One Cook

Under the PSLRA, the lead plaintiff in a securities class action is presumptively the party with the largest financial interest in the relief sought by the class (i.e., the movant who alleges the most potential damages). Although the statute expressly refers to the selection of a “person or group of persons” to fill the lead plaintiff role, some courts have expressed hostility to proposed lead plaintiff groups that are merely aggregations of unrelated investors.

In an unusual decision in In re Pfizer Inc. Sec. Litig., 2005 WL 2759850 (S.D.N.Y. Oct. 21, 2005), the court took this a step further. First, the court rejected the various proposed groups of investors, finding that they had been “artificially grouped by [their] attorneys.” Second, the court declined to appoint the investor with the largest claimed losses because “inaccuracies in its damages calculations” called into question its reliability. Finally, the court selected as lead plaintiff an investor whose counsel had withdrawn its motion for appointment as lead plaintiff (at least conditionally) in favor of another movant.

Quote of note: “Several of the putative plaintiffs are aggregated into artificial ‘groups.’ Nothing before the Court indicates that this aggregation is anything other than an attempt to create the highest possible ‘financial interest’ figure under the PSLRA and I reject it.”