Court Opinion

ID: 8759401
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:00:18.117375+00
Date Added: 2024-06-11T17:01:28.132345
License: Public Domain

OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
I. INTRODUCTION
This federal securities class action is brought on behalf of those who purchased the common stock of Canadian Superior Energy Inc. (“SNG”)1 between January 14, 2008 and February 17, 2009 (the “Class Period”). Three movants submit competing applications seeking appointment as lead plaintiff and to have their respective selections of counsel approved. For the reasons discussed below, Gino Stroker is appointed lead plaintiff and his selection of the law firms of Robbins Geller Rudman & Dowd LLP f/k/a Coughlin Stoia Geller Rudman & Robbins LLP (“Robbins Geller”)2 and Holzer Holzer & Fistel LLC (“Holzer”) as co-lead counsel is approved.
II. BACKGROUND
A. Facts3
SNG engages in the exploration for, acquisition, development, and production of petro*172leum and natural gas, and liquified natural gas projects primarily in western Canada, offshore Nova Scotia, offshore Trinidad and Tobago, the United States, and North Africa.4 SNG’s common stock is registered with the Securities and Exchange Commission and is traded on the American Stock Exchange (“AMEX”) and the Toronto Stock Exchange.5
On April 3, 2006, SNG announced that it had signed a production sharing contract on July 20, 2005, with the government of Trinidad and Tobago to drill wells on “Intrepid Block 5(a)”—an area off the coast of Trinidad.6 As part of that transaction, SNG entered into agreements for the exploration, drilling, and development of Intrepid Block 5(c) with a Canadian based oil and gas exploration company—Challenger Energy—and BG International Limited (“BG”).7 On January 14, 2008, SNG issued a press release announcing that it, along with its partners Challenger Energy and BG, had discovered natural gas reserves in Intrepid Block 5(c).8 Thereafter, SNG made a number of public statements that were positive about SNG, its prospects, and its earnings growth based on its investment in Intrepid Block 5(c).9
Yet, these positive assessments were unrealistic and the outlook for SNG and Intrepid Block 5(c) was not so rosy. According to plaintiff, SNG’s public statements touting the future prospects of SNG’s natural gas drilling program and the success of Intrepid Block 5(c) were false and misleading because they failed to disclose that the reserves for Intrepid Block 5(c) were below the economic threshold for development, SNG could not meet its funding obligations under the joint operating agreement between SNG and BG due to financial constraints, and otherwise lacked a reasonable basis for the positive statement about SNG, its prospects and earnings growth.10
On February 12, 2009, SNG issued a press release announcing the “appointment, upon the application of BG of an interim Receiver of its participating interest in Intrepid Block 5(c). Pursuant to the Court Order, the Receiver, in conjunction with BG, will operate the property and conduct the flow testing of the Endeavour well which [SNG] believes will validate its operations to date.”11 In response to this announcement, SNG’s stock price fell $0.40 per share, or forty-four percent.12 On February 17, 2009, SNG announced that it had received a demand letter from the Canadian Western Bank for repayment of all amounts outstanding under SNG’s forty-five million dollar credit facility with the bank by February 23, 2009.13 In response to this announcement, SNG’s stock price fell again-by $0.16 per share, or thirty percent.14
B. Procedural History
On December 9, 2009, David Sgalambo filed this class action against certain of SNG’s officers and directors alleging violations of the federal securities laws. The same day the Complaint in this action was filed, notice of the action was disseminated to the putative class.15 On February 8, 2010, SNG investors Gino Ströker, Anthony Pacchia, the Kramer Family Investment Partnerships Group (“KFIP”), Algine M. Perry, and James Wolf, III moved to be appointed lead *173plaintiff. Sgalambo did not move to be appointed lead plaintiff. After movants filed their initial motions, Perry and Wolf withdrew their motions, noting that they did not possess the largest financial interest in the litigation.16
Ströker, a Belgian citizen who purchased a total of 198,900 shares of SNG during the Class Period, incurred a loss of $500,317.17 Paechia, who purchased 169,032 shares of SNG, has suffered an estimated loss of $393,627.18 KFIP purchased approximately 105,000 shares of SNG for a total loss of $397,096.03.19 KFIP and Paechia do not dispute that Stroker possesses the largest financial interest among all the movants.20 They nonetheless oppose his motion on the grounds that, as a Belgian citizen, Ströker is subject to unique defenses rendering him an inadequate lead plaintiff.
III. LEGAL STANDARD
In determining whom to appoint as lead plaintiff, the PSLRA sets forth a required procedure.21 The lead plaintiff should be the plaintiff “most capable of adequately representing the interests of class members.”22 The PSLRA requires that the “most adequate plaintiff’ be determined by a two-step competitive process.23
