In the post-Dura world, in-and-out traders (i.e., investors who both bought and sold their shares during the class period) continue to have difficulties pursuing securities fraud claims. Hard on the heels of the lead plaintiff decision in the Comverse case comes an opinion from the D. of Mass. declining to appoint an in-and-out trader as a class representative.
In In re Organogenesis Sec. Litig., 2007 WL 776425 (D. Mass. March 15, 2007), the court found that during the class period one of the proposed class representatives “sold almost six times as many shares as he purchased.” Under the last-in, first out (“LIFO”) methodology of assessing damages adopted by the court, these trades resulted in the investor making a profit on his trading during the class period and rendered him an unsuitable class representative. The court also rejected the other proposed class representative because the investor made his final stock purchase prior to the date one of the individual defendants joined the company and, therefore, lacked standing to proceed against that individual defendant. Finally, the court found that Milberg Weiss was not an adequate lead counsel based on: (a) the submission of erroneous stock certifications on behalf of one of the proposed class representatives; (b) the possible negative effects of the federal indictment against the firm; and (c) the firm’s failure to clearly inform the court of the role of one of its indicted attorneys in the case.
Quote of note: “The court realizes that refusing to certify a class will make it more difficult to prosecute the fraud alleged in this case. But the allegation of fraud is not alone enough to merit class certification. The additional requirements exist for the important reason of ensuring that the named plaintiffs effectively represent the claims of the absent parties.”
The WSJ Law Blog and the National Law Journal have articles on the case that focus on the lead counsel decision.