Rice v. Genworth Financial Incorporated et al

Filing 76

MEMORANDUM OPINION. See Memorandum Opinion for details. It is so ORDERED. Signed by District Judge Robert E. Payne on 8/25/2017. (sbea, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA

f

Richmond Division

ALEXANDER RICE, Individually
And on behalf of all others
Similarly situated, et al.,

~

0 fl

AUG 2 5 20!7

CLERK. U.S. DISTRICT COURl
RICHMOND VA

Plaintiffs,

v.

Civil Action No. 3:17cv59

GENWORTH FINANCIAL INCORPORATED,
et al.
Defendants.

MEMORANDUM OPINION
This

consolidated

securities

fraud

action

is

before

the

Court on two motions seeking appointment as lead plaintiffs and
lead counsel

under

15

Litigation Reform Act
consolidated

action

U.S. C.

78u-4,

§

( "PLSRA") .
agree

that

counsel

International

should
Union

of

be

Plaintiffs

("IUOE" or "Union"),

and

its

counsel,

respectively.

1

seek

Having

appointed

Operating

Fund

the

Private

Securities

All of the Plaintiffs in this

Brian James ought to be appointed as
their

~

Alexander

Rice

and

lead plaintiffs and that
as

lead

Engineers

counsel. 1

Local

478

The
Pension

which is not a party in this action,
designation

in

those

considered both motions,

the

capacities,
supporting

PLAINTIFFS' MOTION FOR APPOINTMENT OF LEAD PLAINTIFFS
COUNSEL (ECF No. 39) ("Plaintiffs' Mtn. for Appt.")

AND

and

memoranda, 2

opposing

and

exhibits,

the

Plaintiffs'

motion

will be granted and the Union's motion will be denied.
FACTUAL AND PROCEDURAL BACKGROUND

The underlying facts are taken from the COMPLAINT
1)

filed by Alexander Rice.

as they have been pled,

The facts,

and,

(ECF No.

as alleged, are recited

for now,

they are taken as true.

The procedural history is reflected as it developed.
Genworth
"Genworth")

Financial

Incorporated

Company"

or

provides consumers with mortgage insurance products

that allow people to purchase homes.
services

ranging

programs

to

products."

("the

from

homeownership

individual

(Comp!.

The Company also offers

and

'JI 36)

group

(ECF No.

education
long-term

1).

and

assistance

care

insurance

For several years,

the

Company's financial circumstances were dire.
"In
proposal

or
to

transaction

around

May

acquire
at

$12.50

2015,

the
per

reduced to between $10-11

the

Company

Company's
share,
per

entities also made proposals,

a

share."

stock

received
in

an

proposal

that

Id.

':!!

at

a

all
was

50.

including companies A,

written
cash
later
"Other

C and D."

Id.

2

MOTION OF THE INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL
NO. 478 PENSION FUND, RICHARD L. SALBERG, AND DAVID PINKOSKI FOR
APPOINTMENT AS LEAD PLAINTIFFS AND APPROVAL OF THEIR SELECTION
OF CO-LEAD COUNSEL ("Union's Mtn. for Appt. ") ( ECF No. 37) .
2

On

October

21,

2016,

a

Merger

Agreement

between Genworth and China Oceanwide.
23,

2016,

Id. at

':11

was

executed
On October

44.

Genworth and China Oceanwide issued a press

release

announcing that the companies had reached an Agreement and Plan
of

Merger,

whereby

Oceanwide.
and

Id.

outstanding

at

':11

Genworth

would

be

acquired

by

China

The merger provided that "each issued

3.

share

of

Genworth

common

stock

[would]

be

cancelled and automatically converted into the right to receive
$5.43 in cash."
On

Id.

December

Preliminary

21,

Proxy

2016,

the

Statement

Company
("Proxy

Securities and Exchange Commission
Proxy

statement

exchange

their

provided
shares

filed

that

("SEC") .

to

Schedule

Statement")

Genworth

pursuant

a

the

Id.

with

at

':11

terms

of

the

the
The

4.

stockholders

14A

should
Merger

Agreement, based, among other things, on the opinion rendered by
Genworth' s
Freres

financial advisors,

& Cp.

LLC.

Id.

Goldman,

Sachs

Proxy

statement

The

&

Co.

and Lazard

explained

that

Genworth began to look to sell the Company because, among other
things,

it

" [ s] ens [ ed]

would

negatively

entitlements
companies A,

that

impact

flow

lucrative
at

may be
equity

impacted,

which

compensation

48.

The proposals made by

C and D, described above,

were not included in the

II

Id.

cash

Proxy Statement.

3

':11

On January 23,
Action Complaint

2017, Alexander Rice

(the

"Complaint") ,

("Rice")

in which

he

filed a Class
raised claims

under Sections 14(a) and 20(a) of the Securities Exchange Act of
The Complaint

1934.
and the

process

Proposed

alleges

by which

Transaction

are

that

"[t] he Merger Consideration

Defendants

agreed

fundamentally

to

consummate

unfair

to

the

Genworth's

public stockholders as the Merger Consideration represents only
a

4.2%

October

premium
21,

to

2016,

the
the

Company's
last

Transaction was announced."
prospects

for

future

closing

trading

day

price
before

growth

ability to command a higher transaction value,
to

enter

into

the

Merger

Agreement

with

$5.21

the

on

Proposed

"Despite Genworth's

(Comp!. 'Il 5) .

profitability and

of

and

Defendants'

Defendants chose

China

Oceanwide

and

agreed to onerous deal provisions and other agreements to ensure
and protect a sale only to China Oceanwide."

Id. at 'Il 75.

The

Merger Agreement contains a no shop provision as well as a $105
million termination fee agreement.
The

Complaint

filed

by

Id. at 79.

Rice

alleges

several

material

misrepresentations and omissions in the Proxy Statement provided
to

Genworth

shareholders. 3

In

3

the

Complaint,

Rice

sought

"The Proxy Statement misrepresents and/or omits material
information that is necessary for the Company's stockholders to
make an informed decision whether to vote in favor of the
Proposed Transaction in violation of Sections 14(a) and 20(a) of
the Exchange Act.
Specifically, the Proxy Statement fails to
4