The first step establishes the presumptive most adequate plaintiff as the “person or group of persons” who meet(s) the following three criteria: (1) the candidate must have “filed the complaint or made a motion in response to a notice;”24 (2) the candidate must have “the largest financial interest in the relief sought by the class,”25 and (3) the candidate must “otherwise satisfy] the requirements of Rule 23 of the Federal Rules of Civil Procedure.”26 At the lead plaintiff stage of the litigation, in contrast to the class certification stage, “a proposed lead plaintiff need only make a ‘preliminary showing’ that it will satisfy the typicality and adequacy requirements of Rule 23.”27 “Typicality ‘requires that the claims of the class representatives be typical of those of the class, and is satisfied when each class member’s claim arises from the *174same course of events, and each class member makes similar legal arguments to prove the defendant’s liability.’”28 “The adequacy requirement is satisfied where the proposed Lead Plaintiff does not have interests that are antagonistic to the class that he seeks to represent and has retained counsel that is capable and qualified to vigorously represent the interests of the class ....”29
Once the presumptive most adequate plaintiff has been designated, the court con-' ducts a second inquiry in which members of the class have the opportunity to rebut that plaintiffs presumptive status. In order to rebut the designation, class members must prove either that the presumptive most adequate plaintiff “will not fairly and adequately protect the interests of the class” or “is subject to unique defenses that render such plaintiff incapable of adequately representing the class.”30 If the presumptive most adequate plaintiff is disqualified on these grounds, the candidate’s position is forfeited and the court returns to the first phase to determine a new presumptive most adequate plaintiff. The process repeats itself until a candidate succeeds in both the first and second phases of inquiry. The lead plaintiff determination does not depend on the court’s judgment of which party would be the best lead plaintiff for the class, but rather which candidate fulfills the requirements of the PSLRA.31
IV. DISCUSSION
A. Lead Plaintiff
The movants do not dispute that Stróker properly moved for lead plaintiff appointment in response to the Class notice and possesses the largest financial interest in the litigation.32 Stróker also meets the other requirements of Rule 23. Stróker purchased shares in SNG during the Class Period and claims that he suffered damage as a result of SNG’s artificially inflated stock price caused by defendants’ false and misleading statements. Stróker is typical of the class.33 Stróker also satisfies the adequacy requirement because he seeks identical relief on identical claims based on identical legal theories making his interests not antagonistic with other class members. Stróker has also submitted a Certification affirming his understanding of the duties owed to absent class members through his commitment to oversee the prosecution of this class action.34 Finally, Stróker has retained Robbins Geller and Holzer as co-lead counsel to represent the Class. Both are highly competent plaintiffs’ firms with substantial securities class action experience.35 Stróker satisfies the adequacy requirement for lead plaintiff appointment and is the presumptive most adequate plaintiff.
Having identified Stróker as the presumptive most adequate plaintiff, the other movants have the opportunity to rebut this presumption. KFIP and Pacchia seek to rebut Stróker’s status on three grounds. First, they argue that this Court may lack subject matter jurisdiction over Stróker’s claims based on the Second Circuit’s recent decision in Morrison v. National Australia *175Bank Ltd36 In Morrison, the Second Circuit held that it lacked subject matter jurisdiction over an action brought by a “foreign cubed” plaintiff—i.e., a foreign investor who purchased shares of a foreign company on a foreign securities exchange.37 KFIP and Paechia assert that Stroker is a foreign cubed plaintiff and, thus, this Court lacks subject matter jurisdiction over Stroker’s claims.38 However, the evidence submitted with Stroker’s motion indicates that he traded on the AMEX, an American exchange. The prices in Stroker’s schedule of transactions and losses during the class period are delineated in United States dollar amounts.39 Such evidence is more than sufficient at this stage to demonstrate purchases on an American exchange.40 Indeed, this is the same evidence that KFIP and Pacchia submitted in support of their motions.41 Although unnecessary, Stroker also submitted a sworn declaration on reply affirming that he purchased all of his CSN shares during the Class Period on the AMEX, eliminating any uncertainty.42 As a result, there is an unequivocal connection between Stroker’s claims and the United States.
