Moshell v. Sasol Limited

Background

Chad Moshell brought a proposed class action on behalf of similarly situated shareholders against Sasol Limited and several individual defendants. The complaint alleges violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5, as well as Section 20(a) of that Act. It alleges that the defendants made false or misleading statements and omissions about the expense, problems, and management of Sasol’s Lake Charles Chemicals Project in Louisiana. According to the complaint, later disclosures about the project were followed by a decline in the price of Sasol’s American depositary receipts, injuring investors.

The order concerns only the selection of the lead plaintiff and lead counsel. Two Sasol shareholders, David Cohn and Saratoga Advantage Trust Energy & Basic Materials Portfolio, moved for appointment as lead plaintiff. Two other individuals had previously moved for appointment but withdrew their motions.

Lead Plaintiff Standard

The Private Securities Litigation Reform Act requires the court to appoint the person most capable of adequately representing the class. The statute creates a rebuttable presumption in favor of a timely applicant who has the largest financial interest in the relief sought and satisfies the relevant requirements of Rule 23 of the Federal Rules of Civil Procedure. That presumption can be overcome by proof that the applicant cannot fairly and adequately protect the class or has defenses that uniquely undermine the applicant’s ability to represent the class.

At this stage, a proposed lead plaintiff need only make a preliminary showing of Rule 23’s typicality and adequacy requirements. Typicality means that the plaintiff’s claims arise from the same events and legal theories as the class’s claims. Adequacy concerns whether the proposed plaintiff and counsel can fairly and competently represent the class without conflicts.

Court’s Analysis

The court found that Cohn was the presumptive most adequate plaintiff. His motion was timely, and he reported the larger financial loss: $71,705.17 based on purchases of 5,000 shares and 5,000 net shares. Saratoga reported a loss of $16,825.30 based on 2,700 gross shares and zero net shares.

The court also found that Cohn’s claims were typical because, like the claims described in the complaint, they alleged losses from defendants’ statements and omissions concerning the Lake Charles Chemicals Project and from the later disclosure of information about that project. The court found Cohn adequate because there was no indication of a conflict between him and the class, he had a substantial financial interest in the case, and his proposed counsel was experienced and competent in securities class actions. The court also considered Cohn’s responses to questions at the April 23, 2020 hearing.

Saratoga argued that Cohn was not adequate because he did not own Sasol stock before two of the four alleged corrective disclosures. The court noted that Saratoga also owned shares before only two of those disclosures. Saratoga additionally argued that its status as an institutional investor made it more adequate, but the court held that this did not rebut the presumption favoring Cohn. The court was independently satisfied that Cohn was adequate.

Lead Counsel

The statute allows the lead plaintiff to select and retain class counsel, subject to court approval. The court approved Cohn’s selection of Hagens Berman Sobol Shapiro LLP because the firm demonstrated experience and competence in securities class actions. The court also reviewed the firm’s retainer agreement with Cohn and stated that, although the agreement was not binding on the court, it reinforced the court’s confidence in the firm’s professionalism.

Disposition

The court appointed David Cohn as lead plaintiff and Hagens Berman Sobol Shapiro LLP as lead counsel. The order did not decide whether Sasol or the individual defendants violated the securities laws.