injunctive relief,

certification of a class,

of

transaction,

the

disclose

proposed
the

material

"unless

information

and

identified

and the enjoining
until
above

Defendants
which

has

provide
the
Company's
stockholders
with
certain
material
information
concerning
the
process
leading
up
to
the
consummation of the Merger and information concerning the
financial analyses and work performed by Goldman Sachs and
Lazard."
(Comp. ' 81).
"The Proxy Statement fails to expressly indicate whether or
not the standstill provisions contained in the confidentiality
agreements entered into with any of the Interested Parties
contained a "fall-away" provision that allows each of the
Interested Parties to submit a superior proposal to acquire the
Company." (Compl. ' 82).
"Goldman Sachs and Lazard must disclose whether they, any
of
their
affiliates
and/or
related
entities
and/or
any
individual employees of Goldman Sachs and Lazard that were
members of the team working on the Genworth account
(as
described in the "Background" section of the Proxy Statement) ,
held and/or owned any type of security interest in Genworth,
China Oceanwide and/or Asia Pacific and/or any affiliated
entities."
(Comp!. CJ[ 83).
"The Proxy Statement provides that the Board reviewed and
considered the Certain Genworth Unaudited Financial Projections
and also that both Goldman Sachs and Lazard utilized these
projections and/or certain line item financial measure in
rendering their fairness opinions.
Specifically, in reconciling
the
Non-GAAP projected
financial
measures
with
the
GAAP
financial measures, as expressly required to do under Regulation
G ( 1 7 C. F. R. §24 4. 100 et seq.) , Defendants failed to disclose
and/or define "accumulated other comprehensive income (loss),
which financial measure was expressly used and omitted in
calculating and projecting Genworth stockholder equity (Proxy
Statement, 91) , GAAP return on equity ("ROE") , and non-GAAP
Operating ROE. Proxy Statement, 92, notes 3 and 4 respectively."
(Comp!. CJ[ 84) .
"[T] he Proxy Statement provides a materially
incomplete and misleading summary of the key financial analyses
Goldman Sachs and Lazard performed in support of their fairness
opinions." (Comp!. CJ[ 85) .

5

been omitted from the Proxy Statement." In the alternative,
(Comp!. 'II C).

Complaint requested recissory damages.
On

January

25,

2017,

the

Company

filed

that

shareholders

vote

in

favor

Transaction and announced that the special
to

vote

on

the

Proposed Transaction

a

Schedule

14A

This Proxy Statement

Definitive Proxy Statement with the SEC.
recommended

the

of

the

Proposed

shareholder meeting

would

occur

on

March

7,

2017.
On January 25,

2017,

Brian James

("James")

Action Complaint for Violations of Sections 14 (a)
the

Securities

Exchange

Act

of

1934,

in

filed

a Class

and 20 (a)

which

he

of

raised

essentially the same substantive claims as those raised by Rice.
Rice

and

James

actions.
filed
Court

a

agreed

to

work

Also on January 25,

2017,

Class Action Complaint

for

the

District

of

together

in

to

coordinate

their

the Rosenfeld Family Trust
the

Delaware,

United States
in

which

it

District
raised

substantively similar claims to those raised by Plaintiffs Rice
and James. 4

On February 2, 2017, Rice, supported by James, filed

4

On February 10, 2017, two weeks after filing its complaint on
January 25, 2017, the Rosenfeld Family Trust filed motions, in
the Delaware proceeding,
for expedited proceedings and a
preliminary injunction seeking to enJoin the March 7, 2017
Genworth stockholder vote.
In response, on February 13, 2 017,
the Delaware Court ordered an accelerated briefing schedule and
set a February 24 hearing date on the motion.
On February 14, 201 7, Defendants filed a motion to vacate
the Delaware Court's February 13 Order on the grounds that, when
6

PLAINTIFF'S
which

sought

MOTION
to

FOR

A PRELIMINARY

enjoin

the

INJUNCTION

shareholder

vote

on

(ECF

No.

2),

the

Proposed

Transaction until certain supplemental disclosures were made to
Genworth's stockholders.
On February 6,
Action

Complaint

District

of

in

2017,
the

Esther Chopp
United

Delaware.

("Chopp")

States

Chopp

District

raised

Financial,

Inc.,

et

al.,

Court

essentially

substantive claims as raised by Rice and James.
Genworth

filed a Class

No.

for
the

the
same

See Chopp v.

3:17-cv-00157-REP

(D.

Del.) .
On
States

February
District

10,

2017,

Court

for

David
the

Ratliff

Eastern

filed

in

the

United

District

of

Virginia

a

complaint in which he raised substantively identical claims to
those already raised by Rice,
Trust.

The

Ratliff

case

was

James,
filed

and the
and

Rosenfeld

identified

as

Family
a

case

related to the Rice case.
On

February

17,

2017,

an

Emergency Motion

to

Consolidate

Cases and for Appointment of Interim Lead Counsel was filed,

in

which Rice and James sought the entry of an order consolidating

the Rosenfeld Family Trust requested expedited relief, it failed
to inform the Delaware Court about the existence of the earlierf iled Virginia Actions.
The Delaware Court granted Defendants'
motion and vacated the February 13 Order.
Thereafter, on
February 14 and February 15, 2017, Defendants filed motions to
transfer each of the Delaware Actions to this Court or, in the
alternative, to stay them pending resolution of the Virginia
Actions.
7

the actions pending before this Court,
Faruqi, LLP, Monteverde & Associates,
LLC

( "KSF")

Interim

as

Lead

Interim

Liaison

Class

and appointing Faruqi

PC, and Kahn Swick & Foti,

Counsel

Counsel.

and

(ECF

determined that "all three actions

&

MeyerGoergen

No.

22).

PC

The

Court

James & Ratliff]

[Rice,

as

shall

be consolidated and the caption of the consolidated case shall
be Rice v. Genworth Financial Incorporated, et al., Civil Action
No.

3:17cv59."

(ECF No.

30).

On February 23,

2017,

the Court

consolidated Rosenfeld Family Trust v. Genworth Financial,

Inc.,

et al., No. 3:17cv156, and Chopp v. Genworth Financial, Inc., et
al.,

No.

3:17cv157

thereafter

with

proceeded

the

under

consolidated

the

style

cases,

Rice,

et

all

al.

of

which

v

Genworth

subsequently reached an agreement

with the

Financial, Inc., et al., No. 3:17cv59.
The

Plaintiffs

Defendants,

pursuant

Injunction

was

consolidated
following
1,

to

which

the

withdrawn.

action

Also,

advised

[Defendant's]

Motion

"that

the
it

is

for

a

Preliminary

parties
their

disclosures called for

in

intent

this
that

in Court Exhibit

these consolidated actions will be settled in their entirety

and,

to

that

Understanding
and,

end,

reflecting

to that end,

proceedings

counsel

counsel

respecting

intend

the

to

prepare

settlement

certification

8

Memorandum

(including

shall prepare a

class

a

releases);

schedule of
and

of

further

appointment

of

counsel all of which shall comply with the timing requirements
of the Private Securities Litigation Reform Act."
On March 6,
LEAD

2016,

the Court entered the STIPULATED PSLRA

PLAINTIFF SCHEDULING ORDER.

that:

"[p]ursuant to 15 U.S.C.