KFIP and Paechia argue, in the alternative, that even if Stroker purchased his shares on the AMEX, this Court still lacks subject matter jurisdiction over his claims under Morrison.43 The Second Circuit’s holding in Morrison that it lacked subject matter jurisdiction was based on three considerations: (1) that the actions central to the alleged fraud occurred in Australia; (2) there was an absence of allegations that the alleged fraud affected American investors or American markets; and (3) there was a lengthy chain of causation between the American contribution to the misstatements and the harm to investors.44 Although a certain amount of the fraud alleged in this case occurred in Canada and involves a Canadian company’s shares, those shares were traded on the AMEX. Where an action involves misrepresentations by a company trading on an American exchange, “the mere fact that [Stroker]—or any other hypothetical [Belgian] in the proposed class—hails from another country does not chance the fact that this action falls squarely under the securities laws of the United States.”45 Further distinguishing this case from Morrison, American investors were harmed by the alleged fraud—Sgalambo, KFIP, and Pacchia are all American investors. That these American investors will be represented by a Belgian citizen who suffered identical harm based on identical facts does not interfere with this Court’s subject matter jurisdiction over the claims. Accordingly, KFIP and *176Pacchia’s first argument against Ströker’s appointment fails.
Second, KFIP and Pacchia argue that courts are “wary” of appointing foreign investors as lead plaintiffs even if they purchased the subject security on an American exchange.46 Citing Southern District of New York cases Borochoff v. Glaxosmithkline PLC and In re Vivendi Universal S.A. Securities Litigation, KFIP and Pacchia urge this Court to reject Stroker’s motion to be appointed lead plaintiff because there is uncertainty regarding whether a Belgian court would give res judicata effect to a judgment in favor of defendants.47 Without the preclusive effect of a United States judgment in Belgium, KFIP and Pacchia proffer that Stroker can litigate his claims here, lose, and litigate them again in Belgium.48
Contrary to KFIP’s and Pacchia’s contentions, courts routinely appoint foreign investors as lead plaintiffs.49 KFIP and Pacchia’s reliance on Borochoff and In re Vivendi is misplaced. Both cases involved foreign cubed plaintiffs.50 Because, as already discussed, Stroker is not a foreign cubed plaintiff, these cases are distinguishable. Moreover, the court in In re Vivendi was able to conduct a detailed evaluation of German procedural law before concluding that a foreign judgment would not be recognized by German courts.51 As part of its assessment, the court was provided with evidence and expert submissions on German law.52 The court in Borochoff then relied on the conchlsions drawn by the court in In re Vivendi when it rejected a German plaintiff’s motion to be appointed lead plaintiff on similar grounds.53
No evidence or expert submissions on Belgian law have been presented here. Instead, KFIP and Pacchia provide only secondary sources—one of which expressly disclaims its reliability.54 In fact, the United States and Belgium have a long-standing treaty which provides, among other things, that “Nationals of either Contracting Party within the territories of the other Party shall be accorded full legal and judicial protection for their persons, rights and interests.”55 The exis*177tence of such a treaty weighs against finding that Belgian courts would refuse to give preclusive effect to a judgment in this case and renders KFIP and Pacchia’s second argument unavailing.56
Finally, KFIP and Paechia contend that management of this case by a Belgian plaintiff will prove difficult and will “subject the entire class to unnecessary difficulties and expense posed by his foreign location.”57 This statement is entirely speculative and provides insufficient grounds on which to find Stroker an inadequate lead plaintiff. “[T]o exclude a foreign investor from lead plaintiff status on nationality grounds would defy the realities and complexities of today’s increasingly global economy.”58 Because KFIP and Pacchia have failed to rebut Stroker’s presumptive most adequate plaintiff status, Stroker’s motion for appointment as lead plaintiff is granted.
B. Appointment of Lead Counsel
The PSLRA provides that “[t]he most adequate plaintiff shall, subject to the approval of the court, select and retain counsel to represent the class.”59 Stroker has selected the law firms of Robbins Geller and Holzer as co-lead counsel. As ascertained from each firm’s resume, and as stated earlier, both firms are qualified to litigate this action. Therefore, Stroker’s selection of Robbins Geller and Holzer as co-lead counsel is approved.
y. CONCLUSION
Ströker is appointed lead plaintiff in this action. Robbins Geller and Holzer are appointed co-lead counsel. The Clerk of the Court is directed to close these motions (Docket Nos. 4, 7, 10, 13, and 16). A conferenee is scheduled for April 12, 2010 at 5:00 p.m.
SO ORDERED.

