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Plumbers Local #200 Pension Fund v. the Washington Post Company

April 21, 2011

PLUMBERS LOCAL #200 PENSION FUND, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
THE WASHINGTON POST COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Paul L. Friedman United States District Judge

MEMORANDUM OPINION

This case is a purported federal securities class action brought on behalf of all persons who acquired Washington Post common stock between July 31, 2009 and August 13, 2010. This matter is before the Court on Iron Workers Local No. 25 Pension Fund's ("Iron Workers") motion for appointment as lead plaintiff in this purported class action and for approval of its selection of counsel pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act of 1934, 15 U.S.C. § 78u-4(a)(3)(B), as amended by Section 101(a) of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). The counsel it proposes are the counsel who filed the complaint in this case on behalf of Plumbers Local #200 Pension Fund ("Plumbers Local"), individually and on behalf of all similarly situated entities. No one has filed an opposition to the pending motion. Upon consideration of Iron Workers' papers, the relevant legal authorities, and the entire record in this case, the Court will grant Iron Workers' motion.*fn1

I. BACKGROUND

On October 28, 2010, plaintiff Plumbers Local filed a complaint in this Court on behalf of itself and a purported class of all those who purchased Washington Post common stock between July 31, 2009 and August 31, 2010 (the "Class Period"). See Compl. ¶ 5. In its complaint, Plumbers Local named three defendants: (1) the Washington Post, a diversified education and media company; (2) Donald E. Graham, the chairman of the board and the chief executive officer of the Washington Post since 1993; and (3) Hal S. Jones, the senior vice president of finance and the chief financial officer of the Washington Post since January 2009. See id. ¶¶ 6, 13-15.

Plumbers Local alleges that during the Class Period, the defendants issued materially false and misleading statements about the Washington Post's business and financial results. Compl. ¶ 7. As Plumbers Local describes it, "defendants failed to disclose that the [Washington Post] had been engaging in abusive and fraudulent recruiting and financial aid lending practices, thereby increasing [the] Washington Post's student enrollment and revenues." Id. As a result, the Washington Post's common stock allegedly traded at "artificially inflated prices during the Class Period, reaching a high of $541.38 per share on April 15, 2010." Id. Eventually, however, information about the Washington Post's allegedly abusive and fraudulent practices "seeped into the market" resulting in "massive sales" of common stock, which decreased their value "approximately 41.7% from the Class Period high." Id. ¶ 11. Plumbers Local seeks damages and injunctive relief. Id. at 16.

Under the procedures established by the PSLRA, on October 28, 2010, the same day it filed its complaint, Plumbers Local caused notice of the pendency of this case to be published in Business Wire, a widely-circulated, national, business-oriented wire service. See Mot., Ex. A to Adelman Decl., Notice of Class Action Suit at 1, Oct. 28, 2010. On December 27, 2010 - 60 days after the notice publication in Business Wire - Iron Workers filed a motion requesting that it be appointed lead plaintiff and that its selection of counsel, Robbins Geller Rudman & Dowd LLP ("Robbins Geller") be approved and appointed as lead counsel. See Mot. at 1. Iron Workers asserts that it should be appointed lead plaintiff because it (1) timely filed its motion, (2) has the largest financial interest in this case, and (3) will fairly and adequately represent the interests of the purported class. Id.

II. LEGAL STANDARD

The PSLRA sets forth the procedure governing the appointment of a lead plaintiff in a private class action brought under the Securities Exchange Act. See 15 U.S.C. § 78u-4(a)(3); Reese v. Bahash, 248 F.R.D. 58, 61-62 (D.D.C. 2008); In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. 13, 16-17 (D.D.C. 2006). Under the PSLRA, the Court shall appoint as lead plaintiff the member or members of the purported class "that the court determines to be the most capable of adequately representing the interests of class members." 15 U.S.C. § 78u-4(a)(3)(B)(i). The Court "shall adopt a [rebuttable] presumption that the most adequate plaintiff . . . is the person or group of persons that - [1] has either filed the complaint or made a motion in response to a notice . . . ; [2] in the determination of the court, has the largest financial interest in the relief sought by the class; and [3] otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure." Id. § 78u-4(a)(3)(B)(iii)(I). This presumption "may be rebutted only upon proof by a member of the purported plaintiff class that the presumptively most adequate plaintiff - [1] will not fairly and adequately protect the interests of the class; or

[2] is subject to unique defenses that render such plaintiff incapable of adequately representing the class." Id. § 78u-4(a)(3)(B)(iii)(II).

