1

 The Court set forth the factual allegations in detail in its January 10, 2005 opinion and

will not repeat them here. See Greater PA Carpenters Pension Fund v. Whitehall Jewellers,

Inc., No. 04 C 1107, 2005 WL 61480, *5 (N.D. Ill. Jan. 10, 2005). 

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

GREATER PENNSYLVANIA )

CARPENTERS PENSION FUND, On Behalf )

of Itself and All Others Similarly Situated, )

)

Plaintiff, ) No. 04 C 1107

)

v. )

)

WHITEHALL JEWELLERS, INC., et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Court Judge:

This is a purported class action lawsuit on behalf of a class of persons who purchased

Whitehall Jewellers, Inc. stock during a specified time period. Plaintiff has alleged that

Defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"),

15 U.S.C. § 78j(b), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act,

15 U.S.C. § 78t-1. Defendants have moved to dismiss the First Amended Consolidated

Complaint (“FAC”) in this case for lack of standing and pursuant to Federal Rule of Civil

Procedure 12(b)(6) for failure to state a claim. For the reasons discussed below, Defendants’

motions are denied. 

FACTUAL BACKGROUND1

Lead Plaintiff Greater Pennsylvania Carpenters Pension Fund (the “Pennsylvania Fund”)

brings this securities fraud suit on behalf of all persons who acquired the common stock of
2

Whitehall Jewellers, Inc.(“Whitehall”) between November 19, 2001, and December 10, 2003

(the “Class Period”). Defendant Whitehall Jewellers, Inc., (“Whitehall”) a Delaware

corporation, has its principal offices located in Chicago, Illinois. Whitehall is a specialty retailer

of fine jewelry operating through 384 mall-based stores in 38 states under the following brand

names: Whitehall Co. Jewellers, Lundstrom Jewelers, and Marks Brothers. Its stock trades on

the New York Stock Exchange (“NYSE”) under the ticker symbol “JWL.” (Id. ¶ 15.) 

Plaintiff also brings this suit against multiple individual defendants. Defendant Hugh

Patinkin serves as Chairman of the Board, Chief Executive Officer (“CEO”), and President of

Whitehall. Patinkin signed most of Whitehall’s quarterly and year-end financial statements. (Id.

¶ 16.) Defendant John H. Browne served as Whitehall’s Chief Financial Officer (“CFO”),

Treasurer, and Executive Vice President until Whitehall fired him on approximately December

11, 2003. Plaintiff alleges that Browne approved Whitehall’s false and misleading press releases

and signed and/or certified the majority of Whitehall’s quarterly and year-end reports filed with

the Securities and Exchange Commission (“SEC”). (Id. ¶ 17.) Defendant Matthew Patinkin is

Whitehall’s President of Operations, who allegedly approved Whitehall’s false press releases and

signed the year-end SEC reports. (Id. ¶ 18.) Defendant John Desjardins is Whitehall’s interim

CFO and Executive Vice President of Operations. Desjardins previously served as Whitehall’s

Executive Vice President of Finance and Administration. (Id. ¶ 19.) Defendant Manny Brown

was Whitehall’s Executive Vice President of Operations during the Class Period, and had

responsibility for the Company’s daily operations. (Id. ¶ 20.) (Collectively, Hugh Patinkin,

Browne, Matthew Patinkin, Desjardins and Brown are referred to as the “Individual

Defendants”). 
3

Plaintiff alleges that during the Class Period, Defendants engaged in fraud and reported

false and misleading financial results and guidance for the fiscal quarters and full years ended

2000, 2001, 2002, and the first two quarters of 2003. It alleges that Defendants concealed

inventory schemes that resulted in Whitehall fraudulently inflating its inventory, net income, and

earnings. These inventory schemes resulted in two financial restatements, occurring in March

2003 and December 2003. Even after the initial restatement, Plaintiff alleges that Defendants

continued to engage in the fraudulent scheme. Plaintiff alleges that Defendants’ fraud artificially

inflated the price of Whitehall’s stock. According to Plaintiff, those who purchased Whitehall

stock during the Class Period suffered damages as a result of its artificially inflated price. 

PROCEDURAL HISTORY

Lead Plaintiff, the Pennsylvania Fund, filed the first complaint in this case on February

12, 2004. (R. 1-1.) On February 19, 2004, Plaintiff Milton Pfieffer filed a class action complaint

against Defendants and included a “Certification of Named Plaintiff Pursuant to Federal

Securities Laws.” (R. 1-1, 04 C 1285.) Three additional plaintiffs – Joshua Kaplan, Jerome

Usheroff, and Michael Radigan – filed similar actions after Pfieffer filed his complaint. On

April 9, 2004, the Court consolidated these cases. On April 14, 2004, the Court granted the

Pennsylvania Fund’s unopposed motion for appointment as lead plaintiff in this case pursuant to

the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u- 4(a)(3). (R. 9-1.) 

