VERNON S. BRODERICK, District Judge.
Plaintiff City of Riviera Beach General Employees Retirement System and Plaintiff Daniel Fajardo each filed separate securities fraud class action lawsuits against Macquarie Infrastructure Corporation ("Macquarie" or the "Company") and several of its officers and directors, alleging that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act (the "Exchange Act"), 15 U.S.C. §§ 78j(b), 78t(a), as well as U.S. Securities and Exchange Commission ("SEC") Rule 10b-5 promulgated pursuant to the Exchange Act.
Before me are motions from six movants seeking (1) consolidation of the Riviera Beach Action and the Fajardo Action, (2) appointment of lead plaintiff, and (3) approval of lead counsel. Because the Related Actions set forth substantially identical questions of law and fact, movants' motions to consolidate are GRANTED. Because movant Moab Partners, L.P. ("Moab") has a large financial interest in the litigation, appears to fulfill the typicality and adequacy requirements of Federal Rule of Civil Procedure 23 at this stage of the litigation, and has chosen counsel with substantial experience in securities litigation and securities class actions, Moab's motion to be appointed lead plaintiff and for approval of its selection of lead counsel is GRANTED. The remaining movants' motions for appointment as lead plaintiff and for approval of lead counsel are DENIED.
Macquarie owns and operates a portfolio of infrastructure and infrastructure-like businesses that provide services to businesses, government agencies, and individuals in the United States. (Riviera Beach Compl. ¶ 14.) Its portfolio consists of four segments, including International-Matex Tank Terminals ("IMTT"), which is the largest of the four segments, generating nearly half of Macquarie's earnings. (Id. ¶ 21.)
The Related Actions are class actions brought on behalf of persons and/or entities who purchased or acquired Macquarie common stock between February 22, 2016 and February 21, 2018 (the "Class Period"), seeking to pursue remedies under federal securities laws. Plaintiff alleges that during the Class Period, Defendants made false and/or misleading statements and failed to disclose material adverse facts about the Company's business, operations, and prospects. (See id. ¶¶ 22-23.) Specifically, Defendants purportedly made false and/or misleading statements and/or failed to disclose the truth regarding the impact on IMTT's financial and operational positions from changes in the heavy and residual oil market. (Id. ¶¶ 24-40.) Defendants also allegedly misled investors regarding the Company's continuing ability to yield high dividends. (Id. ¶¶ 36-40.)
On February 21, 2018, Macquarie "surprised the market by announcing disappointing fourth quarter earnings . . . and that the Company would be slashing its dividend." (Id. ¶ 41.) These earnings were well short of the prior estimates by analysts. "The Company cited as the main reason for its poor performance the loss of `half a dozen' IMTT contracts at its flagship Louisiana storage facility due to a decline in the No. 6 fuel oil segment." (Id.) This news caused Macquarie's stock price to fall from $63.62 per share at the close of trading on February 21, 2018 to $37.41 per share at the close of trading on February 22, 2018—a 41% decline in value on a volume of 27.64 million shares traded. (Id. ¶ 43.) As a result of Defendants' wrongful acts and omissions, and the resulting decline in the market value of Macquarie's stock, Plaintiff and other class members claim that they have suffered significant losses and damages. (Id. ¶ 10.)
Since the Complaint was filed, six plaintiffs and plaintiff groups have filed motions requesting consolidation of the Related Actions, appointment of lead plaintiff, and approval of lead counsel. (See Docs. 20, 23, 26, 29, 32, 34.)
In response to the above-mentioned motions for appointment of lead plaintiff and approval of lead counsel, Goetz and the Stone Trust withdrew their motions because they do not have the largest financial interest in this matter. (See Docs. 38, 41.) Reimer and the Selz Funds filed notices of non-opposition, acknowledging that they too do not possess the largest financial interest in this action. (See Docs. 39, 40.) On July 9, 2018, Goetz and MERS each filed an opposition to Moab's motion, (Docs. 41, 43), and Moab filed an opposition to MERS' motion, (Doc. 45). On July 16, 2018, Moab filed a reply in further support of its motion, (Doc. 46), and MERS filed a reply in further support of its motion, (Doc. 48). Defendants have not taken a position on the merits of these motions.
Consolidation is a "valuable and important tool of judicial administration." Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003, 1006 (2d Cir. 1995), vacated on other grounds, 518 U.S. 1031 (1996). Under Federal Rule of Civil Procedure 42(a), when separate actions before a court involve a common question of law or fact, a court is empowered to "consolidate the actions." Fed. R. Civ. P. 42(a)(2). Essentially, Rule 42 is "invoked to expedite trial and eliminate unnecessary repetition and confusion." Devlin v. Transp. Commc'n Int'l Union, 175 F.3d 121, 130 (2d Cir. 1999) (internal quotation marks omitted).
