1

Under § 205(a)(5) the E-Government Act of 2002 and the definition of “written opinion”

adopted by the Judicial Conference of the United States, this is a “written opinion[ ] issued by the

court” because it “sets forth a reasoned explanation for [the] court’s decision.” It has been written,

however, primarily for the parties, to decide issues presented in this case, and not for publication in

an official reporter, and should be understood accordingly. 

2

The parties included in their motions requests that the court consolidate these actions.

Because the court has already consolidated the cases, these requests are moot.

 IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

RUTH LENTZ, Individually and On Behalf §

of All Others Similarly Situated, § Civil Action No. 3:05-CV-0100-D

 § (Consolidated with

Plaintiff, § Civil Action No. 3:05-CV-0142-D,

 § Civil Action No. 3:05-CV-0157-D

VS. § Civil Action No. 3:05-CV-0184-D,

 § Civil Action No. 3:05-CV-0203-D, 

CITADEL SECURITY SOFTWARE, INC., § Civil Action No. 3:05-CV-0297-D, and

et al., § Civil Action No. 3:05-CV-0488-D)

 §

Defendants. §

MEMORANDUM OPINION

 AND ORDER 

In these consolidated putative class actions alleging securities fraud, two individual plaintiffs

and a group of plaintiffs move to be designated lead plaintiff under the Private Securities Litigation

Reform Act of 1995 (“PSLRA”), 15 U.S.C. § 78u-4, and for approval of lead and liaison counsel.1

I

These are seven consolidated putative class actions alleging securities fraud against Citadel

Security Software, Inc. (“Citadel”) and several of its officers and directors under §§ 10(b) and 20(a)

of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and Securities and Exchange

Commission Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.2

 Plaintiffs purchased

Citadel common stock between February 12 and December 16, 2004. Scott Condon (“Condon”),

 

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3

CIG consists of plaintiffs Timothy M. Turose, Elaine Turose, Lee Waters, and Howard

Dayton.

4

Plaintiffs Keith Ashley, Robert Larson, Mario Ledesma, Joanna Throckmonta, Raymond

K. Richardson, Laurie K. Smith, Kwok Wong, and Kenneth Zimney also moved for similar relief,

but they later withdrew their motions. 

5

Condon filed a March 23, 2005 response to the other movants’ motions, but he did not offer

grounds to support his motion or to refute the remaining movants’ request for designation as lead

counsel.

6

Ward’s request for oral argument is denied. See N.D. Tex. Civ. R. 7.1(g) (“Unless

otherwise directed by the presiding judge, oral argument on a motion will not be held.”).

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Douglas G. Ward (“Ward”), and the Citadel Investors Group (“CIG”)3 move to be designated lead

plaintiff and for approval of lead and liaison counsel.4

Condon maintains that he should be appointed lead plaintiff as the purchaser of 6, 270 shares

of Citadel common stock who suffered losses of approximately $21,749.30. He asserts that he meets

the requirements of 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I) because he has the largest financial loss and

otherwise satisfies the two pertinent requirements of Fed. R. Civ. P. 23(a): his claims are typical of

those of the class, and he will fairly and adequately protect the interests of the class.5

Ward also moves to be designated lead plaintiff. He posits that he suffered losses of

approximately $42,959.49 and that he meets the requirements of § 78u-4(a)(3)(B)(iii)(I) because he

has the largest financial loss and otherwise satisfies the typicality and adequate representation

requirements of Rule 23(a).6

CIG also moves for designation as lead plaintiff. It contends that its four members

collectively purchased no fewer than 61,605 shares of Citadel common stock during the class period

and suffered losses of at least $146,070. CIG also asserts that its members satisfy each requirement

for designation. Alternatively, it requests that one of its members—Timothy M. Turose

 

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- - 3

(“Turose”)—be designated lead plaintiff. See CIG Rep. Br. at 8-9.