Pfieffer did not move to serve as Lead Plaintiff in this case. As Lead Plaintiff, the Pennsylvania

Fund filed a Consolidated Amended Complaint on June 14, 2004. (R. 14-1.) Defendants moved

to dismiss that complaint, and on January 10, 2005, the Court granted Defendants’ motion to

dismiss Plaintiff’s Consolidated Amended Complaint in part and denied it in part. See Greater
4

PA Carpenters Pension Fund, 2005 WL 61480, *5. In its opinion, the Court held that Plaintiff

had pled loss causation, had stated a claim for securities fraud under Section 10(b) and Rule

10b-5, and had stated a claim for control person liability under Section 20(a) of the Exchange

Act. The Court further held that the Pennsylvania Fund does not have standing to pursue the

Section 10(b) claims for allegedly fraudulent statements made by Defendants after June 6, 2002. 

The Court dismissed such claims without prejudice, and gave the Pennsylvania Fund leave to

file an amended complaint addressing the standing deficiency. 

On February 10, 2005, Plaintiff filed its First Amended Consolidated Complaint (the

“FAC”). Defendants subsequently moved to dismiss the FAC for failure to address the standing

deficiencies identified by the Court in its January 10, 2005 opinion. 

After the Supreme Court issued its opinion in Dura Pharms., Inc. v. Broudo, 544 U.S. __,

125 S.Ct. 1627 (2005) on April 19, 2005, the Court requested additional briefing from the parties

on the issue of loss causation. Defendants addressed this issue in a separate submission and

moved the Court pursuant to Rule 12(b)(6) to dismiss the FAC for failure to plead loss causation.

ANALYSIS

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal

sufficiency of a complaint, not the merits of the case. Triad Assoc., Inc. v. Chicago Hous. Auth.,

892 F.2d 583, 586 (7th Cir. 1989). The Court will only grant a motion to dismiss if “it appears

beyond doubt that the plaintiff can prove no set of facts in support of his claim which would

entitle him to relief.” Centers v. Centennial Mortgage, Inc., 398 F.3d 930, 933 (7th Cir. 2005)

(quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)). In

making its determination, the Court must assume the truth of the facts alleged in the pleadings,
2

 Plaintiff attempts to reargue the Court’s holding regarding the Pennsylvania Fund’s

standing. Plaintiff, however, has not identified any manifest error of law or fact. Accordingly,

its attempt to reargue the issue fails. 

3

 Some courts have allowed more than one lead plaintiff to be named, and some courts

have permitted plaintiffs to name class representatives who have standing to proceed on the

claims at issue. See Greater PA Carpenters Pension Fund, 2005 WL 61480 at **7,8. Rather

than address the propriety of any of these approaches recognized by other courts, Defendants

only challenge Milton Pfeiffer’s ability to serve as a representative party. 

5

construe the allegations liberally, and view them in the light most favorable to the plaintiff. Id.

In assessing the merits of Defendants’ motions, the Court must also look to the PSLRA. 

“The PSLRA creates rules that judges must enforce at the outset of the litigation.” Asher v.

Baxter Intern. Inc., 377 F.3d 727, 728 (7th Cir. 2004). 

I. Named Plaintiff

In its January 10, 2005 opinion, the Court held that Lead Plaintiff – the Pennsylvania

Fund – does not have standing to pursue the Section 10(b) claims for allegedly fraudulent

statements made by Defendants after June 6, 2002, because the Pennsylvania Fund’s last

purchase of Whitehall stock took place on June 6, 2002.2 Pursuant to Roots Partnership v.

Lands’ End, Inc., 965 F.2d 1411 (7th Cir. 1992), the Pennsylvania Fund does not have standing to

bring such a claim based on Defendants’ statements made after this date “because the statements

could not have affected the price at which plaintiff actually purchased.” Id. at 1420. The Court

dismissed these claims without prejudice, and enabled Plaintiff to amend its complaint in order

to address the standing deficiency. Although the Court noted several approaches taken by other

courts regarding a lead plaintiff’s standing3, it did not address the legality of any of these

approaches since the parties had not raised the issue. See Greater PA Carpenters Pension Fund,
4

 Although Plaintiff argues in a footnote that the Court should extend the Class Period

based on Lead Plaintiff’s standing until June 12, 2002 because the Pennsylvania Fund’s last

purchase of Whitehall stock took place on June 13, 2002, the FAC alleges that the Lead

Plaintiff’s last purchase date of Whitehall securities during the Class Period is June 6, 2002. (R.

