Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-05407/USCOURTS-cand-4_06-cv-05407-3/pdf.json

Parties Involved:
AFSG Securities Corporation
Defendant
AUSA Life Insurance Company, Inc.
Defendant
Aegon Financial Services Group, Inc.
Defendant
Aegon USA, Inc.
Defendant
John Arizpe
Plaintiff
Bankers United Life Assurance Company
Defendant
Carolyn Gerin
Plaintiff
Mary Kathleen Hughes
Plaintiff
PFL Life Insurance Company
Defendant
Western Reserve Life Assurance Co. Of Ohio
Defendant
Douglas G. Wiseman
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CAROLYN A. GERIN and MARY

KATHLEEN HUGHES, on behalf of

themselves and all others similarly

situated,

Plaintiff,

vs.

AEGON USA, INC., AEGON

FINANCIAL SERVICES GROUP,

INC., AFSG SECURITIES

CORPORATION, PFL LIFE

INSURANCE COMPANY, AUSA

LIFE INSURANCE COMPANY, INC.,

WESTERN RESERVE LIFE

ASSURANCE CO. OF OHIO, and

BANKERS UNITED LIFE

ASSURANCE COMPANY,

Defendants. ________________________________

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No. C 06-5407 SBA

ORDER

(Docket No. 6)

This matter comes before the Court on Plaintiffs' Motion to Appoint Carolyn A. Gerin, Mary

Kathleen Hughes, Douglas G. Wiseman and John Arizpe for Appointment as Co-Lead Plaintiffs, and

for Approval of Their Selection of Counsel.

BACKGROUND

On December 4, 2006, Plaintiffs Carolyn Gerin, Mary Kathleen Hughes, Douglas Wiseman

and John Arizpe filed an Amended Complaint in this Court, on behalf of themselves and all others

similarly situated, against Defendants Aegon USA, Inc., Aegon Financial Services Group, Inc.,

AFSG Securities Corporation, PFL Life Insurance Company, AUSA Life Insurance Company, Inc.,

Western Reserve Life Assurance Co. of Ohio and Bankers United Life Assurance Company. Am.

Compl. at ¶¶21-38. Plaintiffs allege Defendants violated sections 11, 15, and 12(a)(2) of the

Case 4:06-cv-05407-SBA Document 33 Filed 01/10/07 Page 1 of 8
United States District Court

For the Northern District of California

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Plaintiffs Gerin and Hughes filed the original Complaint in this Action on September 1, 2006.

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Defendants submitted a letter on December 5, 2006, indicating: (1) Defendants believe that

Gerin and Hughes are barred by res judicata from prosecuting the claims at issue in the instant action

and (2) Defendants believe there is no venue in this Court for the claims presented by the two more

recently named Plaintiffs, Arizpe (of Texas) and Wiseman (of North Carolina). Defendants declined

to file any opposition to Plaintiffs' Motion, and now seek to address Plaintiffs' Motion in a letter brief

filed well after its opposition was due. This Court does not accept letter briefs, and it was incumbent

upon Defendants to file any opposition which they had to the Motion no later than November 28, 2006.

2

Securities Act by making materially false and misleading statements and omissions, principally in

their prospectuses, which induced Plaintiffs and other members of the Class to purchase the taxdeferred variable annuity contracts. Plaintiffs seek compensatory damages, declaratory and

injunctive relief. Am. Compl. at ¶¶200-276.1

On November 6, 2006, Plaintiffs Carolyn A. Gerin and Mary Kathleen Hughes, along with

Douglas G. Wiseman, and John Arizpe (who were not named Plaintiffs in the original Complaint,

but are named Plaintiffs in the Amended Complaint) filed a Motion for Appointment as Co-Lead

Plaintiffs and for Approval of Their Selection of Counsel. Pl.s' Mot. at 1. Defendants did not file an

opposition to Plaintiffs' Motion.2

LEGAL STANDARD

The selection of the lead plaintiff is governed by the PSLRA. Further, in this jurisdiction,

Civil Local Rule 3-7 provides additional filing and certification requirements for private securities

class actions.

Under the PSLRA, the plaintiff who files the first class action complaint must publish a

notice advising members of the purported class of the (i) pendency of the action, (ii) the claims

asserted therein, (iii) the purported class period, and (iv) their option to move to be appointed as lead

plaintiff of the purported class no later than sixty days after the date on which the notice is

published. See 15 U.S.C. § 78u-4(a)(3)(A).

After notice is published, the Court is required to consider any motion by a class member and 

appoint as lead plaintiff "the member or members of the purported plaintiff class that the court

determines to be the most capable of adequately representing the interests of class members

(hereafter . . . referred to as the most adequate plaintiff)[.]" See 15 U.S.C. § 78u-4(a)(3)(B)(i). 

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United States District Court

For the Northern District of California

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In selecting the lead plaintiff,

[T]he court shall adopt a presumption that the most adequate plaintiff

in any private action arising under this chapter is the person or group

of persons that -

(aa) has either filed the complaint or made a motion

[for designation as lead plaintiff];

(bb) in the determination of the court, has the largest

financial interest in the relief sought by the class; and

(cc) otherwise satisfies the requirements of Rule 23 of

the Federal Rules of Civil Procedure.

