The United States District Court for the Eastern District of New York recently addressed the question of how to designate a lead plaintiff in a class action brought under the Private Securities Litigation Reform Act (PSLRA) where the original named plaintiff withdraws.
Plaintiff Steven Endress filed a securities fraud class action on behalf of all persons who purchased the publicly traded common stock of Gentiva Health Services (Gentiva) during the relevant class period. A pension fund that purchased Gentiva stock during the class period filed a motion to intervene as a plaintiff in that action. After Endress filed a motion to withdraw, four other plaintiffs subsequently filed essentially identical class action claims against Gentiva. All five plaintiffs sought to be named lead plaintiff for the class in the proposed consolidated action.
The court found that none of the proposed lead plaintiffs had complied with the PSLRA requirement that the lead plaintiff must either file the original complaint or move for appointment within 60 days of the plaintiff’s publication of notice that a case has been filed. Instead, the original named plaintiff’s motion to withdraw touched off a “race to the courthouse” in which proposed lead plaintiffs filed essentially identical actions and sought to be named lead plaintiff.
Finding that judges “are not referees at prize fights but functionaries of justice,” the court held that in light of the intent and purposes of the PSLRA, it would determine whether any additional class members desired to serve as named plaintiff prior to the court appointing a lead plaintiff. The court therefore deemed a movant as eligible to be appointed lead plaintiff if there was a motion for appointment filed within 60 days of the original lead plaintiff’s withdrawal, and held that any member of the putative class could also file a motion to be appointed lead plaintiff.
Endress v. Gentiva Health Services, Inc., No. 10-CV-5064 (ADS)(WDW) (E.D.N.Y. Nov. 2, 2011)