April

17,

member

2017,

of

the

(ECF No. 30).

any plaintiff
purported

(ECF No.
§

It provided

78u-4 (a) (3) (A),

in

class

35).

these

who

actions

wishes

to

on or before
or

serve

any

other

as

lead

plaintiff in this consolidated purported class action shall file
a motion to serve as lead plaintiff of the purported class and
shall

state

its

selection

for

lead

counsel

to

represent

the

purported class, subject to approval by the Court."
On April 1,

2017,

the Union filed its motion seeking to be

named lead plaintiff and seeking approval of the Union's counsel
as

lead

counsel.

(ECF

No.

37).

Rice

and

James,

with

the

consent of the other plaintiffs in the consolidated cases, also
filed the PLAINTIFFS'
ANO COUNSEL.

MOTION FOR APPOINTMENT OF LEAD PLAINTIFFS

(EC F No . 3 9) .

The Union also has a shareholder derivative action pending
in

the

Delaware

Consolidated

Court

Derivative

uDelaware State Case") .

of

Chancery,

Litigation,

Genworth
C.A.

No.

Financial,

Inc.

11901-VCS

(the

In that case, the defendants have moved

for dismissal and the motion has been heard.

However, the Judge

in

"any

the

motion

Delaware
to

State

dismiss

in

Case
the

explained
pending
9

that

derivative

ruling

case

on

would

a
be

advisory in light of the fact that the pending merger was going
to extinguish the rights of Shareholders to pursue a derivative
claim and

so

he

requested

another as to whether,
issue

its

that

the

parties

in the parties'

motion-to-dismiss

consult

views,

decision,

and,

parties informed the Court that it was

with

one

the Court should
subsequently,

[their]

should not issue its motion-to-dismiss decision."

the

view the Court
Additionally,

the Union is pursing inspection requests pursuant to 8 DEL.
§220.

Salberg v. Genworth Financial,

Inc., C.A.

No.

C.

2017-0018-

JRS ( De!. Ch . ) .
The
approved;

stockholder vote
however,

has

the merger

taken

place

and the merger was

of Genworth and China Oceanwide

has been pending for several months.

Recently,

a further delay

in the merger was announced. 5
POSITIONS OF PARTIES

Pursuant

to

the

PSLRA,

the

adequate plaintiff"

to

78u-4

To that end,

(a) (3) (B) (i).

serve as

5

Court
Lead

must

appoint

Plaintiff.

15

explains the Union,

the

"most

u.s.c.

§

the Court

See China Oceanwide' s $2. 7bn acguisi ti on of Genworth faces
regulatory
delay,
!BR
Life
Insurance
&
Pensions,
http://lifeinsuranceandpensions.insurance-businessreview.com/news/china-oceanwides-27bn-acquisition-of-genworthfaces-regulatory-delay-170717-5872025 (July 17, 2017).

10

is required to determine which potential lead plaintiff has the
"largest financial

interest" in the relief sought by the Class

and

plaintiff

whether

that

representative

these

that,

Rule

23

a
of

The Union argues that,

Procedure.
in

under

is

motions,

therefore,

lead plaintiff. 6

it

has

the

typical
the

and

Federal

Rules

class

of

Civil

of the shareholders involved

largest

financial

there is a presumption that
And,

adequate

interest,

and

it should be the

the Union contends that it satisfies the

requirements of Rule 23.
Rice and James concede that,
in these motions,
in Genworth.
the PSLRA,

of the shareholders involved

the Union has the largest financial interest

Although Rice and James

acknowledge that,

under

the Union is deemed the presumptive lead plaintiff,

they take

the view that

the Union cannot adequately represent

the

based

conflict

class

"on

the

the

[Union]

simultaneous prosecution of derivative claims

has

due

to

its

for Genworth and

based on its failure to pursue shareholder direct claims as the
Rice Group has."

(ECF No.

50).

In particular,

Rice and James

maintain that the Union's derivative claim against Genworth in
Delaware presents a conflict of interest and subjects the Union
to unique

defenses,

thereby

rendering

the

Union

an

inadequate

lead plaintiff.

6

At all relevant times, the Union held 39,153 shares of Genworth
stock.
11

Rice
continue

and

James

even

after
"There

completed) .
case goes

further

on

for

the
are

years,

conflicted position.

explain

merger

other

exception

to

is

keeping

the

For example,

the

mootness

the

where

response,

because

this

related.

"In

the

action
the

the

the

it

is

derivative

the approval of the Merger

or new evidence could trigger

rule

Union argues
and

(if

will

IUOE Investor Group in a

and

the

derivative

could go on after approval of the Merger .
In

conflict

completed

scenarios

could be delayed for over a year,
an

that

derivate

Derivative Action,

there

action
the

alleges that certain Genworth Financial,

Id.

II

that

is
in

IUOE

Inc.

claims

[)

no

conflict

Delaware

are

Investor Group
executives and

directors breached their fiduciary duties by allowing Genworth
to engage in securities fraud .

inter alia,

alleging,

.

[and here) the Rice Group is

that defendants failed to properly value

the derivative claims asserted by the

IUOE

Investor Group and

disclose all material information regarding those claims."
Finally,
intent
class,

says
to

the

recover

only

"[g)iven

the

non-monetary

Rice

relief

Group's
for

the

apparent
putative

it is not in a position to claim that appointment of the

IUOE Investor Group,
against

Union,

Id.

Defendants,

a group that plans to pursue money damages
will

disadvantage

Id.

12

the class

economically.

/1

In response to the Court's inquiry,
the

all parties agree that

case

notwithstanding

the

aspect

case

is

not

moot,

preliminary

injunction

disclosures

made

by

the

of

Company

the

pursuant

settlement
and

to

of

the

the

the

amended

settlement.

Rice and James argue that the existence of a settlement does not
di vest the Court's jurisdiction over the case,

but does have a

bearing on the lead plaintiff analysis.
On July 5,

2017, at the hearing on the lead plaintiff/lead

counsel motions, the Company weighed in on that issue by arguing
that there was no merit to the securities claims that the Union
says
Court

it

would

raise

if

it

were

appointed

lead

counsel.

The

gave the parties an opportunity to brief that argument.

The Union responded that
position

on

the

lead

the Company had no
plaintiff

right

motions.

to argue a

Rice

and

James

essentially adopted the argument advanced by the Company .

.ANALYSIS AND APPLICATION OF LAW

I.

Jurisdiction

"Although neither party has affirmatively argued that
case

is

essential

moot,

resolution

because,

jurisdiction

to

if

proceed

of

the

case

further

advisory and thus improper."
244,

246

(1971).

that

Therefore,

question

is

moot,

and

any

is
the

"a

13

suit

must

nonetheless
Court

opinion

North Carolina v.
be

the

Rice,

lacks

would

be

404 U.S.

definite

and

concrete, touching the legal relations of parties having adverse
legal

interests

answer."