See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). 

Moreover, the presumption that a plaintiff is adequate may be rebutted:

only upon proof by a member of the purported plaintiff class that the

presumptively most adequate plaintiff -

(aa) will not fairly and adequately protect the interests of the class; or 

(bb) is subject to unique defenses that render such

plaintiff incapable of adequately representing the class.

See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). 

In addition to compliance with the PSLRA, litigants must also comply with Civil Local Rule

3-7. This rule states, in relevant part:

Certification by Nonfiling Party Seeking to Serve as Lead Plaintiff. Any

party seeking to serve as lead plaintiff, but who does not also file a

complaint, need not file the certification required in Civil L.R. 3-7(b), but

must at the time of initial appearance state that the party has reviewed a

complaint filed in the action and either:

1) Adopts its allegations or, if not;

2) Specifies the allegations the party intends to assert.

Civ. L.R. 3-7(c) (emphasis in original omitted).

The lead plaintiff selected by the Court has the discretion to retain counsel of its choice to

represent the class, subject to Court approval. See 15 U.S.C. § 78u-4(a)(3)(B)(v). 

DISCUSSION

Plaintiffs have demonstrated that they are the most "adequate plaintiff" within the meaning

of the PLSRA. Plaintiffs Gerin and Hughes filed the Complaint in this action, and Wiseman and

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Prior to Plaintiffs filing their First Amended Complaint, Wiseman and Arizpe both certified that

they had reviewed the original Complaint filed in this action and authorized the commencement of an

action on their behalf. 

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Arizpe are now named Plaintiffs in the Amended Complaint filed on December 4, 2006.3 

1. Appointment of Lead Plaintiff

In their Motion, Movants Gerin, Hughes, Wiseman and Arizpe seek to be appointed as Lead

Plaintiffs. Movants are the only members of the purported class seeking appointment as Lead

Plaintiffs. Rickert Decl. at ¶3.

The Court may adopt a presumption that the most adequate plaintiff in any private action

arising under the PSLRA is the person or group of persons who: (1) brought the motion for

appointment of lead counsel in response to the publication of notice; (2) has the "largest financial

interest" in the relief sought by the class; and (3) otherwise satisfies the requirements of Federal

Rule of Civil Procedure 23. See 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(aa)-(cc). 

(a) Publication of notice

Here, the notice requirements set forth in 15 U.S.C. §§ 78u-4(a)(3)(A)(i)(I) and (II) have

been satisfied. Specifically, Plaintiffs have provided this Court with a copy of the September 7,

2006 notice advising members of the purported class of the (i) pendency of the action, (ii) the claims

asserted therein, (iii) the purported class period, and (iv) their option to move to be appointed as lead

plaintiff of the purported class no later than sixty days after the date on which the notice is published

pursuant to 15 U.S.C. § 78u-4(a)(3)(A). See Rickert Decl., Exh. B. Movants satisfied 15 U.S.C. §

78u-4(a)(3)(A)(i)(II) by timely moving for appointment as Lead Plaintiffs on November 6, 2006. 

(b) Financial Interest

Wiseman and Arizpe have the largest demonstrated financial interest in this case. Although

the PSLRA does not provide any specific guidance with respect to the appropriate method of

calculating which plaintiff has the "largest financial interest," district courts typically equate "largest

financial interest" with the amount of potential recovery. See, e.g., In re Critical Path, Inc. Sec.

Litig., 156 F. Supp. 2d 1102, 1107-08 (N.D. Cal. 2001); see also In re Network Assocs., Inc., Sec.

Litig., 76 F. Supp. 2d 1017, 1030 (N.D. Cal. 1999). 

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Here, the documentation submitted to the Court shows that Mr. Wiseman purchased

$60,673.48 of the tax deferred variable annuities issued and underwritten by the Aegon Defendants. 

Mr. Arizpe purchased $835,422.42 of the tax deferred variable annuities issued and underwritten by

the Aegon Defendants. Plaintiffs allege the annuity accounts suffered decreases of 44.9-45.7% in

value.

It is clear that Mr. Arizpe and Mr. Wiseman have demonstrated that they have the largest

financial interest in the relief sought by the class within the meaning of 15 U.S.C. § 78u4(a)(3)(B)(iii)(I)(bb). Together, Mr. Arizpe and Mr. Wiseman have purchased $896,095.90 of the

tax deferred variable annuities issued and underwritten by the Aegon Defendants. See Rickert Decl.

at Exh. A. 

It is less clear that Ms. Gerin and Ms. Hughes have demonstrated that they have the largest

financial interest in the relief sought. Ms. Gerin purchased $4,000.00 of the tax deferred variable

annuities issued and underwritten by the Aegon Defendants. Ms. Hughes purchased $2,989.94 of

the tax deferred variable annuities issued and underwritten by the Aegon Defendants.

