Category Archives: Lead Plaintiff/Lead Counsel

The May 2003 edition of the Fordham Law Review contains a transcript of an interesting, if slightly dated, panel discussion on the selection of lead plaintiff/lead counsel in securities class actions. See 71 Fordham L. Rev. 2363 (panel discussion took place on Feb. 5, 2002). The panel participants included Judge Edward Becker (3rd Cir.), Judge Milton Shadur (N.D. Ill.), Jill Fisch (Professor – Fordham), Gregory Joseph (private attorney), and Mel Weiss (private attorney).

Quote of note (Judge Becker): “Congress originally thought that institutions in this new client-driven, as opposed to lawyer-driven, regime that it was creating would be the lead plaintiffs, but it really has not turned out that way. The only institutions that have agreed to be lead plaintiffs are public pension funds and a few union-related institutions. By and large, the mutual funds was the group that I think Congress had in mind–because they’ve got more stock than anybody in any of these corporations that go sour–but the mutual funds won’t touch it. Doing a cost/benefit analysis, they think that it just ain’t worth it for them to get involved. So the mutual funds have not come forth as lead plaintiffs. The private pension funds have not.”

A few weeks ago The 10b-5 Daily speculated that Oscar Wyatt, Jr., who was both helping to finance the attempt to oust the current board of El Paso Corp. and acting as the lead plaintiff in a shareholder class action against the company, would be in an interesting position if the dissident slate of directors won. Would his interests be sufficiently aligned with the the interests of the rest of the class if El Paso was controlled by individuals he had helped elect? We’ll never know. The Houston Chronicle reported last week that the incumbent board of directors was reelected in a close vote.

Quote of note: “Wyatt, who founded a company, Coastal Corp., that was later sold to El Paso, is the lead plaintiff in a shareholder lawsuit accusing El Paso of federal securities violations. Kuehn [El Paso’s CEO] recognized Wyatt to speak [at the shareholders’ meeting]. ‘Mr. Kuehn, you don’t really need to recognize me. I’m recognized by a lot of people, which is something you are not.'”

Quote of note: “Several dozen shareholders cast their ballots at the meeting, including those who were undecided heading in. Among them was Jacqueline Goettsche of Katy who said she bought shares of El Paso four months ago just so she could attend the meeting. ‘It’s more exciting than going to the opera,’ Goettsche said.”

There was an interesting Associated Press story on Friday about the ongoing proxy battle and securities class action involving El Paso Corp., a Houston-based provider of natural gas services. Oscar Wyatt, Jr. is the founder of Coastal Energy, which was sold to El Paso in 2001. As a result of the sale, Wyatt owns 5 million shares of El Paso. Currently, Wyatt is both helping to finance the attempt to oust the current board and acting as the lead plaintiff in a shareholder class action accusing “the company of hiding debt, reporting revenue from so-called ‘wash’ energy trades and defrauding investors.” If the dissident slate of directors wins, however, can Wyatt continue as the lead plaintiff in the class action (even if he will not be a board member)? A court might find that Wyatt’s interests are no longer sufficiently aligned with the interests of the rest of the class.

Addition: The Associated Press has a follow-up story about a full-page ad criticizing El Paso’s management that Wyatt ran in the Sunday edition of the Houston Chronicle.

Addition: The June 9 edition of Fortune has a lengthy profile of Wyatt and El Paso. The story states: “People familiar with the matter say that even if Wyatt wins [the proxy battle], he’ll continue to push forward with the lawsuit.”