [D.E. 1] ~~ 2--6.

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dropped bymorethan62%thefollowingtradingday. Id.; see Higgins, No. 5:14-CV-388-F, Compl.
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4. Plaintiffs in the pending actions brought suit, all alleging violations of Rule 10b-5, 17 C.F.R.

240.10b-5, by all defendants, and section 20(a) of the Exchange Act, 15 U.S.C. § 78t, by the
individual defendants. See Higgins, No. 5:14-CV-388-F, Compl.

~~ 40-54;

Ash, No. 4:14-CV-92-

D, Compl. ~~ 33-47; Taylor, No. 5:14-CV-385-D, Compl. ~~ 62-73.
First, the court considers parties' motions to consolidate the pending actions. See 15 U.S. C.

§ 78u-4(a)(3)(B)(ii) (providing that a trial court shall not appoint a lead plaintiff until rendering a
decision on a motion to consolidate). The court may consolidate actions if they "involve a common
question oflaw or fact." Fed. R. Civ. P. 42(a); 15 U.S.C. § 78u-4(a)(3)(B)(ii) (providing that the
pending actions must "assert[] substantially the same claim or claims" to be consolidated). The
purpose of consolidation is to avoid unnecessary cost or delay. Equal Emp't Opportunity Comm'n
v. HBE Com., 135 F.3d 543, 550 (8th Cir. 1998); Marketel Media. Inc. v. Mediapotamus. Inc., No.
5:13-CV-427-D, 2013 WL 5965681, at *3-4 (E.D.N.C. Nov. 8, 2013) (unpublished). "District
courts have broad discretion under [Rule 42(a)] to consolidate causes pending in the same district."
A/S J. Ludwig Mowinckles Rederi v. Tidewater Constr. Com., 559 F.2d 928,933 (4th Cir. 1977).
In exercising its discretion, a court weighs the risks of possible prejudice and confusion from
consolidation with the risks of inconsistent adjudications of common factual and legal issues, the
burden on parties and judicial resources posed by multiple lawsuits, and other efficiencies created
by a single suit in lieu of multiple suits. Arnold v. E. Air Lines. Inc., 681 F.2d 186, 193 (4th Cir.
1982). With respect to securities cases, "consolidation is often warranted where multiple securities
fraud class actions are based on the same public statements and reports." In re Micro Strategy Inc.
Sec. Litig., 110 F. Supp. 2d 427, 431 (E.D. Va. 2000) (quotation omitted); see In re Facebook. Inc.
IPO Sec. and Derivative Litig., 288 F.R.D. 26, 35 (S.D.N.Y. 2012).
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The pending actions present common questions of fact and law and are appropriate for
consolidation. All three actions allege a class period over the same range, March 10, 2014, to May
7, 2014, although one goes further back in time. See Higgins, No. 5:14-CV-388-F, Compl. ~ 17;
Ash, No. 4:14-CV-92-D, Compl. W1, 15; Taylor, No. 5:14-CV-385-D, Compl. ~ 16 (asserting that
the putative class period begins August 7, 2013). All three allege the same or similar material
misrepresentations in a PowerSecure press release and conference call on March 10, 2014. Higgins,
No. 5:14-CV-388-F, Compl. ~~ 17-20; Ash, No. 4:14-CV-92-D, Compl. ~~ 15-21; Taylor, No.
5:14-CV-385-D, Compl.