Id.

However,
(internal

moot

citations

parties have a concrete interest,

questions

But,

omitted).

however small,

of the litigation, the case is not moot."

require
if

no
"the

in the outcome

Chafin v. Chafin, 568

U.S. 165, 133 (2013).
The inquiry to be made here is much like the one presented
in Lambert v.

Tellabs,

LEXIS 156284,

at *6

shareholders

alleged

Inc.,

(N.D.

No.

13-cv-0794 5,

Ill. Mar.

that

the

5,

2015

2015).

company's

U.S.

Dist.

In Lambert,

"disclosures

the

asking

shareholders to approve the merger omitted critical information
in violation of

§

14 (a)

of the Securities Exchange Act."

Id.

The shareholders sought "primarily injunctive relief to prevent
the merger,

but also sought damages

merger were finalized."

Id.

at

3.

in the alternative if the
The parties negotiated a

Memorandum of Understanding, whereby the company "agreed to send
out supplemental disclosures to shareholder and thereby cure the
alleged defects in their prior disclosures."

Id.

court found "the supplemental disclosures d [id]
Plaintiff's

disclosure-related

claims

moot

The district
not render the
because

they

addressed only seven of the eleven omissions Plaintiff alleged
in her complaint."
that,

Id.

at

6.

Additionally,

the court found

because the complaint sought "not only an injunction to

prevent

the

merger,

but

also

damages
14

if

the

merger

did

go

through," if the court were to reject the settlement agreement,
the

shareholders

could

continue

with

the

litigation

on

the

merits in order to seek damages.

The district court explained

that,

is

u[w]hile

method

for

injunctive

remedying

relief

disclosure

typically

the

preferred

damages

violations

are

available for such violations where the merger has already been
consummated."

Id.

For those reasons,

the case in Lambert was

not moot.
Here,

as in Lambert,

the parties advised that it was their

intent to prepare a Memorandum of Understanding reflecting the
settlement,

whereby certain supplemental disclosures were to be

made.

The

provide

certain

the
If

parties

here

also

agreed

that

discovery

that

would

permit

disclosures,
the

plaintiffs

proceed with the
of

the

as

claim

possible

that

supplemented,

are

not

were

satisfied

for

rescissory

the

Court

not

that

and

point,

inter alia,

damages.

would

Company

And,

approve

would

verification

accurate

on

litigation including,

the

of
the

that

complete.
they

can

the pursuit

course,

it

settlement

is
and

thereupon the case would continue.
Considering the facts
that

the

case

jurisdiction
consider

the

is

over

not

the

motions

in this record,
moot

case.

and
Thus,

respecting

plaintiff and lead counsel.

15

the Court concludes

that

the

it

appropriate

the

is

Court

designation

retains
now

of

to

lead

II.

Presumptive Lead Plaintiff

"[T] he PSLRA provides a sequential procedure for litigants
and the district court to follow

in determining who among the

members of the alleged class is the 'most adequate plaintiff' to
serve as the lead plaintiff for the consolidated class action.
The

PSLRA

candidate

also

provides

certain

must

meet

be

MicroStrategy Inc.
Va.

to

Sec.

specific

named

Litig.,

lead

110 F.

requirements

that

a

In

re

plaintiff.u

Supp.

2d 427,

432

(E.D.

2000) .

First, a complaint is not complete unless
the
named
plaintiff
includes
a
sworn
certification setting forth certain facts
designed to assure a court that the named
plaintiff
(i)
has suffered more than a
nominal loss,
(ii) is not a professional
litigant, and (iii) is otherwise interested
and able to serve as a class representative.
[] Second, the first plaintiff to file a
class action securities fraud complaint must
publish notice of the complaint "in a widely
circulated
national
business-oriented
publicationu within twenty days of filing
the
complaint.
15
U.S.C.
§
78u4 (a) (3) (A) (i).
That notice must (i) include
a description of the claim and the class
period, and (ii) inform other members of the
alleged class that they may move, within
sixty days of the notice, to be named lead
plaintiff, whether or not they have filed
their own complaint.
Id.

There is no dispute that all of the prerequisites have been

met in this case.
Pursuant

to

15

U.S.C.

§

78u-4 (a) (3) (B) (i),

"[n]ot

later

than 90 days after the date on which a notice is published under

16

subparagraph (A) (i),
a

the court shall consider any motion made by

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")
On March 6,

2017,

the Court ordered the parties to file

Lead Plaintiff Notice in compliance with the
No. 35).

A.

their

See

PSLRA.

(ECF

Thereafter, the pending motions were filed.

There Is A Rebuttable Presumption
Should Be The Lead Plaintiff

That

The

Union

The statute creates a rebuttable presumption
that the most adequate plaintiff is the
'person or group of persons' who ( i) 'has
either filed the complaint or made a motion
in response to [notice given] , ' 15 U.S. C. §
78u-4 (a) (3) (B) (iii) (I) (aa),
(ii)
'has
the
largest financial interest in the relief
sought by the class,'
15 U.S.C. § 78u4 (a) (3) (B) (iii) (I) (bb) and (iii)
'otherwise
satisfies the requirements of [Rule 23, Fed.
R.
Civ.
P.],'
15
U.S.C.
§
78u4 (a) (3) (B) (iii) (I) (cc).
In re MicroStrategy Inc.
(E.D.

Va.

2000).

Sec.

Litig.,

110 F.

Supp.

The Union has neither filed a

2d 427,

433

complaint nor

moved for leave to intervene,

but it has moved to be appointed

as

to

lead

Exchange

plaintiff
Act.

pursuant

And,

it

is

Section

eligible
17

21 D (a) ( 3) ( B)
to

be

of

the

considered

for

appointment

as

lead plaintiff pursuant

to the

requirements set

forth under the PSLRA.

1.

The
Rice

and

The Union Has The Largest Financial Stake In The
Litigation

IUOE

holds

James

these motions,

concede

shares

that,

of

of

the

Genworth

common

shareholders

stock.

involved

in

the IUOE holds the largest financial interest in

the litigation.
of Genworth

39,153

Rice and James collectively own 17, 223 shares

stock.

Rice

owns

100

shares.

James

owns

17, 123

shares. 7

2.

The Rule 23 Requirement For Typicality And
Adequacy To Prosecute The Action As Applicable At
This Stage Of The Proceedings

"Even if a candidate has the largest financial interest in
a

case,

it

is

not

the

presumptive

Lead

Plaintiff

unless

it

'otherwise satisfies the requirements of Rule 23 of the Federal
Rules

of

Procedure.'

Civil

4 (a) (3) (B) (iii) (I) (cc)."
187

F.R.D.

litigation,

246,

250

(E.D.