(c) Certification of Named Plaintiff and Compliance with Local Rule 3-7

All of the Movants have complied with 15 U.S.C. §§ 78u-4(a)(2)(A)(i)-(vi) and now all have

complied with the requirements of Civil Local Rule 3-7. Gerin and Hughes were named Plaintiffs in

the original Complaint. The Amended Complaint names all four Movants as Plaintiffs. Also,

Wiseman and Arizpe have submitted sworn amended certifications stating that: (a) they have

reviewed the original Complaint and have adopted its allegations; (b) they did not purchase security

that is the subject of this litigation at the direction of Plaintiff's counsel or in order to participate in

any private action arising under the federal securities laws; (c) they are willing to serve as

representative parties on behalf of a class, including providing testimony at deposition and trial, if

necessary; (d) in the past three years, they have not sought to serve, and have not served, as a

representative party on behalf of a class in any private federal securities action; and (e) they will not

accept any payment for serving as a representative party on behalf of the class beyond their pro rata

share of any recovery, with the exception of the reasonable costs and expenses that relate to their

representation of the class.

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(d) Rule 23(a)

Movants have satisfied the requirements set forth in Federal Rule of Civil Procedure 23. 

Rule 23 requires the Court to find that:

(1) the class is so numerous that joinder of all members is impracticable, 

(2) there are questions of law or fact common to the class, 

(3) the claims or defenses of the representative class are typical of the claims

and defenses of the class, and 

(4) the representatives of the parties will fairly and adequately protect the

interests of the class.

 Fed. R. Civ. P. 23(a). 

When applying this rule in the context of determining the appropriate lead plaintiff under the

PSLRA, the Court considers the third and fourth requirements of "typicality" and adequacy of

representation as the key factors. See In re David Cavanaugh, 306 F.3d 726, 730 (9th Cir. 2002);

see also Armour v. Network Assocs., 171 F. Supp. 2d 1044, 1051 (N.D. Cal. 2001); In re Oxford

Health Plans, Inc. Sec. Litig., 182 F.R.D. 42, 49 (S.D.N.Y. 1998) ("[t]ypicality and adequacy of

representation are the only provisions [of Rule 23] relevant to a determination of lead plaintiff under

the PSLRA."). 

The "typicality" requirement is satisfied when: (1) the claims of the proposed lead plaintiff

arise from the same course of conduct that gives rise to the other purported class members' claims,

(2) the claims are based on the same legal theory, and (3) the purported class members and proposed

lead plaintiff were injured by the same conduct. See Armour, 171 F. Supp. 2d at 1052. The

"adequacy" requirement of Rule 23(a)(4) is satisfied when the proposed lead plaintiff does not have

interests antagonistic to the proposed class, and when the proposed lead plaintiff has retained

experienced and capable counsel. In re Emulex Corp. Sec. Litig., 210 F.R.D. 717, 720 (C.D. Cal.

2002). 

Here, Movants allege that, due to Defendants' allegedly false and misleading representations

concerning the tax deferred variable annuities, they suffered damages when they purchased these

annuities during the purported Class Period. Movants' claims are therefore typical of the claims of

other members of the class. Additionally, it appears that Movants' interests are aligned with those of

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the other class members, and there is no evidence of any antagonism between Movants' interests and

those of the purported class. Further, Movants have obtained qualified and experienced counsel,

and, as set forth in their certifications, Movants state that they are willing to assume the

responsibilities of class representatives. See Reckert Decl. at Exh. A. These factors demonstrate

that Movants' claims are typical of those of the purported class, as required by Rule 23(a)(3), and

that Movants will fairly and adequately represent the interests of the purported class, as required by

Rule 23(a)(4). 

Accordingly, the Court GRANTS IN PART Movants' request and APPOINTS Douglas G.

Wiseman, and John Arizpe to serve as Lead Plaintiffs. The Court also ORDERS Plaintiffs Gerin

and Hughes to show cause as to why appointment of Mr. Arizpe and Mr. Wiseman as co-lead

Plaintiffs is not adequate. Plaintiff's response to this ORDER to show cause is due within ten (10)

days of the date of this Order, and is limited to five (5) pages.

2. Selection of Counsel

Movants have requested that the Court approve their selection of Wolf Haldenstein Adler

Freeman & Herz to serve as Lead Counsel. 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). 

Movants contend that the Court should approve the firm of Wolf Haldenstein Adler Freeman

& Herz as Lead Counsel because the firm possesses extensive experience in litigating securities

class actions and has successfully prosecuted numerous securities fraud class actions on behalf of

injury investors. See Reckert Decl., Exh. B, Exh. C. Having reviewed the firm's resume, this Court

is satisfied that Wolf Haldenstein Adler Freeman & Herz is sufficiently qualified and experienced in

securities class action litigation as the firm is currently the court-appointed lead counsel, co-lead

counsel, or executive committee member in numerous large and significant class action securities

cases nationwide.

As such, this Court APPROVES Lead Plaintiffs' selection of counsel, Wolf Haldenstein

Adler Freeman & Herz . 

IT IS SO ORDERED.

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Dated: 1/9/07 SAUNDRA BROWN ARMSTRONG

United States District Judge

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