W 35-37. 2

All three allege the same May 7, 2014 disclosure of

PowerSecure's true financial condition that triggered the decrease in PowerSecure's stock price.
Higgins, No. 5:14-CV-388-F, Compl. ~~21-22;Ash,No. 4:14-CV-92-D, Compl. ~~22-26; Taylor,
No. 5:14-CV-385-D, Compl. ~~ 41-48. As noted, the legal claims in the three actions are identical.
The court finds that the common questions of fact and law strongly favor consolidation, and no
evidence suggests that consolidation would prejudice the defendants. See Micro Strategy Inc., 110
F. Supp. 2d at 431 (holding that "minor differences" such as a difference in alleged class periods did
not detract from the "overwhelming factual and legal similarities among the cases").
Next, the court considers the motions of three purported class members to be appointed lead
plaintiff and to have their selection of lead counsel and liaison counsel approved. The relevant
portion of the statute states:
[T]he court shall consider any motion made by a purported class member ... and
shall appoint as lead plaintiff the member or members ofthe purported plaintiff class
that the court determines to be most capable of adequately representing the interests
of class members . . . . [T]he 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 ... [ 1] in the determination of the court, has the largest fmancial interest
2

The plaintiff in Taylor alleged additional material misrepresentations at other points during
its longer putative class period. Taylor, No. 5:14-CV-385-D, Compl. ~~ 16-34, 38-39.

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in the relief sought by the class; and [2] otherwise satisfies the requirements of Rule
23 of the Federal Ru1es of Civil Procedure.
15 U.S.C. § 78u-4(a)(3)(B)(i),(iii). 3
The court first examines the movants' and complainants' alleged financial interest. The
financial interest in the relief sought is the loss that the defendants allegedly caused to the plaintiffs,
first, by fraudu1ently inflating the purchase price of a security through misrepresentation or omission,
and second, by subsequently disclosing corrective information that caused the security price to
decrease. See Dura Pharm.. Inc. v. Broudo, 544 U.S. 336, 342-46 (2005); Katyle v. Penn Nat'l
Gaming. Inc., 637 F.3d 462, 472-73 (4th Cir. 2011) (holding that the corrective disclosure may
happen at a single time or gradually); Glaser v. Enzo Biochem. Inc., 464 F.3d 474, 479 (4th Cir.
2006) ("It is only after the fraudu1ent conduct is disclosed to the investing public, followed by a drop
in the value of the stock, that the hypothetical investor has suffered a 'loss' that is actionable ....").
Here, the alleged corrective disclosure occurred after the market closed on May 7, 2014. See
Ash, No.4: 14-CV-92-D, Maguire Mem. Supp. Mot. Consolidate [D.E. 13-1] 5. The court calcu1ates
the financial interest of the would-be lead plaintiffs by determining the drop in the value of their
securities, after the May 7, 2014 closing price of $18.60, that the corrective disclosure caused. See
id., Ex. B [D.E. 13-4] (noting the closing price on May 7, 2014).
Maguire alleges a total loss attributable to the corrective disclosure of$2,182,170. Id. This
loss was allegedly caused by the May 8, 2014 sale of93,000 shares ofPowerSecure stock at the
price of$6.91 per share and by the May 8, 2014 cover purchase of 1,000 put options at the price of
$1,330 per option.

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The wou1d-be lead plaintiffs must also have filed the complaint or made a motion to be
appointed lead plaintiff, but that requirement is not in dispute. See 15 U.S.C. § 78u4(a)(3)(B)(iii)(I)(aa).
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Movant Brandon Higgins ("Higgins") alleges a total loss attributable to the corrective
disclosure of $11,680. Ash, No. 4:14-CV-92-D, Higgins Mot. Consolidate, Ex. C [D.E. 10-4].
However, this amount may overstate the true losses allegedly caused by the corrective disclosure
because it includes a $1.90 decrease in PowerSecure's stock price on May 7, 2014, before the
disclosure occurred. See Ash, No.4: 14-CV-92-D, Higgins Mem. Supp. Mot. Consolidate [D.E. 11]