Switzenbaum
Va.

1999).

u.s.c.

15
v.

Orbital
At

this

78u

§

Scis.
stage

Corp.,
of

the

the Rule 23 "inquiry is not as searching as the one

7

None of the other plaintiffs have moved for appointment as lead
plaintiff.
Further, the other plaintiffs own fewer shares than
the movants Rice and James.
"Plaintiff Ratliff holds just 37 5
shares of Genworth commons stock - barely 2% of the holdings of
Movants - and the plaintiffs in the Delaware Actions hold only
200 and 300 shares, respectively - less than 3% of the holdings
of Movants."
(ECF No. 40).
18

triggered

by

a

motion

for

class

the

certification

candidate must make at least a preliminary showing that it has
claims which are typical of those of the putative class and that
it

has

the

others."
Cir.

to

provide

adequate

Id.; see also In re Cavanaugh,

2002)

plaintiff

capacity

(the court
and

"must then

determine,

based

representation

for

306 F.3d 726, 730

(9th

its

that

focus
on

the

attention on

information

he

has

provided in his pleadings and declarations, whether he satisfies
the requirements of Rule 23(a)").
Originally,
position

on

Rice and James
typicality

and

did not
the

challenge

capacity

representation at this stage of the litigation. 8

the

for

Union's
adequate

However, at the

hearing, counsel for the Company argued as follows:
The Union are the wrong people to bring the
14 (a) claim because either the "union voted
for the deal, knowing everything there was
to know about the derivative claim, in which
event I don't see how they could possibly
pursue a fraud claim, or they voted against
the deal in which event I don't understand
how they can represent a class of people who
didn't vote against it because they' re not
similarly
situated.
In
fact,
they' re
completely different from everyone else."

8

See ("Rice Group Memorandum of Law In Opposition") ( ECF No. 50)
("It appears that IUOE Investor Group has the largest financial
interest, and by operation of law, gains a presumption of being
the most adequate Lead Plaintiff under the PSLRA and Fed. R.
Civ. P. 23. However, once a plaintiff is deemed the presumptive
lead, "competing plaintiffs have the opportunity to rebut the
presumptive
lead
plaintiff's
showing
of
typicality
and
adequacy."}.
19

(ECF No. 68, #1892).
James

challenged

knowledge

of

After the hearing on the motions, Rice

the

the

Union's

derivative

shareholder vote on the merger.

adequacy
action

based
at

on

the

the

and

Union's

time

of

the

As Rice and James put it:

In this case, it appears that the IUOE
Investor Group seeks damages not because it
casted
an
uninformed
vote,
but
instead
because the vote did not go the way it
wanted.
This is no basis for a Section
14(a) claim, and is an audacious position
for a party that sat idly by with superior
knowledge of the value of the derivative
claims and did not challenge the sufficiency
of the disclosures to protect the class
before (or after} the vote.
See (ECF No. 73} . 9
The Court agrees with the Union that the Company cannot be
the party to contest whether the Union can rebut the presumption
of the Union's adequacy.
with

member

"a

of

the

Under the PSLRA, that prerogative lies
purported

plaintiff

class"

evidence rebutting the lead plaintiff presumption.
Lumber

Liquidators

12588686,
Plaintiffs

at

*2

Holdings,
(E.D.

successfully

Va.
raise

Inc.,
May
the

No.
14,

can

See Kiken v.

4: 13cv157,
2014)

rebuttable

offer

("After

2014

WL

Moving

presumption

of

adequacy, the presumption cannot be rebutted by Defendants."}.

MEMORANDUM OF LAW IN RESPONSE TO IUOE INVESTOR GROUP'S
SUPPLEMENTALMEMORANDUM
ADDRESSING
DEFENDANTS'
OPPOSITION
TO
APPOINTMENT ("Rice Group's Supp. Mem. Def's Opp.").
20

However,

raised

argument

the

subsequently adopted

by

Rice

and

by

James,

is

and

Company,

the

applicable

to

the

relaxed Rule 23 analysis and the Company is entitled to weigh in
on

that

argument

by

satisf [y]
Ci vi!

Therefore,

issue.
the

the

[Company]

"[t]he

that

Court

the

[Union]

requirements of Rule 23
Kiken v.

Procedure."

will

consider

do [es]

of the

the

not

Federal Rules of

Lumber Liquidators Holdings,

Inc.,

No. 4:13CV157, 2014 WL 12588686, at *3 (E.D. Va. May 14, 2014).
As explained earlier,
23

is

and

not appropriate at

should

motion

be

for

left

class

Sec.

Litig.,

(D.

Md.

R.

they

the

Rule

In

typical

be

the

identical.

or

re

consideration
Milestone

168 F.
requires

Supp.

the

similar

Gruber

v.

a

Scientific

the

of

to

class

566

named

claims.

claims
the

of

2d 560,

that

of the class'

While

same

stage of the litigation
later

Litig.,

23(a) (3).

should be

need not

Court's

23 (a) (3)

claims be

P.

Civ.

initial

certification."

2001).

plaintiff

for

this

In re USEC Sec.

representative's
Fed

"[a] wide ranging analysis under Rule

the

See
named

claims,

Price Waterhouse,

117

F.R.D. 75, 79 (E.D. Pa. 1987).
The

Union

argues

that,

without

regard

to

its

specific

knowledge or votes, it has standing to pursue the§ 14(a} claims
because

"[it

was]

harmed

when

Defendants

issued

a

misleading

proxy that caused Genworth shareholders to approve a merger for
$2.7 billion when the truth was that Genworth was worth at least
21

$2.939 billion."
Supp.

393,

1984),

397

the

establish

Va.

(E.D.

defendant

plaintiff

deciding

how

However,

the

pursue

(ECF No. 70).

the

In Hershfang v. Knotter, 562 F.

1983),

argued

aff'd,

that

not

rely

vote"

to

did

and

the

voted

Court

found

securities

that

claim

725

on

the

F.2d 675

"uncontroverted

the

proxy

against

such

a

facts

materials

the

plaintiff

"because

(4th Cir.

in

transaction.

had

standing

claim employs

to
a

different standard of causation from that applied in a Rule lOb5

claim.

A Rule

14a-9

claim

'transactional causation':
not

the

alleged

defect

in

link in the transaction.
Co.,

396 U.S.

added) .

at 385,

Therefore,

that

requires

only

a

showing

of

the proxy solicitation itself,

the

solicitation,

was

an

essential

See, e.g., Mills v. Electric Auto-Lite

90 S.Ct.

at 622."

Id.

at 398

(emphasis

in proxy disclosures cases "there can be no

doubt that the transaction required shareholder approval which,
in

turn,

required

the proxy solicitation.

