The U.S. District Court for the Southern District of New York recently addressed lead plaintiff designation in a consolidated class action brought under the Private Securities Litigation Reform Act (PSLRA).
Plaintiffs Randall Humphreys and Forsta AP-Fonden (API) each brought a putative class action suit on behalf of investors who claimed to suffer damages in their purchases of Agnico-Eagle Mines Ltd. (AEM) securities. After consolidating the actions, each of which asserted causes of action under the Securities Exchange Act of 1934 in connection with allegedly false or materially misleading statements made on behalf of AEM, the Court determined the appropriate lead plaintiff.
Although API represented the largest financial interest in the relief sought by the class with $3.6 million in asserted losses, Humphreys raised several challenges to API’s appointment. Among other things, Humphreys contended that API lacked standing to pursue claims on behalf of the class because API’s asserted losses may not have been losses of API itself but of API’s clients. Humphreys further argued that API’s purchases of AEM securities on foreign exchanges might make API vulnerable to unique defenses, and that API’s home country of Sweden may not enforce a ruling of the Southern District of New York. As a result, Humphreys contended, API was atypical of the purported class.
The Court found that API’s sworn assertion that it “owns all of the investments that it purchases” was sufficient to establish its standing under the PSLRA. It further noted that the purchase of AEM securities on at least one foreign stock exchange did not pose any barrier to API’s adequacy as lead plaintiff. Finally, the Court was not persuaded that API was inadequate to serve as lead plaintiff because of the risk of Swedish courts denying res judicata effect to its ruling, noting that non-U.S. investors, including Swedish funds, had been appointed lead plaintiffs.
Stone v. Agnico-Eagle Mines Ltd. et al, Nos. 11-CV-7968 (JPO), 11-CV-8466 (JPO) (S.D.N.Y. Feb 6, 2012).