Chen v. NQ Mobile et al

Filing 14

MEMORANDUM OPINION AND ORDER. It is therefore ORDERED that the Xiang Cao's Motion for Appointment of Lead Plaintiff and Approval of Selection of Counsel (Dkt. 8 ) is hereby GRANTED. Xiang Cao's choice of lead counsel and liaison counsel are hereby APPOINTED. Signed by District Judge Amos L. Mazzant, III on 5/31/2018. (baf, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

SHIQIANG CHEN, Individually and on
Behalf of All Others Similarly Situated
v.
NQ MOBILE, VINCENT WENYONG SHI,
ROLAND WU, and ZEMIN XU

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Civil Action No. 4:18-CV-00096
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Xiang Cao’s Motion for Appointment of Lead Plaintiff and
Approval of Section of Counsel (Dkt. #8). The Court, having considered the relevant pleadings
and relevant case law, finds that the motion should be granted.
BACKGROUND
On February 10, 2018, Plaintiff Shiqiang Chen filed this federal securities class action on
“behalf of a class consisting of all persons and entities, other than Defendants and their affiliates,
who purchased publicly traded NQ Mobile securities from March 30, 2017 through February 6,
2018” (Dkt. #1 at pp. 1–2).

Five different movants filed three different motions seeking

appointment as lead plaintiff(s), with their choice of lead counsel, under the Private Securities
Litigation Reform Act of 1995 (“PSLRA”) (Dkt. #6; Dkt #7; Dtk #8). Four movants withdrew
from lead plaintiff consideration, and only one movant remains: Xiang Cao (“Cao”) (See Dkt. # 10;
Dkt #11).
APPLICABLE LAW
The PSLRA establishes the procedure for appointing a lead plaintiff in an action “that is
brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.” 15 U.S.C.
§ 78u-4(a)(1). The PSLRA requires that within twenty days after filing the class action, “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: (1) of the
pendency of the action, the claims asserted therein, and the purported class period; and (2) that,
not later than [sixty] 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.” 15 U.S.C.
§ 78u-4(a)(3)(A)(i). The Court must then appoint the “most capable of adequately representing
the interests of class members.” 15 U.S.C. § 78u-4(a)(3)(B)(i). After deciding any pending motion
to consolidate the related actions, the Court shall consider any motion made by a purported class
member to serve as lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(B)(ii).
The PSLRA requires all proposed lead plaintiffs to submit a sworn declaration to assure
the Court that the proposed plaintiff: (1) has suffered financial harm; (2) is not a serial litigant; and
(3) is interested and able to serve as lead plaintiff. 15 U.S.C. § 78u-4(a)(2)(A). There is then a
“rebuttable presumption” that the most adequate plaintiff has: (1) either filed the complaint or
made a motion in response to a notice; (2) the largest financial interest in the relief sought by the
class during the proposed class period; and (3) otherwise satisfied the requirements of Rule 23 of
the Federal Rules of Civil Procedure. 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). The presumption can be
rebutted only when a class member offers proof that the presumptive lead plaintiff “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).
ANALYSIS
Cao requests that the Court appoint him as lead plaintiff and approve his choice of lead
counsel. The Court will go through the analysis of the three factors contained in Section
78u-4(a)(3)(B)(iii) to determine if Cao is presumed to be the most adequate plaintiff.

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A. Procedural Requirements
There is no dispute that Cao met the procedural requirements of Section 78u-4(a)(3)(A)(i)
because he timely moved for appointment of lead counsel. The PSLRA requires plaintiffs filing a
securities class action publish notice of the pendency of the suit within twenty days after the
complaint is filed. Cao’s notice went out on February 10, 2018. The notice informed potential
plaintiffs that, if they wanted to be considered for appointment as lead plaintiff, they needed to file
a motion by April 11, 2018.
After notice is filed, any party wishing to serve as lead plaintiff must file a motion within
sixty days of the publication of that notice. 15 U.S.C. § 78u-4(a)(3)(A)(i)(II). Any supplement or
augmentation of the motion must also take place within the sixty-day deadline. In re Telxon Corp.
Sec. Litig., 67 F. Supp. 2d 803, 819 (N.D. Oh. 1999). The purpose of this requirement is to ensure
that the lead plaintiff is appointed as early as possible, and to expedite the lead plaintiff process.
See, e.g., In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. 13 (D.D.C. 2006) (citations
omitted); In re Telxon, 67 F. Supp. 2d at 818–19; Lax v. First Merchants Acceptance Corp., 1997
WL 461036, at *4 (N.D. Ill. Aug. 11, 1997) (citations omitted). Thus, compliance with the
procedural requirements of the PSLRA is mandatory and should be strictly enforced. See, e.g.,
Skworts v. Crayfish Co., 2001 WL 1160745, at *5 (S.D.N.Y. Sept. 28, 2001); In re MicroStrategy
Inc. Sec. Litig., 110 F. Supp. 2d 427, 440 (E.D. Va. 2000). Cao filed his motion on April 11, 2018.
Thus, his motion is timely under Section 78u-4(a)(3)(A)(i)(II).
B. Largest Financial Interest
If a motion is timely filed, the presumptive lead plaintiff must have the largest financial
interest. 15 U.S.C. § 78u-4(a)(3)(B)(iii). Cao argues that he has the largest financial interest of

