Altimeo Asset Management v. Jumei International Holding Limited
- Edward Chen
- 3:20-cv-02751
- U.S. District Court · Northern District of California
- 10
In Haideri v. Jumei, Judge Chen denied the Huang Group’s lead-plaintiff motion and granted Altimeo’s motion to appoint it and approve Pomerantz as counsel.
Altimeo was appointed lead plaintiff, and Pomerantz LLP was approved as lead counsel. The Huang Group was denied appointment. The ruling concerns representation of the putative shareholder class, not the merits of the securities claims.
What happened
Emal Haideri v. Jumei International Holding Limited is a securities class action about Jumei’s buyout by companies affiliated with its founder and chief executive, Leo Ou Chen. The court considered competing requests from the Huang Group and institutional investor Altimeo to represent the shareholder class and choose class counsel.
The court found that the Huang Group had the larger financial interest but was not an adequate representative. The group’s relationship before the lawsuit was minimal, its members appeared to have responded to counsel’s solicitation, and its explanations about how it would manage the case were conclusory. The court found that Altimeo was adequate because it was an institutional investor with securities-litigation experience and had reasonably selected Pomerantz LLP.
In Emal Haideri v. Jumei International Holding Limited, Judge Edward M. Chen denied the Huang Group’s motion for appointment and granted Altimeo’s motion for appointment as lead plaintiff and selection of Pomerantz as lead counsel.
The detailed version
- Altimeo Asset Management v. Jumei International Holding Limited · No. 3:20-cv-02751
- Edward Chen
- Sept. 4, 2020
Background
The opinion describes a federal securities class action concerning Jumei International Holding Limited’s proposed buyout by Super ROI, a company affiliated with Jumei founder and chief executive Leo Ou Chen. The complaint asserted claims under Sections 14(e) and 20(a) of the Securities Exchange Act of 1934. It alleged that the buyout process was unfair, that the $2-per-share offer undervalued Jumei, that deal-protection provisions discouraged competing bids, and that shareholder materials omitted or misrepresented important information.
The court was not deciding the merits of those securities claims. It was deciding competing motions under the Private Securities Litigation Reform Act for appointment of a lead plaintiff and approval of lead counsel. The Huang Group consisted of four individuals and was represented by Bragar Eagel & Squire, P.C. Altimeo, an institutional investor, was represented by Pomerantz LLP.
Lead-Plaintiff Analysis
The statute directs the court to appoint the class member or group most capable of adequately representing the class. It creates a rebuttable presumption in favor of the applicant with the largest financial interest that also satisfies the adequacy and typicality requirements of Federal Rule of Civil Procedure 23. A group with the largest losses may be rejected if it cannot fairly and adequately protect the class or is subject to unique defenses.
Altimeo initially claimed that it had the larger financial interest, but conceded at the hearing that the Huang Group’s financial interest was larger. The court therefore considered whether the Huang Group was adequate. It examined factors used to evaluate whether a shareholder group is a genuine, coordinated group or an artificial group assembled by lawyers, including the members’ relationship, involvement in the litigation, sophistication, and choice of counsel.
The court concluded that those factors largely weighed against the Huang Group. Although the members said they met through Xueqiu.com shortly after the buyout announcement and discussed the transaction, the court found that this was, at most, a minimal pre-litigation relationship. The members did not show that they had independently formed the group before interacting with counsel. Each member stated that the person independently contacted Bragar Eagel & Squire after responding to a press release, which the court characterized as client solicitation by counsel.
The court also found that the group’s members had provided little information about their investment experience, relationships, organization, decision-making process, or plans to manage the litigation. Even after the court gave them opportunities to provide more information, their declarations remained conclusory. The court found that the group appeared lawyer-driven rather than client-driven and did not adequately demonstrate commitment to monitoring the litigation.
Altimeo and Counsel
The court found Altimeo’s financial interest significant and viewed its status as an institutional investor as supporting adequacy. The opinion states that institutional investors may have securities-market expertise, a substantial interest in market integrity, and the ability to supervise class counsel. The court also noted that Altimeo had served as a lead plaintiff in other securities actions.
The court treated selection of counsel as separate from appointment of a lead plaintiff. It approved Altimeo’s selection of Pomerantz LLP, finding that Altimeo had an interest in carefully evaluating counsel and that Pomerantz and its lawyers were qualified and experienced in securities matters. The court also noted that Pomerantz conceded at oral argument that the Huang Group had the greater financial interest and instead focused on whether the group was adequate.
Disposition
The court denied the Huang Group’s motion for appointment as lead plaintiff and selection of lead counsel, Docket No. 12. It granted Altimeo’s motion for appointment as lead plaintiff and selection of Pomerantz as lead counsel, Docket No. 17. The order disposed of both motions. Judge Edward M. Chen signed the order.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.