40-1, FAC ¶ 14.) Similarly, the Pennsylvania Fund’s sworn certification filed with its original

complaint also reflects that it last purchased Whitehall stock on June 6, 2002. (R. 1-1, Schedule

A to Cert. of Named Pl.) Accordingly, the June 6, 2002 date in the Court’s January 10, 2005

opinion stands. 

6

2005 WL 61480 at *8. 

In the FAC, the Pennsylvania Fund did not add another Lead Plaintiff. Instead, Plaintiff

added Milton Pfeiffer as a “representative party” in the FAC. (R. 40-1, FAC ¶ 14.) Plaintiff

alleges that Pfeiffer purchased Whitehall stock at artificially inflated prices on October 27, 2003

– after Defendants made the alleged false statements – thus he has standing to bring the Section

10(b) claim based on post-June 6, 2002 statements. (Id. ¶ 14.) Plaintiff further alleges that Lead

Plaintiff is acting on behalf of Pfeiffer and the plaintiff class. (Id.) 

Defendants challenge Milton Pfeiffer’s role as a representative party. Defendants have

moved to dismiss any allegations in the FAC based on allegedly false statements or omissions

made after June 6, 20024

 – the date after which the Court held that the Pennsylvania Fund does

not have standing – on the ground that Pfeiffer cannot serve as a “representative party” based on

the PSLRA’s requirements. Specifically, Defendants argue that Pfeiffer has not filed a PSLRA

sworn certification with the FAC and that he fails to satisfy the requirements of a representative

party. 

A. Sworn Certification

The PSLRA details certain sworn certification requirements for a plaintiff who is

“seeking to serve as a representative party on behalf of a class.” 15 U.S.C. § 78u-4(a)(2)(A). 
7

Namely, such a plaintiff must file a sworn certification that:

(i) states that the plaintiff has reviewed the complaint and authorized its filing;

(ii) states that the plaintiff did not purchase the security that is the subject of the

complaint at the direction of plaintiff's counsel or in order to participate in any private

action arising under this chapter;

(iii) states that the plaintiff is willing to serve as a representative party on behalf of a

class, including providing testimony at deposition and trial, if necessary;

(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of

the complaint during the class period specified in the complaint;

(v) identifies any other action under this chapter, filed during the 3-year period preceding

the date on which the certification is signed by the plaintiff, in which the plaintiff has

sought to serve as a representative party on behalf of a class; and

(vi) states that the plaintiff will not accept any payment for serving as a representative

party on behalf of a class beyond the plaintiff's pro rata share of any recovery, except as

ordered or approved by the court in accordance with paragraph (4).

15 U.S.C. § 78u-4(a)(2)(A). 

Defendants argue that Pfeiffer is a “professional plaintiff” who has filed at least nine

other federal securities class action lawsuits within the past three years. Defendants contend that

Pfieffer’s sworn certification from his original filing of a class action complaint against

Whitehall on February 19, 2004 is inadequate because he failed to identify the other actions

where he sought to serve as a class representative, as required under the PSLRA. The Court

agrees. In his first certification, Pfeiffer certified that he had “not served as a class

representative in any federal securities fraud case in the last 3 years.” Pfeiffer failed to address –

as he must – whether he sought to serve as a representative party on behalf of a class in any such

action. This failure directly conflicts with the plain language of the statute. 

In an effort to cure any defect, Plaintiff attached a sworn declaration of Pfeiffer to the

opposition to Defendants’ motion to dismiss. In this declaration, Pfeiffer states that “I have

never filed a motion to become a lead plaintiff or class representative in any federal securities

fraud class action in the past three years.” (R. 48-1, Pfeiffer Decl., ¶ 7.) This sworn statement,
8

however, does not answer the question of whether Pfeiffer has sought to serve as a representative

party on behalf of a class. Pfeiffer still has not complied with the mandates of the PSLRA for

those seeking to serve as a representative party. The Court will give Plaintiff Pfeiffer until July

20, 2005 to file an amended certification addressing this deficiency and identifying “any other

action” during the 3-year period prior to the date of the signed amended certification “in which

the plaintiff has sought to serve as a representative party on behalf of a class.” 

If Pfeiffer fails to submit this certification, he cannot seek to serve as a representative

party in this case, and the Court will dismiss any allegations after June 6, 2002 for lack of

standing. Alternatively, Plaintiff can seek to address the standing deficiency identified in the

Court’s January 10, 2005 Opinion in some other manner. 

Defendants also argue that Pfeiffer’s certification is defective because he must file a

separate, revised certification with each amended complaint, specifically addressing the lawsuits

where he sought to serve as a representative party. The Court need not address this issue

because Pfeiffer’s amended certification will moot it.

