Batter v. Hecla Mining Company

Background

The court considered two securities class actions against Hecla Mining Company and several of its officers and directors. The plaintiffs alleged that the defendants made materially false and misleading statements and failed to disclose material adverse facts about Hecla’s business, operations, and prospects. They alleged that disclosure of the information caused Hecla’s stock price to fall. Both cases concerned people and entities that purchased Hecla publicly traded common stock between March 19, 2018, and May 8, 2019.

Eight proposed plaintiffs timely moved to consolidate the cases, to be appointed lead plaintiff, and to have lead counsel approved. Four later withdrew their motions. The remaining competing applicants were Ahmed Hussein, the Gluck Family—Dr. Robert Gluck, Emma Gluck, and Sarah Gluck—the City of Birmingham Retirement and Relief System (BRRS), and James Hughes.

Consolidation

The court granted the motions to consolidate under Federal Rule of Civil Procedure 42(a). No party objected. The court found that the cases involved similar parties, substantially similar alleged misconduct and class periods, and substantially similar factual and legal issues. It concluded that consolidation would promote efficiency without causing prejudice or confusion.

Hussein’s Presumptive Status and Disqualification

Under the Private Securities Litigation Reform Act, the lead plaintiff is generally the class member most capable of representing the class. The statute creates a rebuttable presumption in favor of the timely applicant with the largest financial interest who also meets the typicality and adequacy requirements of Federal Rule of Civil Procedure 23.

The court found that Hussein was timely, had the largest claimed financial loss, and preliminarily satisfied the typicality and adequacy requirements. The court rejected the Glucks’ challenge to the accuracy of Hussein’s trading data because their supporting link was no longer operational and Hussein had submitted account statements supporting his loss chart.

The court nevertheless held that the Glucks rebutted Hussein’s presumptive status. They identified six matters from Hussein’s past, including a regulatory proceeding involving his handling of an investment account, a federal tax dispute, his involvement with the Middle East Paper Company, disputes involving Quality Systems Inc., alleged use of a dissolved corporation for personal investing, and a lawsuit concerning a gambling debt. The court considered the regulatory proceeding involving the Frotas matter especially troubling because Hussein had consented to findings that he engaged in fraudulent conduct violating securities-law provisions similar to those asserted in the Hecla case.

The court stated that Hussein’s consent did not establish that he admitted the underlying allegations, but it created a potential for unique defenses unavailable against other class members. The court concluded that the potential for such defenses, along with concerns about Hussein’s ability to serve as a class fiduciary, meant that he was not an adequate lead plaintiff.

Appointment of the Gluck Family

The court concluded that the Gluck Family was the most adequate lead plaintiff. It allowed the family members to aggregate their losses and found that, apart from Hussein, they had the largest financial interest. The court also found that their claims were typical because they alleged that they purchased Hecla securities at prices inflated by the defendants’ false or misleading statements and suffered losses as a result.

Hussein and BRRS argued that the Glucks’ original certifications did not comply with the statute because Dr. Gluck signed certifications for Emma and Sarah. The court found that supplemental certifications personally signed by Emma and Sarah, together with Dr. Gluck’s declaration stating that he had permission to sign the earlier documents and made the investment decisions for their account, cured the deficiency. The court further found that the Glucks otherwise satisfied the adequacy requirements, including having competent and experienced counsel and sufficient financial interests to support vigorous advocacy.

Lead Counsel

The court approved Kaplan Fox & Kilsheimer as lead counsel. Under the Private Securities Litigation Reform Act, the lead plaintiff selects lead counsel subject to court approval. The court found that the firm had extensive experience litigating securities class actions and approved the Gluck Family’s selection.

Disposition

The court granted the motions to consolidate. It also granted the Gluck Family’s motion for appointment as lead plaintiff and approved Kaplan Fox & Kilsheimer as lead counsel. The remaining motions for lead counsel appointment were denied. The order terminated the listed motions; it did not decide the underlying securities-fraud claims.