. Canadian Superior Energy Inc.’s stock symbol is SNG.

. See Notice of Firm Name Change (Docket No. 32).

. The facts in this section are taken from the Complaint (“Compl.”) and are presumed true for purposes of this motion.

. See Compl. ¶ 7.

. See id. ¶ 12. SNG is not named as a defendant in the action because it sought protection under Canadian bankruptcy and reorganization laws and has recently reorganized. See id. ¶ 7.

. See id. ¶ 21.

. See id. ¶¶ 22, 29.

. See id. ¶ 30

. See id. ¶¶ 30-57.

. See id.

. id. ¶ 58.

. See id.

. See id. ¶ 60.

. See id.

. See 12/9/09 Notice, Coughlin Stoia Getter Rudman & Robbins LLP Files Class Action Suit Against Former Executives of Canadian Superior Energy Inc., Ex. A to the Declaration of David A. Rosenfeld, Stroker’s counsel, in Support of the Motion of Gino Strdker for Appointment as Lead Plaintiff and Approval of Selection of Co-Lead Counsel ("Rosenfeld Decl.”).

. See Notices of Withdrawal (Docket Nos. 23, 27).

. See Stroker’s Purchases and Losses, Ex. B to Rosenfeld Deck; Stroker's Certification of Named Plaintiff Pursuant to Federal Securities Laws, Ex. C to Rosenfeld Deck

. See Pacchia’s Certification Pursuant to the Federal Securities Laws, Ex. 3 to the Declaration of Lawrence P. Eagel, Pacchia's counsel ("Eagel Deck").

. See KFIP Consolidated Schedule of Transactions and Losses, Ex. B to the Declaration of David A.P. Brower, KFIP’s counsel, in Support of Motion of KFIP to be Appointed Lead Plaintiff and to Approve Proposed Lead Plaintiff's Choice of Counsel (“Brower Deck”).

. See Memorandum in Support of the Motion of KFIP and Paechia to be Appointed Lead Plaintiff and to Approve Proposed Lead Plaintiff’s Choice of Counsel ("KFIP/Pacchia Opp.”) at 2. KFIP and Paechia joined forces to oppose Stroker’s motion after the initial motions were filed. They admit that they “are not seeking to have their losses aggregated for the purposes of calculating the movant with the 'largest financial interest in the relief sought.’ ” Id. at 9 n. 8. Nor could they, as post-motion efforts to group movants to aggregate their losses violates the strict sixty day deadline to file a motion for lead plaintiff appointment established by the Private Securities Litigation Reform Act ("PSLRA”). See In re Telxon Corp. Sec. Litig., 67 F.Supp.2d 803, 819 (N.D.Ohio 1999) (noting that courts strictly adhere to the PSLRA’s deadline to prevent movants from "manipulatfing] the size of their financial loss by ... adding additional persons to a ‘group’ in supplemental filings ... [tjhis would effectively render the strict timeliness set forth in the PSLRA meaningless, and would nullify Congress’s attempt to expedite the lead plaintiff appointment process”); see also In re XM Satellite Radio Holdings Sec. Litig., 237 F.R.D. 13, 19-20 (D.D.C.2006) (rejecting the "joint opposition" of a group formed post-motion to raise “concerns” about presumptive lead plaintiff and push their joint candidacy).