It is well-settled that Rule 42 gives a district court broad discretion to consolidate legal actions sua sponte. Id. Indeed, if judicial resources will be conserved thereby advancing judicial economy, a district court will generally consolidate actions. See Johnson v. Celotex Corp., 899 F.2d 1281, 1285 (2d Cir. 1990) ("[C]ourts have taken the view that considerations of judicial economy favor consolidation."); Bank of Montreal v. Eagle Assocs., 117 F.R.D. 530, 532 (S.D.N.Y. 1987) ("Considerations of judicial economy strongly favor simultaneous resolution of all claims growing out of one event." (internal quotation marks omitted)). Further, "consolidation should be considered when savings of expense and gains of efficiency can be accomplished without sacrifice of justice." Devlin, 175 F.3d at 130 (emphasis and internal quotation marks omitted).
In securities actions in particular, district courts consolidate cases when complaints are based on the same set of public statements and disclosures and there are common questions of law or fact. See Werner v. Satterlee, Stephens, Burke & Burke, 797 F.Supp. 1196, 1211 (S.D.N.Y. 1992). Courts also consider whether consolidation would prejudice the defendants. Constance Sczesny Tr. v. KPMG LLP, 223 F.R.D. 319, 322 (S.D.N.Y. 2004).
Before me are motions from six plaintiffs and plaintiff groups requesting consolidation of the Related Actions. (See Docs. 20, 23, 26, 29, 32, 34.) Because the motions for consolidation are unopposed and because the actions are substantially similar, I find that consolidation of the Related Actions is warranted.
The Related Actions involve a similar set of plaintiffs and defendants—both are securities class actions on behalf of all persons who purchased or otherwise acquired Macquarie's securities between February 22, 2016 and February 21, 2018, (Riviera Beach Compl. ¶ 1; Fajardo Compl. ¶ 1)
Since the motions for consolidation of the Related Actions are unopposed, as well as the substantially similar nature of the Related Actions and the common questions of law and fact arising under the actions, movants' motions for consolidation are granted and the Related Actions are hereby consolidated.
The Private Securities Litigation Reform Act of 1995 (the "PSLRA") establishes a procedure for the appointment of a lead plaintiff in "each private action . . . that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure." 15 U.S.C. § 78u-4(a)(1). First, "[n]ot later than 20 days" after the first complaint is filed, a notice must be published "in a widely circulated national business-oriented publication or wire service" advising members of the purported class "of the pendency of the action, the claims asserted therein, and the purported class period" and "not later than 60 days after the date on which the notice is published, any member of the purported plaintiff class may move the court to serve as lead plaintiff." 15 U.S.C. § 78u-4(a)(3)(A)(i).
Next, the PSLRA provides that a district court must "appoint as lead plaintiff the member or members . . . that the court determines to be most capable of adequately representing the interests of class members." 15 U.S.C. § 78u-4(a)(3)(B)(i). Pursuant to the PSLRA, courts must adopt a presumption that the most adequate plaintiff is the person or entity who (1) either filed the complaint or made a timely motion to be appointed lead plaintiff; (2) "has the largest financial interest in the relief sought by the class"; and (3) "otherwise satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). "[O]ther members of the purported class may try to rebut the statutory presumption by showing that the presumptive lead plaintiff will not fairly and adequately protect the interests of the class or is incapable of adequately representing the class because of `unique defenses." In re Bank of Am. Corp. Sec., Derivative, & ERISA Litig., 258 F.R.D. 260, 268 (S.D.N.Y. 2009) (quoting 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)); see also In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 40 (2d Cir. 2009) (noting that adequacy is not met if the class representative is "subject to any `unique defenses which threaten to become the focus of the litigation' (quoting Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 59 (2d Cir. 2000))).
In determining which plaintiff has the greatest financial interest, courts consider four factors: (1) the number of shares purchased during the class period; (2) the number of net shares purchased during the class period; (3) the total net funds expended during the class period; and (4) the approximate losses suffered. See, e.g., In re eSpeed, Inc. Sec. Litig., 232 F.R.D. 95, 100 (S.D.N.Y. 2005). The magnitude of the loss is the most significant factor. See Kaplan v. Gelfond, 240 F.R.D. 88, 93 (S.D.N.Y. 2007).
