City of Warren Police and Fire Retirement System v. World Wrestling…

Background

Two putative class actions were consolidated for all purposes. The plaintiffs alleged that World Wrestling Entertainment, Inc. (WWE) and three executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.

The alleged harm arose from WWE’s strategic relationships with Saudi Arabia, including agreements to broadcast and host live events in the Middle East and North Africa. According to the complaints, tensions developed in 2018 and 2019 because of fan reactions to Saudi Arabia’s policies, the killing of journalist Jamal Khashoggi, and Saudi dissatisfaction with WWE’s portrayal of women. The plaintiffs alleged that Saudi Arabia refused to pay millions of dollars, WWE stopped holding events there, and a media agreement failed. They further alleged that WWE concealed the deteriorating relationship, and that partial disclosures between April 2019 and February 2020 caused WWE’s stock price to fall. The complaints also alleged that certain executives sold millions of dollars of WWE shares before those disclosures.

Lead- Plaintiff Selection

The court considered motions by John R. Howland and the Firefighters’ Pension System of the City of Kansas City Missouri Trust, referred to as Kansas City FPS, for appointment as lead plaintiff under the Private Securities Litigation Reform Act (PSLRA). The PSLRA requires the court to appoint the applicant most capable of adequately representing the class.

The statute creates a rebuttable presumption in favor of the applicant who timely files or responds to notice, has the largest financial interest in the requested relief, and preliminarily satisfies the typicality and adequacy requirements of Federal Rule of Civil Procedure 23. That presumption can be overcome with proof that the presumptive lead plaintiff will not fairly and adequately protect the class or faces unique defenses.

Howland timely moved and claimed the largest loss, $264,016.18. The court also found that he had preliminarily shown that his claims were typical of the class and that his chosen firm was qualified. However, the court found that Kansas City FPS rebutted the presumption favoring Howland. Howland testified that he lacked meaningful litigation experience, and the court concluded that his career experience did not appear relevant to managing securities litigation. The court also questioned his handling of counsel selection and retention. In particular, Howland’s statements about negotiating his fee agreement, together with fee percentages the court viewed as high for this type of case, suggested that he would not adequately serve as lead plaintiff.

The court found Kansas City FPS suitable despite its claimed loss being smaller, $121,996.70. Its claims were based on the same facts and legal theories as the class’s claims. The court found that Kansas City FPS had selected qualified counsel, had no conflict with the class, and had an incentive to prosecute the case vigorously. The court also relied on the pension system’s nearly seventy years of fiduciary experience, resources, and Executive Officer Barbara Davis’s experience monitoring complex litigation.

Lead Counsel and Disposition

The PSLRA allows the lead plaintiff to select and retain class counsel, subject to court approval. The court approved Labaton Sucharow LLP as lead counsel because the firm demonstrated experience and success in securities class actions. The court also found that the retainer agreement supported its confidence in the firm’s professionalism.

The court appointed Kansas City FPS as lead plaintiff in the consolidated action and Labaton Sucharow LLP as lead counsel. This was a management ruling in the litigation; the opinion did not resolve the merits of the alleged securities-law violations.