. See 15 U.S.C. § 78u-4(a)(3)(B).

. Id. § 78u-4(a)(3)(B)(I).

. See id. § 78u-4(a)(3)(B)(iii).

. Id. § 78u-4(a)(3)(B)(iii)(I)(aa).

. Id. § 78u-4(a)(3)(B)(iii)(I)(bb).

. Id. § 78u-4(a)(3)(B)(iii)(I)(cc).

. In re Bank of America Corp. Sec. Deriv. & ERISA Litig., 258 F.R.D. 260, 268 (S.D.N.Y.2009) (quoting Kaplan v. Gelfond, 240 F.R.D. 88, 94 (S.D.N.Y.2007)).

. Central States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 F.3d 229, 245 (2d Cir.2007) (quoting Robinson v. Metro-N. Commuter R.R. Co., 267 F.3d 147, 155 (2d Cir.2001)).

. Glauser v. EVCI Ctr. Colls. Holding Corp., 236 F.R.D. 184, 189 (S.D.N.Y.2006) (citing Dietrich v. Bauer, 192 F.R.D. 119, 124 (S.D.N.Y.2000)).

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

. See In re Cavanaugh, 306 F.3d 726, 729 (9th Cir.2002) ("While the words 'most capable' seem to suggest that the district court will engage in a wide-ranging comparison to determine which plaintiff is best suited to represent the class, the statute defines the term much more narrowly.”).

. See KFIP/Pacchia Opp. at 2.

. See Glauser, 236 F.R.D. at 189 (finding typicality where proposed lead plaintiff "like all class members” purchased the securities at issue during the proposed class period at prices allegedly artificially inflated by the defendants' false and misleading statements or omissions and suffered damage thereby).

. See Stróker’s Certification of Named Plaintiff Pursuant to Federal Securities Laws, Ex. C to Rosenfeld Deck

. See Resume of Robbins Heller, Ex. D to Rosenfeld Deck; Resume of Holzer, Ex. E to Rosenfeld Deck

. See KFIP/Pacchia Opp. at 10-11 (citing Morrison, 547 F.3d 167, 176 (2d Cir.2008), cert. granted, - U.S. -, 130 S.Ct. 783, 175 L.Ed.2d 513 (2009)); Reply Memorandum in Support of the Motion of KFIP and Pacchia to be Appointed Lead Plaintiff and to Approve Proposed Lead Plaintiff's Choice of Counsel ("KFIP/Pacchia Reply”) at 5-6.

. See Morrison, 547 F.3d at 176.

. See KFIP/Pacchia Opp. at 10-11.

. See Stroker's Purchases and Losses, Ex. B to Rosenfeld Decl.

. See, e.g., Steinberg v. Ericsson LM Tel. Co., No. 07 Civ. 9615, 2008 WL 1721484, at *2 (S.D.N.Y. Apr. 11, 2008) ("[A]n examination of the evidence before the Court at the time of its ruling, specifically a comparison of the transaction prices of Mr. Fuhrer's shares, corroborates the claim that Mr. Fuhrer’s shares were purchased on a United States securities exchange.”).

. See KFIP Consolidated Schedule of Transactions and Losses, Ex. B to Brower Decl. (stating purchases and losses in United States dollar amounts); Pacchia Schedule of Purchases of CSN Common Stock, Ex. 3 to Eagel Decl. (same).

. See Ströker Deck, Ex. A to the Reply Declaration of David A. Rosenfeld in Further Support of Motion of Ströker for Appointment as Lead Plaintiff and Approval of Selection of Lead Counsel, ¶ 5.

. See KFIP/Pacchia Reply at 4-6 & n. 4.

. See Morrison, 547 F.3d at 176-77.