Thus

transactional

causation existed regardless of whether plaintiff relied on the
proxy materials."

Id.

The same is true in this case.

Whether the Union relied on

the proxy statement in making its vote,

10

the proxy itself is the

basis for the 14(a) claim, thus the Union has standing to pursue

10

The Union has not disclosed whether or not it voted to approve
the merger.
22

the claim.

And, on that point

the Rule 23 inquiry at
F. 3d 726,

730-31

(typicality), the Union satisfies
See

this stage.

(9th Cir.

2002)

In re Cavanaugh,

306

("At step two of the process,

when the district court makes its initial determination, it must
rely

on

the

presumptive

certification;

there

lead

is

no

plaintiff's
adversary

complaint

process

and

to

sworn

test

the

substance of those claims.") . 11
B.

Rice And James Have Rebutted The Presumption that the
Union Is The Presumptive Adequate Lead Plaintiff

"The

above

presumption

largest financial

interest]

the

lead

[insofar

presumptive

of

the

entity

'unique

adequately

defenses'

plaintiff

that

render

representing

the

4(a) (3) (B) (iii) (II) (aa)-(bb) ."
Litig.,

217

F.R.D.

372,

the

may only be rebutted by proof that
will

{ 1)

not

adequately protect the interests of the class or
to

with

375

such

11

Va.

&

incapable

Wireless,

2003).

and

is subject

Id.

class.

{E.D.

(2)

plaintiff

In re Cable

fairly

§

of

78u-

PLC Sec.

To demonstrate

No one seems to challenge the Union's position that it has the
capacity to provide adequate representation for the class.
At
this stage, adequacy equates to capability.
But, if adequacy
were to include an analysis similar to the conflicts issue
raised by Rice and James (and discussed below), the adequacy
issue could not be resolved in the Union's favor.
Rice and
James allude to that point, but it is really a matter to be
dealt with in assessing the alleged conflict.
Nonetheless,
because, as discussed below, the Union has serious conflicts,
the Union would not meet the adequacy requirement if that
requirement were to be assessed beyond the surf ace question of
capability.
23

that

the

lead plaintiff will

be

inadequate,

courts

require

a

showing of "specific support in evidence of the existence of an
actual

or potential

Trust v.
e.g.,

KPMG LLP,

Sofran v.

(S. D. N. Y.

conflict of
223 F.R.D.

LaBranche

2004)

&

Constance Sczesny

interest."

319,

Co.,

324-25
Inc.,

(emphasizing that

the

220

(S.D.N.Y.
F.R.D.

2004);
398,

PSLRA requires

see

403-04

proof of

inadequacy and not merely speculation) .
Rice

and

James

argue

that

the

Union

Therefore,

interest in representing the class.
contend

that

(4th

conflict

Union

See Ward v.

the class.
180

the

Cir.
of

2010)

interest

cannot

fairly

Union

is

(internal
to def eat

subject

a

conflict

of

Rice and James

and adequately

represent

Dixie Nat. Life Ins. Co., 595 F.3d 164,
citations
the

conflict must be fundamental.").
the

has

to

omitted)

("For

adequacy requirement,

a

that

Rice and James also argue that

unique

defenses

that

render

it

an

unsuitable lead plaintiff.
1.

The Union's Potential
Defenses Issue

Conflicts

And

The

Unique

To rebut the presumption that the Union is not an adequate
lead

plaintiff,

Rice

and

James

contend

that

the

Union

has

a

conflict of interest in this action against the Company because
it is pursuing, on behalf of the Company, a derivative action in
the

Delaware

Court

of

Chancery.

In

analyzing

the

alleged

conflicts of interest, the Court considers that "[a] conflict is

24

not

fundamental

when

[]

all

class

members

share

objectives and the same factual and legal positions

common

[and]

have

the same interest in establishing the liability of [defendants].
Moreover, a conflict will not defeat the adequacy requirement if
Ward v.

it is merely speculative or hypothetical."
Life

Ins.

Co.,

595

F.3d

164,

180

(4th

Cir.

2010)

Dixie Nat.
(internal

quotations omitted).
Rice and James assert the following conflicts based on the
Union's prosecution of the derivative action:
•

The derivative case filed by the Union seeks monetary
damages from some of the same corporate and individual
defendants in this case - but not all of them.
It
also seeks monetary damages from related individual
defendants not named in this case

•

The derivative case
filed by the Union asserts
"related"
claims
against
the
same
but different
corporate and individual defendants in this case but
not all of them.
It also asserts "related" but
different claims against individual defendants not
named in this case

•

The Union seeks to represent two overlapping but
different classes without benefit of a waiver from the
mutual members of both classes

•

The Union would be conflicted as to the management of
the two cases.
They are at different stages - the
derivative action is subject to a pending motion to
dismiss
and
this
action
has
been
referred
to
settlement negotiations, which are in progress.
The
fact that the Union is concerned that any potential
settlement reached in this case may adversely impact
them is prima facie proof that they have a conflict of
interest with the putative class in this case

25

•

The
Union
would
be
es topped
or
precluded
from
disputing
director
and
manager
liability
of
overlapping
claims,
for
its
different
set
of
defendants, thus reducing the recovery available to
the class in this case from the defendants that are
named

•

The
apparently
sizeable
body
of
confidential
information produced under different circumstances
from different parties will cause the Union to be the
subject of unique defenses and additional motion
practice

•

As plaintiffs in a derivative action, the Union has a
right to seek documents that are subject to the
attorney client privilege to the extent the privilege
is owned by the corporation.
If the Union already
possesses such documents, it will be conflicted in
this case.
If not, and it becomes Lead Plaintiff in
this case, it will be conflicted in representing the
corporation
and
seeking
such
documents
in
the
derivative case

The Fourth Circuit has not determined whether a plaintiff
pursuing a derivative action on behalf of a corporation in one
case

is per

against
under

the

decision
1987)

the

se

conflicted when also pursuing

corporation
PSLRA.

in

But,

Koenig

instructive.

v.

in

a

on

separate
that

Benson,

In Koenig,

case

point,

117

as

the

F.R.D.

a

direct

lead plaintiff

Court

330,

action

333

finds

the

(E.D.N.Y.

the defendant objected to class

certification based on the "alleged atypicality and inadequacy
of the representatives.n

The basis for that objection was that

the class representative and counsel are "presently bringing a
derivative

suit

against

[the

Defendant

in

a

state

court]

and

this commitment creates a conflict of interest in representing a

26

Id.

class in this litigation."
that

this

disqualifies

[the

"Defendants contend

at 334.

plaintiff]

representative under Rule 23 (a) (4),

as

an

adequate

class

because his commitments to

the derivative suit shows an interest contradictory to that of
the class he seeks to represent."
representative

argued

"that

this

In response,

Id.

conflict

is more

the class

theoretical

than real, and it should not affect class certification at this
time,

because

decertified
members."

the

later
Id.

if

class
a

true

representatives
conflict

always

can

prejudices

the

be

class

The Court found that there was a disqualifying

conflict, explaining that:
When a plaintiff brings a derivative suit
seeking recovery for the corporation and
simultaneously
files
a
class
suit
for
damages against that same corporation, there
is an inherent conflict.
One court has
written, "it is difficult to understand how
an
attorney
can properly
represent
the
interests of a corporation and its present
shareholders in a derivative action brought
on their behalf, and, at one and the same
time, properly represent its present and/or
former
shareholders
in
a
class
action
against the corporation without compromising
the independence of professional judgment
and loyalty to these two groups of clients
with
potentially
conflicting
interests."
Stull v. Baker, 410 F.Supp. 1326, 1336-37
(S.D.N.Y. 1976).
Id;

see

(E. D. N. Y.

also

Tuscano

v.

