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Shenk v. Mallinckrodt PLC

United States District Court, District of Columbia

March 9, 2018

PATRICIA A. SHENK, et al., Plaintiffs,
v.
MALLINCKRODT PLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          DABNEY L. FRIEDRICH United States District Judge.

         Before the Court are the State Teachers Retirement System of Ohio's (“STRS Ohio's”) Motion for Consolidation, Appointment as Lead Plaintiff, and Approval of Its Selection of Counsel, Dkt. 16, and the Motion of Amalgamated Bank for Consolidation of Related Actions, Appointment as Lead Plaintiff, and Approval of Its Selection of Lead Counsel, Dkt. 18. Having considered the parties' briefs and counsels' arguments during the motions hearing held on March 1, 2018, the Court will grant STRS Ohio's motion, appoint STRS Ohio as lead plaintiff, approve Barrack, Rodos & Bacine as lead counsel, and deny Amalgamated Bank's motion.0F[1]

         Pursuant to the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4 (2016), a court must “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 . . . .” 15 U.S.C. § 78u-4(a)(3)(B)(i). A court's appointment of lead plaintiff is circumscribed by the PSLRA's mandate that:

[T]he court shall adopt a presumption that the most adequate plaintiff in any private action arising under this chapter is the person or group of persons that-
(aa) has either filed the complaint or made a motion in response to a notice under subparagraph (A)(i);
(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).

         As noted, both STRS Ohio and Amalgamated Bank filed motions under the PSLRA seeking appointment as lead plaintiff. 1F[2] Accordingly, the process of determining the lead plaintiff begins by identifying the movant with the largest financial interest in the relief sought by the class. In re Cendant Corp. Litig., 264 F.3d 201, 262 (3d Cir. 2001).

         In this case, there is little question that STRS Ohio has the largest financial interest. Calculated on a first-in-first-out (“FIFO”) accounting basis, STRS Ohio's alleged financial loss is $46, 378, 080, and on a last-in-first-out (“LIFO”) accounting basis, its alleged financial loss is $45, 659, 928. STRS Ohio's Br. in Supp. of Mot. 11, Dkt. 16. Not only is STRS Ohio's financial interest substantial, it exceeds that of Amalgamated Bank by a multiplier of more than twenty. 2F[3]

         To satisfy the requirements of Rule 23 of the Federal Rules of Civil Procedure, a movant seeking to be appointed lead plaintiff need only make a preliminary showing that it meets the typicality and adequacy requirements. See In re Cendant Corp. Litig., 264 F.3d at 263 (stating that “[t]he initial inquiry (i.e., the determination of whether the movant with the largest interest in the case ‘otherwise satisfies' Rule 23) should be confined to determining whether the movant has made a prima facie showing of typicality and adequacy” (quoting 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(cc))). STRS Ohio has met this standard.

         First, STRS Ohio's claims appear to be typical of the putative class as a whole. To satisfy the typicality requirement, a movant's claims need not be identical with the absent class members, but they must be reasonably coextensive with the class as a whole. See Brown v. Kelly, 609 F.3d 467, 475 (2d Cir. 2010) (noting that the typicality “requirement is satisfied when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability”); Wagner v. Taylor, 836 F.2d 578, 591 (D.C. Cir. 1987) (“Courts have held that typicality is not destroyed by factual variations.”); Dellums v. Powell, 566 F.2d 216, 230 (D.C. Cir. 1977) (stating that the claims of the class representative must be typical of the class as a whole). STRS Ohio, like Amalgamated Bank and the other putative plaintiffs, alleges that it suffered a loss from its purchase of allegedly artificially-inflated Mallinckrodt securities that it acquired during the class period. See STRS Ohio's Br. in Supp. of Mot. 13, Dkt. 16; Class Action Compl. ¶¶ 1-22, 31-54 & 61, Dkt. 1; Class Action Compl. for Violations of the Fed. Sec. Laws ¶¶ 1-16, 26-52 & 54, Dkt. 1, Patel v. Mallinckrodt PLC, No. 17-cv-00171 (D.D.C. Jan. 26, 2017); Compl. for Violations of the Fed. Sec. Laws ¶¶ 1-18, 36-55 & 71-74, Dkt. 1, Fulton Cnty. Emps.' Ret. Sys. v. Mallinckrodt PLC, No. 17-cv-00534 (D.D.C. Mar. 23, 2017); Class Action Compl. for Violations of Fed. Sec. Laws ¶¶ 1, 17-53, Dkt. 1, Schwartz v. Mallinckrodt PLC, No. 17-cv-00447 (D.D.C. Mar. 13, 2017).

         Second, STRS Ohio also appears to meet the adequacy requirement of Rule 23. In assessing this requirement, courts generally consider whether a movant has the ability and incentive to represent the claims of the class vigorously, whether the movant has obtained adequate counsel, and whether there is a conflict of interest between the movant's claims and those asserted on behalf of the class. In re Cendant Corp. Litig., 264 F.3d at 265. Based on its financial interest in excess of $45 million, STRS Ohio has ample incentive to represent the putative class vigorously. Moreover, both STRS Ohio and its proposed lead counsel, Barrack, Rodos & Bacine, have extensive experience in securities litigation. STRS Ohio has served as a lead or co-lead plaintiff in numerous class-action securities lawsuits, including a prior case litigated in this district, while Barrack, Rodos & Bacine has served as lead counsel and has secured multimillion- to billion-dollar recoveries in numerous such suits. See STRS Ohio's Opp'n. Br. 1-2, Dkt. 27; STRS Ohio's Reply Br. 10-12, Dkt. 28 (citing lawsuits); STRS Ohio's Br., Rosen Decl. Ex. D at 5-7, Dkt. 16-5. As a preliminary matter, it also appears that STRS Ohio's interests are aligned with the putative class, and STRS Ohio can adequately represent the class's interests.

         The conclusion that STRS Ohio is presumptively the most adequate plaintiff does not end the inquiry because the presumption can be rebutted if a putative plaintiff can prove that STRS Ohio “will not fairly and adequately protect the interests of the class” or “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). In addition, a putative plaintiff can obtain discovery to rebut the presumption but “only if the plaintiff first demonstrates a reasonable basis for a finding that the presumptively most adequate plaintiff is incapable of adequately representing the class.” ...


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