3.
Movants Clay Leslie and Paul Moore ("PowerSecure Investors") allege a total loss
attributable to the corrective disclosure of$34,658. Ash, No.4: 14-CV-92-D, PowerSecure Investors
Mem. Supp. Mot. Consolidate [D.E. 14-1] 1.
Movant Leonard Ash ("Ash") does not allege a specific total loss attributable to the
corrective disclosure, but any loss appears to be less than $21,000. Specifically, Ash states that he
purchased 1,590 PowerSecure shares onMay2, 2014, at a price of$21.31 per share. Ash, No. 4:14CV-92-D, Pl. Certification [D.E. 1-1]. Using a 90-day post-disclosure average price of$8.60, the
alleged loss is approximately $20,431. See Ash, No. 4:14-CV-92-D, Higgins Mot. Consolidate,
Ex. C; 15 U.S.C. § 78u-4(e)(1) (imposing a limit on damages based on the mean trading price of the
security over a 90-day period after the corrective disclosure). Similarly, Sandra Taylor ("Taylor")
does not allege a specific loss attributable to the corrective disclosure, but any loss appears to be less
than $3,400. Specifically, Taylor states that she purchased 250 PowerSecure shares on April29,
2014, at a price of$21.83. Ash, No. 5:14-CV-385-D, Compl. 40. Thus, her alleged loss appears to
be approximately $3,307.
For purposes of determining the lead plaintiff, Maguire is the plaintiff or movant with the
largest financial interest in the requested relief.

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The court next determines whether Maguire satisfies the other requirements of Rule 23.
Under this inquiry, the court looks solely at whether the movant will be an appropriate class
representative, and thus need only determine (1) whether the movant's claims or defenses are typical
of the class's claims or defenses, and (2) whether the movant will fairly and adequately protect the
interests of the class. See MicroStrategy, 110 F. Supp. 2d at 435; Fed. R. Civ. P. 23(a)(3),(4). The
first requirement, typicality, is met when the representative plaintiff's claims arise from the same
event that gave rise to claims of other class members and the claims are based on the same legal
theory. See Gunnells v. HealthplanServs.. Inc., 348 F.3d417, 425 (4th Cir. 2003). Here, Maguire's
claim centers on the same factual questions of defendants' alleged misrepresentations and on the
same legal questions under Rule 10b-5 and section 20(a) of the Exchange Act.
The second requirement, adequacy, is met when the movant is represented by counsel who
are qualified, experienced, and generally able to conduct the proposed litigation, and when the
movant is a class member whose interests do not conflict with those of other class members.
McLaurin v. Prestage Foods. Inc., 271 F.R.D 465, 476 (E.D.N.C. 2010). Having reviewed the
record, the court finds that Maguire's selected counsel are qualified, experienced, and generally able
to conduct the proposed litigation.

See,~.

Ash, No. 4:14-CV-92-D, Maguire Mem. Supp. Mot.

Consolidate, Exs. D-E [D.E. 13-6, 13-7]. The court also finds no evidence that Maguire's interests
conflict with those of the other class members. Thus, the court adopts the presumption that Maguire
is the most adequate plaintiff.
Other movants may rebut this presumption with proof that Maguire "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. § 78u-4(a)(3)(B)(iii)(II). No other
movant has presented such proof. Cf. Ash, No. 4:14-CV-92-D, PowerSecure Investors Resp. to
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Competing Mots. [D.E. 15]. Therefore this court appoints Macguire as lead plaintiff for the
purported plaintiff class and approves its choice of lead counsel and liaison counsel.
II.

In sum, the court GRANTS Maguire's motion, Ash, No. 4:14-CV-92-D [D.E. 13], to
consolidate the actions, to be appointed lead plaintiff, and to approve Maguire's choice of lead
counsel and liaison counsel. The three actions are consolidated and shall proceed under the caption
at case number 4:14-CV-92-D. The court DENIES Higgins's and the PowerSecure Investors'
motions, Ash, No. 4:14-CV-92-D [D.E. 10, 14], to the extent that they each request to be appointed
lead plaintiffs and to have their respective counsel chosen as lead counsel and liaison counsel.
SO ORDERED. This 10 day of October 2014.

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