Broker-Dealer Litigation - Greenberg Traurig LLP

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Sparano v. Lief, 2011 WL 830109 (S.D. Cal. Mar. 3, 2011).
After consolidating three related shareholder derivative actions, the court denied
competing motions for appointment as lead plaintiff. The court noted that the Private Securities
Litigation Reform Act of 1995 governs the appointment of lead plaintiffs in securities fraud
actions, but that no such authority existed for shareholder derivative suits. While some courts
have appointed lead plaintiffs in derivative suits, the court could not find any benefit to doing so.
Accordingly, the court denied the motions for appointment of lead plaintiff and appointed only a
lead counsel.
Schueneman v. Arena Pharms., Inc., 2011 WL 3475380 (S.D. Cal. Aug. 8, 2011).
After consolidating related securities fraud class actions, the court considered numerous
competing motions for appointment as lead plaintiff. In determining the movant with the
greatest financial stake in the outcome, the court focused on potential recovery and, thus,
primarily considered the number of net shares retained at the end of the class period. In doing
so, the court narrowed the field of potential lead plaintiffs to two individual investors, Ghayour
and Schwartz. The court found that Schwartz had the greatest potential recovery and, thus, was
presumptively the most adequate lead plaintiff because he had a significantly higher number of
retained shares than Ghayour, even though Ghayour had suffered a slighter larger total estimable
loss. The court rejected the argument that Schwartz lacked standing to adequately represent
options purchasers, noting that lead plaintiffs need not have standing to pursue all causes of
action of the class and additional named plaintiffs could be added later to represent sub-sets of
the class. The court further found that alleged inaccuracies in Schwartz’s Private Securities
Litigation Reform Act of 1995 certification regarding his stock transactions did not make him
unreliable or inadequate as a lead plaintiff. The court also rejected the argument that Schwartz
was subject to unique defenses as a “day trader” because absent evidence that Schwartz did not
rely on the stock’s market price, day-trading was not enough to rebut the presumption that he
was the most adequate lead plaintiff. Accordingly, after finding that Schwartz met the
requirements of Fed. R. Civ. P. 23, the court appointed him lead plaintiff and approved his
choice of counsel.
Moradi v. Adelson, 2011 WL 5025155 (D. Nev. Oct. 20, 2011).
In a consolidated shareholder derivative action, the district court considered two
competing motions for appointment of lead counsel brought by a group of individual
shareholders and a retirement fund. The retirement fund also sought appointment as lead
plaintiff and the shareholders argued that there was no need to appoint a lead plaintiff. The court
noted that while there is a statute to appoint a lead plaintiff in securities fraud actions, there is no
such statute in derivative actions. Nor had the parties cited any Ninth Circuit authority indicating
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