A potential lead plaintiff must also "make a preliminary showing that it satisfies the typicality and adequacy requirements of Rule 23." In re eSpeed, 232 F.R.D. at 102. The Rule 23 analysis in the context of appointment of lead plaintiff "need not be as complete as would a similar determination for the purpose of class certification." Id. The parties moving for lead plaintiff are only required to make a prima facie showing that they meet the Rule 23 prerequisites, and courts need only consider the typicality and adequacy requirements. Varghese v. China Shenghuo Pharm. Holdings, Inc., 589 F.Supp.2d 388, 397 (S.D.N.Y. 2008); Kaplan, 240 F.R.D. at 94. With respect to typicality, courts consider whether the claims of the proposed lead plaintiff "arise from the same conduct from which the other class members' claims and injuries arise." In re Initial Public Offering Sec. Litig., 214 F.R.D. 117, 121 (S.D.N.Y. 2002) (internal quotation marks omitted); see also In re Oxford Health Plans, Inc., Sec. Litig., 182 F.R.D. 42, 50 (S.D.N.Y. 1998). While the claims need not be identical, they must be substantially similar to the other members' claims. See Canson v. WebMD Health Corp., No. 11 Civ. 5382(JFK), 2011 WL 5331712, at *4 (S.D.N.Y. Nov. 7, 2011). In considering the adequacy of a proposed lead plaintiff, a court must consider whether the proposed lead plaintiff: (1) maintains claims that conflict with those of the class; (2) has sufficient interest in the outcome of the case; and (3) has selected counsel that is qualified, experienced, and generally able to conduct the litigation in question. Reitan v. China Mobile Games & Entm't Grp. Ltd., 68 F.Supp.3d 390, 400 (S.D.N.Y. 2014).
Before me are competing motions for appointment of lead plaintiff by movants MERS and Moab.
As an initial matter, all movants timely filed for appointment as lead plaintiff. The Riviera Beach Complaint was the first filed complaint on April 23, 2018. (See generally Riviera Beach Compl.) The next day, on April 24, 2018, notice of that complaint was published in PRNewswire, a widely-circulated national business-oriented wire service, fulfilling the PSLRA requirements set forth in 15 U.S.C. § 77z-1(a)(3)(A)(i). The notice advised class members of the pendency of the action, the alleged claims, the class definition, and the option of moving to be appointed as lead plaintiff by June 25, 2018. (See Rosenfeld Decl. Ex. A.)
Movants Goetz and the Stone Trust have withdrawn their motions for lead plaintiff in recognition that they do not possess the largest financial interest in this matter. (See Docs. 38, 41.) Additionally, movants Reimer and the Selz Funds have filed notices of non-opposition acknowledging that they too do not possess the largest financial interest, but stating that if the court were to determine that those entities with larger financial interests are inadequate to represent the class, they would be willing and able to serve as lead plaintiff (See Docs. 39, 40.) Of the remaining motions filed by Moab and MERS, Moab has the larger financial interest.
Moab states that it purchased 501,602 shares of Macquarie stock during the Class Period and suffered approximately $11.5 million in losses as calculated under a last-in, first-out ("LIFO") basis, and approximately $14.8 million in losses as calculated under a first-in, first-out ("FIFO") basis.
In addition to suffering the largest financial losses, Moab satisfies the typicality and adequacy requirements of Rule 23. Typicality is satisfied when a movant's claims "arise from the same course of events, and the other class members make similar legal arguments to prove liability." Hellenbein v. Altair Nanotechnologies, Inc., No. 14 Civ. 7828 (AT), 2015 WL 12912278, at *2 (S.D.N.Y. May 15, 2015). Here, Moab's and all other class members' claims arise from the same course of events and their legal arguments to prove Defendants' liability are substantially identical. Like other class members, Moab claims that it: (1) purchased Macquarie securities during the Class Period, (2) at prices artificially inflated by Defendants' materially false and misleading statements and omissions, and (3) was damaged as a result. See Faig v. BioScrip, Inc., No. 13 Civ. 06922(AJN), 2013 WL 6705045, at *3 (S.D.N.Y. Dec. 19, 2013) (finding typicality satisfied when movant alleged "that it suffered financial losses due to material misstatements made by [the company] during the class period").