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any other movant, which is not contested by any of the movants. Therefore, the Court is satisfied
that Cao has the largest financial interest.
C. Rule 23 Requirements
Finally, if a plaintiff has timely filed a motion and asserts the largest financial interest, it
must also satisfy the requirements of Federal Rule of Civil Procedure 23 to be the presumptive
lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(B)(iii). “For the purposes of the lead plaintiff analysis,
only the typicality and adequacy prongs of Rule 23 are relevant.” Marcus v. J.C. Penney Co.,
6:13-cv-736-RWS-KNM, Dkt. #62, slip op. at 9 (E.D. Tex. Feb. 28, 2014) (citing Buettgen v.
Harless, 263 F.R.D. 378, 381 (N.D. Tex. 2009)). It is uncontested that Cao is the presumptive
lead plaintiff because he timely moved to be appointed as lead plaintiff, he has the largest financial
interest, and he meets the requirements set out in Federal Rule of Civil Procedure 23.
i. Typicality
Cao asserts that his claims are typical of the class. No party challenges Cao’s claim of
typicality. The Court is satisfied that Cao is typical of the class; in other words, he has “the same
essential characteristics as those of the other class members.” Marcus, 6:13-cv-736-RWS-KNM,
Dkt. #62, slip op. at 9 (quoting Buettgen, 263 F.R.D. at 381).
ii. Fair and Adequate Representation
No party contests that Cao will fairly and adequately represent the class.
The PSLRA was passed in December 1995 in response “to significant evidence of abusive
practice and manipulation by class action lawyers in private securities lawsuits.” In re Landry’s
Seafood Rests., Inc., 2000 U.S. Dist. LEXIS 7005, at *10 (S.D. Tex. Mar. 30, 2000) (citing H.R.
REP. NO. 104-369, at 21 (1995), reprinted in 1995 U.S.C.A.A.N. 730 at 731) (“Conf. Rep.”). The
PSLRA expressly allows for a “person or group of persons” to be appointed lead plaintiff.

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15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). Generally, courts permit a “group of persons” to serve as lead
plaintiff as long as the group will adequately represent the class. Marcus, 6:13-cv-736-RWSKNM, Dkt. #62, slip op. at 11 (citing Varghese v. China Shenghuo Pharm. Holdings, Inc.,
589 F. Supp. 2d 388, 392 (S.D.N.Y. 2008)). Courts look closely to determine a group’s adequacy
when the group is comprised of unrelated individuals. “[W]hen unrelated investors are cobbled
together, the clear implication is that counsel rather than the parties, are steering the litigation.”
Buettgen, 263 F.R.D. at 380 (alteration in original) (quoting another source) (internal quotation
marks omitted). See Accord In re Level 3 Commc’ns, Inc. Sec. Litig., 2009 U.S. Dist. LEXIS
44706, at *12 (D. Colo. May 4, 2009) (citing In re Donnkenny Inc. Sec. Litig., 171 F.R.D. 156,
157–58 (S.D.N.Y. 1997)).
Here, the Court exercises its discretion in this case and does not bar Cao from serving as
lead plaintiff of the class. The reasons behind the PSLRA are to prevent lawyer-driven litigation
and to ensure that the plaintiff has the ability to actively participate in the litigation. See In re
Unumprovident Corp. Sec. Litig., 2003 U.S. Dist. LEXIS 24633, at *20–21 (E.D. Tenn.
Nov. 6, 2003). Again, Congress was concerned that lawyers would group together professional
plaintiffs who “typically owned a deminimus number of shares,” which could cause the lawyers
to have a larger financial interest “than the putative plaintiffs in the outcome of the action,” leaving
plaintiffs “with very little control over their attorneys.”

See In re Alcatel Alsthom,

1999 WL 33756548, at *3 (E.D. Tex. June 7, 1999).
Cao has a large enough interest, individually, to maintain control over his attorneys and to
remain invested in the outcome of the case. The Court finds that Cao is able to fairly and
adequately represent the class. Accordingly, because Cao timely filed its motion, has the largest
financial interest, and satisfies the requirements of Federal Rule of Civil Procedure 23, Cao is the

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presumptive lead plaintiff. Further, the presumption has not been overcome. Therefore, the Court
appoints Cao as lead plaintiff in this action.
II.

Lead Counsel

Cao seeks to appoint Cohen Milstein Sellers & Toll PLLC as lead counsel for the class and
MT2 Law Group as liaison counsel for the class. The Court has reviewed the resumes provided
for each attorney, and is satisfied that each could adequately represent the plaintiff in this action.
CONCLUSION
It is therefore ORDERED that the Xiang Cao’s Motion for Appointment of Lead Plaintiff
and Approval of Section of Counsel (Dkt. #8) is hereby GRANTED. Xiang Cao’s choice of lead
counsel and liaison counsel are hereby APPOINTED.

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Therefore, Lead Plaintiff and Lead Counsel are hereby authorized to take all necessary or
appropriate steps on behalf of the proposed class to protect and preserve the rights and claims of
the class.
IT IS SO ORDERED.

SIGNED this 31st day of May, 2018.

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AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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