Davoodi v. Zeta Global Holdings Corp.

What the Court Decided

The court ruled on competing motions to appoint a lead plaintiff and lead counsel under the Private Securities Litigation Reform Act. It appointed Amir Konigsberg and the Allegheny County Employees’ Retirement System as co-lead plaintiffs and approved their selected law firms as co-lead counsel. The remaining motions to serve as lead plaintiff were denied.

Why Dart Trust Was Not Appointed

The court found that Dart Trust had shown that it responded to the required notice and had the largest financial interest in the requested relief. Those facts ordinarily would create a presumption that Dart Trust should be appointed lead plaintiff, but the presumption also required a preliminary showing that Dart Trust could adequately represent the class.

The court found that Dart Trust had not made that showing. Dart Trust is registered under the Cook Islands International Trusts Act of 1984. Because Dart Trust had not shown that it was a trust with a separate legal identity, the court assumed it was a traditional trust, which generally must sue through its trustee. Mirko Dardi, however, was identified as the trust’s settlor and protector rather than its trustee. The trustee had given Dardi a limited power of attorney to represent Dart Trust in securities-fraud litigation, but the court held that a power of attorney does not itself give the holder the right to sue in the holder’s own name.

The court therefore found that Dart Trust had not established Article III standing, meaning the ability to pursue the case in federal court. The court concluded that this prevented Dart Trust from making the required preliminary showing of typicality and adequacy under the class-action rules. The court also noted that Dart Trust had not provided basic information about Dardi’s location, professional background, or investment experience. Even apart from the standing issue, that lack of information supported rejecting Dart Trust as lead plaintiff.

Why Konigsberg and Allegheny Were Appointed

Amir Konigsberg submitted a detailed declaration supporting his ability to represent the class. The court found that his claims were typical of the class claims and that he had responded to the required notice. The court also concluded that he had the greater financial interest among the remaining candidates after considering the number of shares purchased, net shares purchased, total net funds spent, and approximate loss.

Konigsberg had lost approximately $79,004.60 on purchases of 24,565 Zeta securities during the class period and retained 9,600 shares through the end of that period. Eric Stephanson had greater losses but did not oppose the competing motions and acknowledged that Konigsberg prevailed on three of the four financial-interest factors. The court found that Konigsberg was presumptively the most adequate lead plaintiff, and no one had shown that he would not fairly represent the class or faced unique defenses.

The court noted that Konigsberg lives overseas, which could create challenges for quickly litigating the case. The Pennsylvania-based Allegheny County Employees’ Retirement System agreed at the hearing to serve as co-lead plaintiff, and no movant objected. The court therefore concluded that appointing Allegheny alongside Konigsberg was in the class’s best interest.

Counsel and Disposition

The court found that Konigsberg’s selected counsel, Kahn Swick & Foti, LLC, and Allegheny’s selected counsel, Labaton Keller Sucharow LLP, had extensive experience with complex securities class actions and were qualified to represent the proposed class. It appointed them as co-lead counsel, provided that their work would not be duplicated and that using co-lead counsel would not increase attorneys’ fees or expenses.

Judge Dale E. Ho ordered that Konigsberg’s and Allegheny’s motions to serve as lead plaintiff were each granted to the extent that they were appointed co-lead plaintiffs, and their selection of counsel was approved. The remaining motions to serve as lead plaintiff were denied. The Clerk of Court was directed to terminate the listed docket entries.