Tuscano,

403

2005) ("Any individual claims

27

F.

Supp.

raised by a

2d

214,

223

shareholder

in

a

derivative

interest) .
Other
Koenig,

action

present

an

impermissible

conflict

of

12

courts

117 F.R.D.

have

disagreed

at 334

with

a

per

se

approach.

Those decisions

(collecting cases).

teach that a case by case approach is the necessary analytical
construct.

That

is

because,

even

if

the

existence

of

simultaneous direct and a derivative actions are not viewed as a
per se conflict,
conflict

for

~a

particular case may give rise to a potential

someone serving as

a class

derivative plaintiff at the same time.
consider

these

appropriate."

potential
Id.

conflicts

representative and a

Therefore the Court must
and

deal

with

them

as

Thus, it is necessary to consider the facts

of the case to determine whether a conflict of interest does in
fact
rebut

exist and whether,
the

presumption

if so,
that

the

the conflict is sufficient to
Union

is

an

adequate

lead

plaintiff.

12

Other decisions deliver the same message.
See e.g., Wood v.
Rex-Noreco, Inc., 61 F.R.D. 669, 674 (S.D.N.Y. 1973); Hawk
_I_n_d_u_s_t_r_i_e_s...:,.,__
I_n_c_.__ __
v_. B_a_u_s_c..;_h....;...__&.;.___L_o_m_b...;....<..,_.::;.I. :. .;n.. ::c.. .:. . , 5 9 F. R. D. 619, 6 2 4
(S.D.N.Y. 1973); Ruggiero v. American Bioculture, Inc., 567
F.R.D. 93, 95 (S.D.N.Y. 1972).
28

There Is A Conflict Between The Derivative
Class And The Direct Action Class Because Of
the Limited Funds Of The Corporation

(i)

The

Court

is

persuaded by

James that there is a
and

the

derivative

damages.

the argument made by

Rice

and

conflict between the direct action here

action

in

Delaware

based

on

the

issue

of

Their argument is that:
[O]n one hand this direct class action seeks
recovery from the corporation in the form of
rescissory
damages,
attorneys'
fees
and
other
costs.
The
Derivative
Action
maintained by members of the [Union] also
seeks
recovery
for
the
corporation
of
damages from director defendants, but also
recovery or attorneys'
fees,
accountants'
and experts' fees, costs, and expenses for
which the corporation itself may be liable.

("Mem.

Opp.

to

IUOE"} (ECF No.

50} (internal citations omitted}.

And, that argument is indeed correct in this case.
The Union tries to rebut this conflict not by denying its
existence,
consurrunated,

but

by

explaining

that,

once

the

the derivative action will disappear.

merger

is

Although it

is true that derivative actions can often become direct actions
post-merger,
("the

see In Lewis v. Anderson, 477 A.2d 1040

Delaware

derivative

Supreme

action

corporation") ,

the

Court

passes
Union

held
via

provides

that

the

merger
no

right

to

authority

the
to

(Del. 1984}
to

bring

a

surviving
support

a

finding that the Court should appoint a lead plaintiff based on
a possible outcome of a pending merger.

29

And, this Court located

no

such

authority.

requirements

for

PSLRA

The

the

appointment

provides
of

lead

timing

strict
plaintiff,

thus

postponing the lead plaintiff appointment till the consummation
of the merger would be in contradiction to the overall purpose
of the statute.
The Union clearly stated in oral argument that "most of the
time

when

there's

a

lead plaintiff appointed,

that's

not

the

original plaintiff, and the merger is not -- does not have a set
date yet,

commonly what the parties stipulate to and the court

orders is that the amended complaint be filed after the merger
certain

set

days."

(ECF No.

68).

That

proposed

procedural

scenario is troubling because this merger has been pending for
several months,
Thus,
This

and recently another delay has been announced.

it is unclear when,
action

cannot

sit

or if,
on

hold

a merger will be consummated.
on

the

speculation

that

an

already long-delayed merger may ultimately come to fruition or
on the possibility that the Union will file an amended complaint
that eliminates the present conflict.
The Court also

finds

persuasive the argument of Rice and

James that the Union's 220 Action potentially serves as a basis
to

strengthen

the

Union's

derivative

13

case

post-merger. 13

See

On this point, Rice and James contend: "the [Union] is also
pursuing the Section 220 Action in the Delaware Court of
Chancery.
As part of its demand in that case, the IUOE Investor
30

Ark.
894

Teacher Ret.
(Del.

2013)

Sys. v.

Corp.,

7 5 A. 3d 8 8 8,

(" [T] his Court recognized two exceptions to the

loss-of-standing rule.
the subject

Countrywide Fin.

of a

The first

claim of

is where the merger itself is

fraud,

being perpetrated merely to

deprive shareholders of their standing to bring or maintain a
derivative action.").
The Court cannot assess

the adequacy of a

lead plaintiff

The merger has not yet been

based on possible future events.

consummated and the Court must analyze the conflict as it exists
today.

As of now, the derivative action is still pending and so

too is the merger.
the

derivative

Given the nature of the claims here and in

action,

Rice and James argue,
merger.

While

the

there

is

a

conflict.

Furthermore,

the derivative action can continue postCourt

cannot

now

determine

derivative action here will succeed on that front,
certainly is not speculative.
is

clear

that

the

as

whether

the conflict

On this record at this time,

possibility

of

monetary

the

recovery

to

it
the

Group is seeking certain documents and records of Genworth 'to
determine, in light of the claims in the Derivative Action,
whether the members of the Board pursued and authorized the
Acquisition as a means to eliminate potential personal liability
for claims in the Derivative Action.' 220 Complaint at~ 16(b).
In other words, the [Union] is seeking evidence that would be
grounds to continue to pursue the Derivative Action even if the
Merger is consummated, under the fraud exception to the loss-ofstanding rule."
("Supp. Mem. Conflict of Interest") (ECF No.
59).
At this stage of the proceedings, that contention is
correct.
31

corporation in the derivative action is in direct contradiction
to

the

class

likely,

action

Although

here.

it

is

possible,

that this action will end in settlement,

not a

certainty,

could

seek

and,

rescissory

in any event,
damages

as

in

Koening,

under

Tuscano,

objectives

of

the

This

14(a).