II

Under the PSLRA, the court must “appoint as lead plaintiff the member or members of the

purported plaintiff class 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). The court must presume 

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 in response to a

notice under subparagraph (A)(i);

(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.

Id. § 78u-4(a)(3)(B)(iii)(I). This presumption is rebuttable “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.” Id. § 78u-4(a)(3)(B)(iii)(II).

Ward asserts that he has sustained the largest loss of any other individual movant and that

the members of CIG have not taken steps to demonstrate their cohesiveness and ability to represent

the class effectively or to supervise their counsel, and that they are attempting impermissibly to

aggregate the losses of unrelated individuals for purposes of securing designation as lead plaintiff.

He posits that he is a sophisticated and motivated investor who is able to lead these class actions.

CIG argues that its members’ financial interests are substantially greater than any other

movant, that it is presumptively entitled to be designated lead plaintiff, and that one of its

members—Turose—suffered losses of approximately $78,435.20, which is greater than those of any

other individual seeking lead plaintiff status. CIG also notes that, together, Turose and his wife, who

 

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- - 4

is also a member of CIG, have combined losses of approximately $90,500.20. CIG asserts that its

members have conferred and agreed to prosecute the case as vigorously as possible and to monitor

their selected counsel throughout the action. Alternatively, it asks that Turose be designated lead

plaintiff.

In this case the court need not consider in detail whether it should deny CIG’s motion on the

ground that its members consist of unrelated investors who have combined to secure the status of

lead plaintiff. Cf., e.g., In re Enron Corp. Sec. Litig., 206 F.R.D. 427 (S.D. Tex. 2002). Turose, a

member of CIG, sustained the largest loss of any individual movant (approximately $78,435.20

compared to Ward’s loss of approximately $42,959.49). And he and his wife together have a

combined loss of approximately $90,500.20. It would be facetious to suggest that a husband and

wife who invested and suffered losses in the same securities were “cobbled together . . . to aggregate

their losses.” See Ward Apr. 4, 2005 Mem. at 1 (referring to CIG and other groups that sought lead

plaintiff status). And the court need not deny lead plaintiff status to CIG as a group where there are

but two other members besides the Turoses, because there is no indication that their participation

will weaken the group’s ability to manage and prosecute the litigation and superintend their counsel.

There is no dispute in the record that CIG’s members satisfies the typicality and adequate

representation requirements of Rule 23(a). 

Accordingly, CIG has demonstrated that it is entitled to the presumption that it is the most

adequate plaintiff. This presumption has not been rebutted. The court therefore grants CIG’s March

15, 2005 motion for appointment as lead plaintiff and for approval of lead plaintiff’s selection of colead counsel. The court designates CIG as lead plaintiff and approves Murray, Frank & Sailer LLP

and Goodkind Labaton Rudoff & Sucharow LLP as co-lead counsel and Baron & Budd, P.C. as

 

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7

In briefing these motions, none of these three movants complied with N.D. Tex. Civ. R.

7.1(i)(1) or 7.2(e). Rule 7.1(i)(1) provides that “[a] party who relies on documentary (including an

affidavit, declaration, deposition, answer to interrogatory, or admission) or non-documentary

evidence to support or oppose a motion must include such evidence in an appendix.” Rule 7.2(e)

states that “[i]f a party’s motion or response is accompanied by an appendix, the party’s brief must

include citations to each page of the appendix that supports each assertion that the party makes

concerning any documentary or non-documentary evidence on which the party relies to support or

oppose the motion.” The court expects counsel to comply with this court’s local civil rules in

briefing any other motions that may be filed in these consolidated cases.

- - 5

liaison counsel. The court denies Ward’s March 15, 2005 motion for appointment as lead plaintiff

and for approval of selection of lead and liaison counsel and denies Condon’s March 15, 2005

motion for appointment as lead plaintiff and approval of plaintiff’s selection of lead counsel.7

SO ORDERED.

May 25, 2005.

_________________________________

SIDNEY A. FITZWATER

UNITED STATES DISTRICT JUDGE

 

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