I also find that Moab satisfies Rule 23's adequacy requirement. Under Rule 23(a)(4), a representative party must "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). In order for the class' interests to be fairly and adequately represented, the lead plaintiff must not have interests that are antagonistic to the class, must have a sufficient interest in the outcome of the case to ensure vigorous advocacy, and must retain counsel that is qualified to represent the interests of the class. See BioScrip, 2013 WL 6705045, at *3. Moab satisfies these elements because its substantial financial stake in the litigation provides the ability and incentive to vigorously represent the class' claims. Moreover, Moab's interests seem to be aligned with those of the other class members and do not appear to be antagonistic to them in any way; there are no facts to suggest any actual or potential conflict of interest or other antagonism between Moab and other class members.
Additionally, Moab has selected Bernstein Litowitz as counsel to represent the class in this action. As discussed more fully below, Bernstein Litowitz is highly qualified and experienced in securities class action litigation and has repeatedly demonstrated an ability to conduct complex securities class actions effectively. Lastly, Moab is the sort of lead plaintiff envisioned by Congress in its enactment of the PSLRA—a sophisticated institutional investor with a substantial financial interest in the litigation. See H.R. Conf. Rep. No. 104-369, at *34 (explaining that "increasing the role of institutional investors in class actions will ultimately benefit shareholders and assist courts by improving the quality of representation in securities class actions"); see also Glauser v. EVCI Career Coils. Holding Corp., 236 F.R.D. 184, 188 (S.D.N.Y. 2006) (noting that "the PSLRA was passed . . . to increase the likelihood that institutional investors would serve as lead plaintiffs" (internal citation omitted)).
Accordingly, Moab has satisfied Rule 23's typicality and adequacy requirements for the purposes of this stage of the litigation.
Goetz and MERS (together, the "Rebuttal Movants") attempt to rebut the statutory presumption designating Moab as lead plaintiff The Rebuttal Movants assert that Moab is incapable of adequately representing the class because it is subject to unique defenses that threaten to become the focus of the litigation. In particular, the Rebuttal Movants claim that Moab representatives engaged in private conversations with certain Defendants during which Moab obtained material nonpublic information ("MNPI") about the Company and its securities. (Goetz Opp. 2-6; MERS Opp. 4.) By engaging in multiple non-public discussions with several of the individual Defendants regarding the nature of Moab's investment, its personal agenda, and the subject matter of this litigation, the Rebuttal Movants argue that Moab is subject to a unique defense not shared by the rest of the putative class and therefore should not be appointed lead plaintiff.
The lead plaintiff presumption may be rebutted only upon proof by a member of the purported class that the presumptive lead plaintiff will not fairly protect the interests of the class or is subject to unique defenses that render such plaintiff incapable of adequately representing the class. Foley v. Transocean Ltd., 272 F.R.D. 126, 127 (S.D.N.Y. 2011) (internal quotation marks omitted); see also Woburn Ret. Sys. v. Salix Pharm., Ltd., No. 14-CV-8925 (KMW), 2015 WL 1311073, at *9 (S.D.N.Y. Mar. 23, 2015) ("[M]ere allegations of wrongdoing, without a finding established on the record, are insufficient to rebut [the lead plaintiff] presumption."). Relying on a letter sent by Moab President Michael Rothenberg to Macquarie on April 17, 2018, the Rebuttal Movants point to three instances during which Moab executives met or spoke with Macquarie management—(1) a November 10, 2017 telephone call between Rothenberg and Macquarie's head of investor relations, Jay Davis; (2) a November 28, 2017 investor group dinner hosted by the Company's management and attended by Rothenberg; and (3) a March 8, 2018 discussion between Rothenberg, Davis, and Macquarie CFO Liam Stewart—but provide no evidence to support their claims that Moab received any MNPI during these private or semiprivate conversations, (see Goetz Opp. 3-4; MERS Opp. 6), making their assertion mere speculation.
In response, Moab submitted a sworn affidavit from Rothenberg insisting that no MNPI was conveyed to or received by Moab during these dialogues. Indeed, Moab contends that the investor dinner was not private, but rather was attended by representatives from approximately a dozen different institutional investors. (See Rothenberg Decl. Ex. A ¶ 7.)
