The Only Crap Game In Town

Senior District Judge Milton Shadur has a colorful history when it comes to applying the PSLRA’s lead plaintiff/lead counsel provisions. It just got a bit more colorful with his decision in Gorham v. General Growth Properties, Inc., 2009 WL 661303 (N.D. Ill. March 16, 2009).

In selecting a lead plaintiff in General Growth, the court was forced to choose between two individual investors, neither of whom had moved for lead plaintiff status within the requisite 60 days after publication of notice of the case. Investor A filed a complaint within the 60-day period, had a small loss, and entered into a high-cost fee arrangement with proposed lead counsel. Investor B only filed a complaint after the 60-day period, had a larger loss, and entered into a low-cost fee arrangment with proposed lead counsel. In pressing its application, Investor A argued that he was – in Judge Shadur’s phrasing – “the only crap game in town” because Investor B had not even filed a complaint within the first 60 days.

Judge Shadur found, however, that “any presumption that [Investor A] is the ‘most adequate plaintiff’ has been fully rebutted by the inferiority of his chosen counsel’s proposal for the fees to be charged to the class members out of any recovery.” Accordingly, the court appointed Investor B as lead plaintiff and his chosen counsel as lead counsel.

Quote of note: “This Court flatly rejects the prospect of having such a tiny wisp of a tail-[Investor A] with his minimal investment in General Growth-wag the very large dog of the plaintiff class. What [Investor A] has to lose in terms of his in-pocket recovery, if the class is successful in the litigation and if his own counsel’s formulation were to apply rather than the far more client-favorable formulation proffered by [Investor B’s counsel], is in the range of a few hundred dollars, while what the class would stand to lose under the [Investor A]-sponsored formula would be measured in millions of dollars.”

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