§

objectives

in

this

Wood,

action.

Hawk,

action

derivative

are

Where

that is still

the class plaintiffs here

that

conflict

In other words,

renders the Union an inadequate lead plaintiff.
here,

indeed

and
at
is

Ruggiero,
odds

so,

the

with

there

the
is

a

conflict that precludes the relief sought by the Union.
(ii) There Is A Conflict Between The Derivative
Class And The Direct Action Class Because Of
The Different Legal Claims And Different
Named Defendants In Each Case

The

derivative

fiduciary

duties

executives.

on

However,

action

in

Delaware

the

part

of

alleges

nine

the

directors

breach
and

of

three

this class action "only involves a single

schedule 14A Preliminary Proxy Statement and names ten director
defendants, two of which are not named in the derivative action,
and

no

executives."

(emphasis
differences

("Mem.

added} .

As

are

significant

Opp.

argued

by

because

to

IUOE") (

Rice

and

the

PSLRA

(ECF

No.

James,
"reduces

50)
these
the

liability for an individual defendant based on that defendant's
percentage of fault
liable,

compared to all parties

whether or not named

in

32

the

that are arguably

lawsuit."

Id.

However,

"[t] he

[Union]

would be

estopped

from

disputing

manager liability of overlapping claims,

director

and

for its different set

of defendants, thus reducing the recovery available to the class
in this case from the defendants that are named."

Id.

This too

is a sufficient conflict to rebut the presumption that the Union
is an adequate lead plaintiff.
On this record,

the Court finds that the Union's conflicts

are sufficient to rebut the lead plaintiff presumption.

II.

Lead Plaintiff & Lead Counsel

It now is necessary to consider whether the movants
and

James)

PSLRA.

should

be

appointed

as

lead

plaintiffs

(Rice

under

the

"Plaintiff Rice held and continues to hold 100 shares of

Genworth common stock and Plaintiff James held and continues to
hold at least 17, 123 shares of Genworth common stock."
Law

Support

shareholders

Lead

Plnt.") (ECF

involved

second largest

in

financial

No.

these
interest

40).
motions,

The

movants,

therefore

of

the

hold

the

in the Company and thus are

presumed to be the most adequate lead plaintiff. 14

14

("Mem.

Further,

in

Rice and James are moving for the appointment of lead plaintiff jointly.
Early on in the litigation, the plaintiffs agreed to work together.
"A group
consisting of persons that have no pre-litigation relationship may be
acceptable as lead plaintiff candidate so long as the group is relatively
small . . . and therefore presumptively cohesive."
Simmons v. Spencer, 2014
WL 1678987, at *5 (S.D.N.Y. Apr. 25, 2014).
While the decision to appoint
aggregate lead plaintiffs may implicate PSLRA concerns as to lawyers
directing the course of litigation, the Court finds that the problem is not
applicable here.
James holds the most shares, excluding the Union, with or
without the aggregation of Rice's shares.
The choice by Rice and James to

33

all

respects,

and

James

typicality

relaxed

Rice

have

and

adequacy

shown

that

they

(capability)

meet

the

requirements

of

Rule 23 that apply at this stage of the proceedings.
The lead plaintiff is empowered under the PSLRA to select
and

retain

counsel

to

represent

See 15 U.S.C.

consolidated actions.
Court finds
Kahn

that

Swick

MeyerGoergen PC
requisite
members

Faruqi

to

approves

class

members

in

the

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

The

(the "Faruqi Firm")

and

as

Co-Lead

Counsel

and

as Liaison Counsel possess the

represent

the

§

LLP

("KSF"}

("MeyerGoergen")

experience

and

Faruqi,

&

LLC

Foti,

&

the

the

selection of

interests
those

of

firms

the
as

class

co-lead

counsel and liaison counsel respectively.
The Court notes that the current case is a situation where
the

appointment

"[T] he
group

statute
of

of

allows

persons'

or

U.S.C. § 78u-4 (a) (3}
Sec.

Litig.,

James

have

more

219

(B)

than

the

lead

class
(i),

F.R.D.

one

plaintiff

plaintiff

'member

or

group

(iii) (I)

369,

effectively worked

372

to

be

appropriate.
a

'person

or

of members,'

15

In re Cree, Inc.,

II

2003).

(M.D.N.C.

together

is

since

Rice

and

the beginning of

this litigation.
"There
should

be

is,

however,

allowed

to

some
serve

question
as

whether

co-lead

two

counsel."

law

firms
In

re

work together since the inception of the litigation was based on the parties'
mutual shared interests.

34

MicroStrategy Inc.
Va.

2000) .

Sec.

"[T] he

Litig.,

statute

counsel to one law firm,

110 F.

does

not

Supp.

2d 427,

explicitly

440

(E.D.

restrict

lead

and there may be instances in which a

class is well-served by having two or more law firms combine to
direct the litigation.
firms

could

share

Other courts have held that multiple law

lead counsel duties

so

long as

those

firms

provided assurance that they would work together efficiently and
without

duplication

omitted) .

Here,

of

services."

co-counsel

have

It is clear from the parties'
presented

by

appointment

Rice
of

appropriate.

and

lead

worked

papers,

James

are

plaintiffs

However,

Id.

counsel

(internal
together

citations

efficiently.

that the legal theories
identical.

with

co-lead

Thus,
counsel

are admonished that

the
is

any future

application for legal fees must show that there is no overlap of
legal

work

and

that

counsel

have

efficiently

responsibilities so as to confine attorneys'

allocated

fees to those that

are reasonable in amount and necessarily incurred.
CONCLUSION

For the foregoing reasons,

the MOTION OF THE INTERNATIONAL

UNION OF OPERATING ENGINEERS LOCAL NO. 478 PENSION FUND, RICHARD
L.

SALBERG,

AND

DAVID

PINKOSKI

FOR

APPOINTMENT

AS

LEAD

PLAINTIFFS AND APPROVAL OF THEIR SELECTION OF CO-LEAD COUNSEL
(ECF

No.

37)

will

be

denied

35

and

PLAINTIFFS'

MOTION

FOR

APPOINTMENT OF LEAD PLAINTIFFS AND COUNSEL (ECF No. 39) will be
granted.
It is so ORDERED.

Isl
Robert E. Payne
Senior United States District Judge
Richmond, Virginia
Date: August ~, 2017

36