The Rebuttal Movants' failure to proffer any proof that Moab received MNPI from Macquarie, coupled with Moab's declaration that no MNPI was communicated to Moab, is fatal to the Rebuttal Movants' claim. See, e.g., In re Peregrine Sys., Inc. Sec. Litig., No. 02 CV 870-J(RBB), 2002 WL 32769239, at *9 (S.D. Cal. Oct. 11, 2002) (granting movant's lead plaintiff application where, in response to allegations of receiving MNPI, movant filed declaration stating that it received only publicly available information from company); see also In re Independent Energy Holdings PLC Sec. Litig., 210 F.R.D. 476, 482-83 (S.D.N.Y. 2002) ("[A]typicality has been found where there is evidence that the named plaintiff received information, either directly or indirectly, from an officer or director. Atypicality has not been found, however, when there is no evidence that inside information was shared despite the existence of some relationship between the named plaintiff and the officer or director."); Dietrich v. Bauer, 192 F.R.D. 119, 125 (S.D.N.Y. 2000) (rejecting unique defenses argument, noting that "while the [o]bjecting [d]efendants have suggested that [plaintiff] may be subject to unique defenses arising out of his contact with [the company], nothing in the record indicates that [plaintiff's] decision to purchase [company] stock was based on information obtained from [the company]"); Hallet v. Li & Fung, Ltd., No. 95 Civ. 8917(JSM), 1997 WL 621111, at *3 (S.D.N.Y. Oct. 6, 1997) (finding unique defenses argument "groundless" where plaintiff denied that any non-public information was conveyed and defendants "failed to present any evidence that [plaintiff] received the alleged inside information"); cf. Blank v. Jacobs, No. 03-CV-21111 (JS)(MLO), 2009 WL 3233037, at *5 (E.D.N.Y. Sept. 30, 2009) (finding that unique defense threatened to become the focus of the ligation where plaintiff admitted to receiving non-public information from company executives).
Furthermore, courts have repeatedly recognized that the kind of communications between Moab and Defendants pose no barrier to appointment as lead plaintiff where no MNPI was exchanged. For instance, in In re DVI Inc. Securities Litigation, 249 F.R.D. 196 (E.D. Pa. 2008), the court certified a class after investors privately communicated with company management but only discussed topics that were "disclosed through public conference calls, press releases, SEC filings or other publicly available materials." Id. at 202. As a result, the court found that there was no basis to think that the issue would "become a major focus of the litigation." Id. at 202-03 ("Since the PSLRA clearly contemplates that institutional investors—who are generally understood to communicate with corporate officers—will serve as class representatives, we decline to find that an investor will be precluded from serving as class representative merely because of his private communications with corporate insiders about publicly available information."). Other courts have reached similar conclusions. See, e.g., Howard v. Liquidity Servs. Inc., 322 F.R.D. 103, 126 (D.D.C. 2017) (finding that "private meetings conceivably threaten to become a focus of the litigation only if a party could plausibly argue that insider information was exchanged"); Beaver Cty. Emps.' Ret. Fund v. Tile Shop Holdings, Inc., No. 14-786 ADM/TNL, 2016 WL 4098741, at *5 & n.3 (D. Minn. July 28, 2016) (finding pension fund typical where its adviser met one-on-one with management but received no MNPI); Hallet, 1997 WL 621111, at *3 ("[I]f the plaintiff has received information from company insiders that confirms, reflects, repeats, or even digests publicly available market information, that plaintiff is an appropriate class representative.").
Accordingly, because the Rebuttal Movants have presented no proof demonstrating that any unique defense will become a major focus of the litigation, they have failed to rebut the presumption that Moab should be appointed lead plaintiff in this matter.
The PSLRA provides that the "most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class." 15 U.S.C. § 78u-4(a)(3)(B)(v). "There is a strong presumption in favor of approving a properly-selected lead plaintiff's decision as to counsel selection." Sallustro v. Cannavest Corp., 93 F.Supp.3d 265, 278 (S.D.N.Y. 2015) (internal quotation marks omitted).
Having reviewed Moab's motion papers, as well as the Firm Resume of Bernstein Litowitz attached as an exhibit to the Josefson Declaration, (see Moab Mem. 8-9; Josefson Decl. Ex. D),
For the foregoing reasons, movants' motions for consolidation are GRANTED based on the similarity of the Related Actions. Because I find that Moab is the presumptive lead plaintiff and no other movants have rebutted that presumption, Moab's motion for appointment as lead plaintiff and for approval of lead counsel is GRANTED. The remaining motions from Paul Reimer, James Goetz, the Selz Funds, MERS, and the Stone Trust for appointment as lead plaintiff and for approval of lead counsel are DENIED. The Clerk of Court is respectfully requested to terminate the pending motions at Docket Numbers. 20, 23, 26, 29, 32, and 34.
Moab is directed to file an amended consolidated complaint no later than thirty (30) days after the date of issuance of this Opinion & Order. Defendants are directed to answer or otherwise respond to the amended consolidated complaint no later than thirty (30) days after Moab serves the amended consolidated complaint.
SO ORDERED.