. Marsden v. Select Med. Corp., 246 F.R.D. 480, 486 (E.D.Pa.2007). Accord In re Royal Ahold N.V. Sec. & ERISA Litig., 219 F.R.D. 343, 351 (D.Md.2003) ("Under this [effects] test, it has not been disputed that the court in this case has jurisdiction over the claims ... of foreign investors who purchased Royal Ahold American Depositary Receipts ... on a domestic exchange, because [that activity has] significant effects in the United States.”).

. KFIP/Pacchia Opp. at 11-13.

. See id. at 14-15 (citing Borochoff, 246 F.R.D. 201, 205 (S.D.N.Y.2007) (holding that the "possibility that foreign courts will not enforce a decision in favor of” defendant, raised significant concerns and "prudence cautions that the arguments for its exclusion are substantial, and in light of that risk it would be improvident to appoint the German Institutional Investor Group as lead plaintiff”) and In re Vivendi, 242 F.R.D. 76, 105 (S.D.N.Y.2007) (refusing to certify a German investor under Rule 23, reasoning "plaintiffs have not shown a probability that German courts will give res judicata effect to a judgment in this case")).

. See id. at 14; KFIP/Pacchia Reply at 6.

. See, e.g., Mohanty v. Bigband Networks, Inc., No. 07 Civ. 5101, 2008 WL 426250, at *10 (N.D.Cal. Feb. 14, 2008) (appointing an individual lead plaintiff who was a resident of the Republic of Cyprus).

. See In re Vivendi, 242 F.R.D. at 81 (involving European plaintiffs who purchased shares of a French company traded on the Paris Bourse); Borochoff, 246 F.R.D. at 205 (involving a German plaintiff who purchased shares of a British company traded on the London Stock Exchange).

. See In re Vivendi, 242 F.R.D. at 105.

. See id.

. See Borochoff, 246 F.R.D. at 204-05 (citing In re Vivendi, 242 F.R.D. at 104-05).

. See KFIP/Pacchia Opp. at 13-14 (citing Judicial Assistance Belgium, United States Department of State Website, Ex. 11 to the Declaration of David A.P. Brower in Support of Motion of KFIP and Pacchia to be Appointed Lead Plaintiff and to Approve Proposed Lead Plaintiff's Choice of Counsel ("Brower Opp. Decl.”) (noting that there is "no treaty, convention or other international agreement in force between Belgium and the United States regarding enforcement of judgments. Expedited enforcement of U.S. judgements, therefore, [sic] not available and each case must be tried in Belgium on its merits,” but also disclaiming that “the information in this circular is provided for general information only and may not be totally accurate in a specific case"), and Linda Silberman, Enforcement and Recognition of Foreign Country Judgments in the United States, New York University School of Law (2009), Ex. 12 to Brower Opp. Deck, and Survey on Foreign Recognition of U.S. Money Judgments, Committee on Foreign and Comparative Law, Association of the Bar of the City of New York (2001), Ex. 13 to Brower Opp. Deck).

. Treaty of Friendship, Establishment and Navigation, U.S.-Belgium, Feb. 21, 1961, 14 U.S.T. 1284.

. See In re Goodyear Tire & Rubber Co. Sec. Litig., No. 03 Civ. 2166, 2004 WL 3314943, at *5 (N.D.Ohio May 12, 2004) (appointing an Austrian lead plaintiff and noting that "Austrians, by treaty, are entitled to the same rights and privileges before United States courts as United States citizens”).

. KFIP/Pacchia Opp. at 15.

. In re Goodyear, 2004 WL 3314943, at *5. Cf. In re Network Assocs., Inc. Sec. Litig., 76 F.Supp.2d 1017, 1027-30 (N.D.Cal.1999) (refusing to appoint two European foreign investors as lead plaintiff where, in addition to considering each investor's distance from California and differences in business culture, the investors stated that they were not interested in devoting the time necessary for sufficient representation, were under investigation for criminal fraud, and would face unique defenses regarding reliance; the court noted that it "[did] not say that a foreign investor could never qualify”).

. 15 U.S.C. § 77z-l(a)(3)(B)(v).