Broker-Dealer Litigation - Greenberg Traurig LLP

that the presumptive lead plaintiff met the requirements of Fed. R. Civ. P. 23, the court appointed
that movant lead plaintiff and approved his selection of counsel.
In re Smith Barney Transfer Agent Litig., 2011 WL 6318988 (S.D.N.Y. Dec. 15, 2011).
In a consolidated securities fraud class action, the court had originally appointed a union
trust fund along with an individual investor as lead plaintiff. The court was subsequently
informed by lead counsel that the union trust fund never actually owned any shares of the
security at issue and the court invited the filing of new motions for appointment as lead plaintiff.
The court now considered three competing motions for appointment as substitute lead plaintiff
filed by: (i) a group of investors including Weber, the individual plaintiff who had originally
been appointed as lead plaintiff along with the union trust fund; (ii) Zagunis, an individual
investor who had previously moved for appointment as lead plaintiff; and (iii) an individual
investor who had not previously moved for appointment as lead plaintiff. In considering which
movant should be appointed as substitute lead plaintiff, the court considered: (i) whether the
substitute lead plaintiff has made a timely request for appointment as lead plaintiff; (ii) whether
the substitute lead plaintiff had the largest financial stake in the outcome of the litigation; and
(iii) whether the substitute lead plaintiff otherwise satisfied the requirements of Fed. R. Civ. P.
23. The court also gave priority to movants who had originally timely filed for appointment as
lead plaintiff. In applying this test, the court found that Zagunis was presumptively the most
adequate lead plaintiff because he clearly had the largest financial stake in the outcome of the
litigation and had originally filed a timely motion for appointment as lead plaintiff. The court
rejected defendants’ argument that Zagunis may not be an adequate class representative because
he purchased his shares of the fund at issue through a dividend reinvestment program. The court
noted that defendants had objected to the appointment of each available lead plaintiff and the
court was not required to consider defendants’ argument at this stage of the litigation.
Accordingly, after finding that Zagunis met the requirements of Fed. R. Civ. P. 23, the court
appointed him lead plaintiff and approved his choice of lead counsel, thereby replacing class
counsel who had served for the last six years.
Vandevelde v. China Natural Gas, Inc., 2011 WL 2580676 (D. Del. Jun. 29, 2011).
In a putative securities fraud class action, the district court denied two competing motions
for appointment as lead plaintiff and declined to appoint a lead plaintiff. The court noted that
Third Circuit precedent requires the court to consider whether a potential lead plaintiff has
demonstrated the ability to negotiate a reasonable retainer agreement with counsel. However,
neither plaintiff had submitted materials related to fees or retainer agreements necessary for the
court to determine the adequacy of either movant with respect to this issue. Accordingly, the
court ordered both movants to submit supplemental briefs detailing their respective efforts in
retaining counsel and describing any fees or retainer agreements.
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