B. Representative Party

Defendants next argue that even if Pfeiffer files an amended certification, he is not

qualified to serve as a representative party because he has filed nine federal securities class

actions in the three years prior to the filing of the amended complaint in this case, and he only

purchased 5 shares of Whitehall stock during the Class Period for $58.30 just before the close of

the Class Period. In essence, Defendants argue that Pfeiffer is a “professional plaintiff’ and unfit

to serve as a representative party in this case. 

Defendants essentially challenge Pfeiffer’s adequacy as a class representative. The
5

 Following that opinion, the Court asked the parties to submit additional briefing on

what effect, if any, the Dura holding has on Plaintiff’s loss causation allegations. 

9

PSLRA, however, does not provide a vehicle for the Court to address his adequacy at this stage

of the litigation. Although the PSLRA provides a basis for courts to scrutinize a Lead Plaintiff

who will actively represent the class, the PSLRA does not provide an independent method for

courts to scrutinize class representatives at the early stages of the litigation. Once a potential

representative party complies with the PSLRA’s certification requirements, the Court must wait

to address class representative issues under Rule 23's standards. The PSLRA does not alter Rule

23. See Franklin High Yield Tax-Free Income Fund v. City of Baudette, No. 98-CV-1576, 1999

WL 33912055, *5 (D.Minn. Sept. 13, 1999).

II. Loss Causation

Loss causation – “a causal connection between the material misrepresentation and the

loss” – is an element of a securities fraud claim brought pursuant to Section 10(b). Dura

Pharms., Inc. v. Broudo, 544 U.S. __, 125 S.Ct. 1627 (2005). Defendants previously challenged

Plaintiff’s loss causation allegations. After analyzing the parties’ respective position, in its

January 10, 2005 opinion, the Court concluded that “[v]iewing the complaint in the light most

favorable to Plaintiff, the Court can reasonably draw the inference that the loss was caused by

the alleged fraud at issue.” Greater PA Carpenters Pension Fund, 2005 WL 61480, *5. 

On April 19, 2005, the Supreme Court in Dura Pharms addressed the issue of loss

causation in securities fraud cases.5

 Dura Pharms, 125 S.Ct. 1627, 1631-34. The Dura Pharms.

Court found the plaintiffs’ mere allegation that it “‘paid artificially inflated prices for Dura's

securities’ and suffered ‘damage[s]’” insufficient to plead loss causation. The Supreme Court
10

noted the deficiency in this allegation:

The statement implies that the plaintiffs’ loss consisted of the “artificially

inflated” purchase “prices.” The complaint’s failure to claim that Dura’s share

price fell significantly after the truth became known suggests that the plaintiffs

considered the allegation of purchase price inflation alone sufficient. The

complaint contains nothing that suggests otherwise.

[T]he “artificially inflated purchase price” is not itself a relevant economic loss. 

And the complaint nowhere else provides the defendants with notice of what the

relevant economic loss might be or of what the causal connection might be

between that loss and the misrepresentation concerning Dura's “spray device.”

Id. at 1634.

The Supreme Court expressly noted that Federal Rule of Civil Procedure 8(a)(2) governs

a plaintiff’s allegations of loss causation, not Rule 9(b), and that pleading loss causation is “not

meant to impose a great burden upon a plaintiff.” Id. at 1634. It further noted that “it should not

prove burdensome for a plaintiff who has suffered an economic loss to provide a defendant with

some indication of the loss and the causal connection that the plaintiff has in mind. At the same

time, allowing a plaintiff to forgo giving any indication of the economic loss and proximate

cause that the plaintiff has in mind would bring about harm of the very sort the statutes seek to

avoid.” Dura, 125 S.Ct. at 1634.

These principals articulated by the Supreme Court do not affect the Court’s prior ruling

in this case regarding loss causation. The Court analyzed the allegations regarding loss

causation and concluded that Plaintiff had sufficiently alleged that “the loss was caused by the

alleged fraud at issue.” Greater PA Carpenters Pension Fund, 2005 WL 61480 at *5. Plaintiff

has alleged more than simply inflation of the purchase price.

CONCLUSION

For the reasons discussed above, Defendants’ motions to dismiss are denied. Plaintiff
11

Pfeiffer has until July 20, 2005 to file an amended certification addressing the deficiency in his

original certification as discussed above, and to identify “any other action” during the 3-year

period prior to the date of the signed amended certification “in which the plaintiff has sought to

serve as a representative party on behalf of a class.” If Pfeiffer fails to file this certification or if

Plaintiff fails to identify another remedy to the standing problem, the Court will dismiss any

allegations after June 6, 2002 for lack of standing. 

Date: June 30, 2005

ENTERED

 

AMY J. ST. EVE

United States District Court Judge