Foley v. Transocean Ltd.

272 F.R.D. 126, 2011 U.S. Dist. LEXIS 1541, 2011 WL 103960
CourtDistrict Court, S.D. New York
DecidedJanuary 3, 2011
DocketNo. 10 Civ. 5233 (NRB)
StatusPublished
Cited by70 cases

This text of 272 F.R.D. 126 (Foley v. Transocean Ltd.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Foley v. Transocean Ltd., 272 F.R.D. 126, 2011 U.S. Dist. LEXIS 1541, 2011 WL 103960 (S.D.N.Y. 2011).

Opinion

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD, District Judge.

This action is brought against Transocean Ltd. (“Transocean”) and its current and most recently former CEOs on behalf of a purported class of investors who purchased or otherwise acquired shares in Transocean between August 5, 2009 and June 1, 2010, the class period. Three investors filed motions seeking to be appointed as lead plaintiff and for their attorneys to be appointed as lead counsel. These include: (1) Johnson Investment Counsel, Inc. (“Johnson”); (2) Daniea Pension A/S (“Daniea”); and (3) Employees’ Retirement System of the Government of the Virgin Islands (‘Virgin Islands”). For the reasons set forth below, we appoint Daniea as lead plaintiff and approve its selection of lead and liaison counsel.

DISCUSSION

A. The Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (“PSLRA”) governs the appointment of a Lead Plaintiff in “each private action arising under the (Securities Exchange Act) that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.” 15 U.S.C. § 78u-4(a)(l) & (a)(3)(B)®. It provides that within 20 days of the filing of the action, plaintiffs are required to publish a notice in a widely circulated business-oriented publication or wire service, informing class members of their right to move the Court, within 60 days of the publication, for appointment as lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(A).

In appointing a lead plaintiff, we are to presume that the “most adequate plaintiff’ is the person or group of persons that:

(aa) has either filed the complaint or made a motion in response to a notice (published by a complainant);
(bb) in the determination of the court, has the largest financial interest in the relief sought by the class; and (cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure.

15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). This presumption may be rebutted only upon proof by a member of the purported class that the presumptive lead plaintiff:

(aa) will not fairly and adequately protect the interests of the class; or
(bb) 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).

B. The Presumptive Lead Plaintiff

1. Timely Complaints and Motions

All of the class members seeking appointment as lead plaintiff meet the first requirement in that they have submitted motions for lead plaintiff status in a timely manner.1 Accordingly, we turn to the second requirement and assess which movant has the largest financial interest in the action.

2. Largest Financial Interest

[l] The PSLRA is not explicit as to the methodology courts are to use in determining which plaintiff has the largest financial interest in the relief sought by the class, and the Second Circuit has not definitively ruled on the proper method. While disputes remain as to the proper methodology, courts in this Circuit have applied a four factor test first set forth in Lax v. First Merchants Acceptance Corp., Nos. 97 Civ. 2715 et al., 1997 WL 461036, at *5 (N.D.Ill. Aug. 11, 1997). These factors include: (1) the total number of shares purchased during the class period; (2) the net shares purchased during the class period (in other words, the difference be[128]*128tween the number of shares purchased and the number of shares sold during the class period); (3) the net funds expended during the class period (in other words, the difference between the amount spent to purchase shares and the amount received for the sale of shares during the class period); and (4) the approximate losses suffered. Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. LaBranche & Co., 229 F.R.D. 395, 404 (S.D.N.Y.2004) (adopting the four-factor “Lax test”); see also In re Orion Securities Litig., No. 08 Civ. 1328(RJS), 2008 WL 2811358, at *5 (S.D.N.Y. July 8, 2008); In re eSpeed, Inc. Sec. Litig., 232 F.R.D. 95, 100 (S.D.N.Y.2005) (relying on Lax test factors). Although courts have differed on how much weight to assign to each of the Lax factors, we, as have other courts, shall place the most emphasis on the last of the four factors: the approximate loss suffered by the movant. City of Monroe Employees’ Ret. Sys. v. Hartford Fin. Servs. Grp., 269 F.R.D. 291, 294 (S.D.N.Y.2010); Reimer v. Ambac Financial Group, Inc., Nos. 08 Civ. 411(NRB) et al., 2008 WL 2073931, at *3 (S.D.N.Y. May 9, 2008); Kaplan v. Gelfond, 240 F.R.D. 88, 93 (S.D.N.Y.2007); see Weiss v. Friedman, Billings, Ramsey Group, Inc., No. 05 Civ. 4617(RJH), 2006 WL 197036, at *3 (S.D.N.Y. Jan. 25, 2006) (“The amount of financial loss is the most significant of [the Lax test] elements”) (quoting In re Vicuron Pharm. Inc. Sec. Litig., 225 F.R.D. 508, 510-11 (E.D.Pa.2004)); see also Takara Trust v. Molex Inc., 229 F.R.D. 577, 579 (N.D.Ill. 2005) (in determining the largest financial interest, “most courts simply determine which potential lead plaintiff has suffered the greatest total losses”).

The only parties still claiming to have the greatest financial interest are Johnson2 and [129]*129Danica. Virgin Islands concedes in its opposition and reply memoranda that Danica “appears to possess the largest financial interest” and should be the presumptive lead plaintiff.3 Virgin Islands Memorandum of Law in Response to the Competing Motions at 1.

Johnson argues that it has a greater financial interest than Danica because it purchased a greater number of net shares during the class period, expended a greater amount of net funds, and had greater losses.4 Danica does not contest that Johnson expended a larger amount of net funds and purchased a greater number of net shares, but does dispute that Johnson has the greatest losses. We turn to this argument now.

a. Approximate Losses Suffered

No party disputes that the “last in, first out” (“LIFO”) methodology should be used to measure losses. LIFO calculates losses by assuming that the first stocks to be sold are the stocks purchased most recently prior to that sale. The alternative, “first in, first out” (“FIFO”), assumes that the first stocks to be sold are the stocks that were acquired first. Often, these first-acquired stocks were acquired outside the class period.

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272 F.R.D. 126, 2011 U.S. Dist. LEXIS 1541, 2011 WL 103960, Counsel Stack Legal Research, https://law.counselstack.com/opinion/foley-v-transocean-ltd-nysd-2011.