As Judge Huvelle has explained, "[t]he [lead plaintiff] selection process begins once the first plaintiff files an action and publicizes the pendency of the action, the claims made, and the purported class period." In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. at 17 (citing 15 U.S.C. § 78u-4(a)(3)(A)(i)). "The second step is for the court to choose the plaintiff who has the greatest financial stake in the outcome of the case." Id. (citing 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(bb)). "The PSLRA's presumption that the most adequate plaintiff is the one with the largest financial interest reflects Congress' desire to curtail lawyer-driven securities class actions." Id. (citing H.R. CONF. REP. NO. 104-369, at *31 (1995), reprinted in 1995 U.S.C.C.A.N. 370). "To achieve this goal, Congress sought to attract lead plaintiffs with a significant financial stake in the litigation on the assumption that they would be more likely to play an active role in directing and overseeing the litigation." Id. (citing Barnet v. Elan, 236 F.R.D. 158, 161 (S.D.N.Y. 2005)).

After a court determines which plaintiff has the greatest financial stake in the case, the PSLRA requires that the court evaluate whether that plaintiff satisfies Rule 23(a) of the Federal Rules of Civil Procedure. See In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. at 18. "[A]lthough Rule 23(a) includes four requirements - numerosity, commonality, typicality, and adequacy - the presumptive lead plaintiff 'need only make a preliminary showing that it satisfies the typicality and adequacy requirements of Rule 23.'" Reese v. Bahash, 248 F.R.D. at 62 (quoting In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. at 18).

The typicality requirement "'asses[es] whether the action can be efficiently maintained as a class and whether the [movant has] incentives that align with those of absent class members so as to assure that the absentees' interests will be fairly represented.'" In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. at 18 (quoting Baby Neal v. Casey, 43 F.3d 48, 58 (3d Cir. 1994)). Accordingly, "[t]ypicality is generally satisfied when the [movant's] claims arise from the same course of conduct, series of events, or legal theories as the claims of other class members." Id.; see Reese v. Bahash, 248 F.R.D. at 63 (typicality satisfied "'if each class member's claim arises from the same course of events that led to the claims of the [movant] and each class member makes similar legal arguments to prove the defendant's liability'") (quoting In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12, 27 (D.D.C. 2001)). The adequacy requirement assesses whether the movant "'has the ability and incentive to represent the claims of the class vigorously,' [and] has retained 'adequate counsel,'" as well as whether "there exists any 'conflict between [the movant's] claims and those asserted on behalf of the class.'" In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. at 18 (quoting Hassine v. Jeffes, 846 F.2d 169, 179 (3d Cir. 1988)); see also Reese v. Bahash, 248 F.R.D. at 63 (to satisfy adequacy requirement, movant "'must not have antagontistic or competing interests with the unnamed members of the class'" and "'must appear able to vigorously prosecute the interests of the class through qualified counsel'") (quoting Twelve John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997)).

The final step in the determination of the lead plaintiff "is to give other plaintiffs an opportunity to rebut the presumptive lead plaintiff's showing that it satisfies Rule 23's typicality and adequacy requirements." In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. at 18 (citing 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)). "If the presumption is overcome, the court must then turn to the plaintiff with the next highest financial interest in the litigation and start the process over again until all challenges have been exhausted." Id.

With respect to the appointment of lead counsel, the PSLRA provides that "[t]he most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class." 15 U.S.C. ยง 78u-4(a)(3)(B)(v). The PSLRA "'evidences a strong presumption in favor of approving a properly-appointed lead plaintiff's decisions as to counsel selection and counsel retention.'" In re XM Satellite Radio ...


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