A few months ago, this blog noted an unusual lead plaintiff decision. A S.D.N.Y. court dismissed the lead plaintiff from a securities class action brought against Smith Barney Fund Management and Citigroup Global Markets because, after six years of litigation, it was revealed that the entity had not actually purchased the securities at issue. So what happened to the case?
All is revealed in the court’s most recent order (In re Smith Barney Transfer Agent Litig., 2011 WL 6318988 (S.D.N.Y. Dec. 15, 2011)), along with some new twists and turns. The court decided to reopen the lead plaintiff selection process. The applicants included a new proposed lead plaintiff group associated with the former lead counsel for the case, as well as one of the unsucessful lead plaintiff applicants from back in 2005. As a group, the applicants associated with the former lead counsel had the largest financial interest in the relief sought. The court found, however, that “[p]laintiffs who moved for lead plaintiff appointment within sixty days of the original notice are entitled to priority over plaintiffs who only moved within sixty days of the order dismissing the prior lead plaintiff.” Accordingly, the court selected the original applicant to handle the case.
Quote of note: “In appointing new lead counsel, this Court is mindful that [former lead counsel] served . . . for over six years. But it is investors – and not their lawyers – who are the focus under the PSLRA. And the Court would not have been confronted with this situation if [former lead counsel] had investigated their client’s holdings in 2005. In any event, this Court has every confidence that [former lead counsel] will provide ample assistance to new lead counsel consistent with their professional responsibilities to their clients and their obligations as officers of the Court.”