Finkelstein v. Fox

Background

The court had appointed the Brooklyn Investor Group—Steven Weill, David Klein, Isaac Broyn, and Elliot Abramowitz—as lead plaintiff on August 29, 2024. The court did so because the group had the largest financial interest in the relief sought. On November 13, 2024, Weill and Klein filed a notice of voluntary partial dismissal. Without them, the group no longer had the largest financial interest; Timothy K. Klintworth had the largest financial interest instead.

The court ordered the Brooklyn Investor Group to show cause, meaning explain in writing, why it should not reopen the lead-plaintiff appointment or substitute Klintworth. The court also allowed prior movants to respond. The group acknowledged that Klintworth now had the largest financial interest and consented to his substitution.

Court’s Analysis

The court explained that courts may consider requests to remove, withdraw, substitute, or add lead plaintiffs during a securities class action. Although the Private Securities Litigation Reform Act (PSLRA) does not specify the procedure for substituting a lead plaintiff, courts have treated the next plaintiff meeting the PSLRA’s criteria as the appropriate replacement. Because Klintworth had the largest financial interest and the substitution was unopposed, the court granted his request.

Ruling and Next Steps

Judge Jesse M. Furman reopened the appointment of lead plaintiff and granted Klintworth’s request to be substituted as lead plaintiff in place of the Brooklyn Investor Group. The court also approved Bragar Eagel & Squire, P.C. as new lead counsel for Klintworth and the proposed class. Klintworth was ordered to confer with the defendants and file a proposed order by December 12, 2024, addressing the duties and responsibilities of lead plaintiff and lead counsel and deadlines for any amended complaint and answer or motion to dismiss. The Clerk of Court was directed to update the docket to reflect the substitutions.