Owen v. Elastos Foundation

Background

Mark Owen and James Wandling moved to serve as lead plaintiffs in the putative securities class action and sought approval of their selection of Bleichmar Fonti & Auld LLP (BFA) as lead counsel. The court had set deadlines for oppositions and replies, but no opposition was filed. The proposed class action alleged that the defendants sold unregistered securities, giving rise to claims under Sections 5 and 12(a)(1) of the Securities Act.

Legal standard

The Private Securities Litigation Reform Act (PSLRA) requires the court to appoint as lead plaintiff the member of the proposed class who is most capable of adequately representing the class. The statute creates a presumption in favor of the timely applicant with the largest financial interest who also makes a preliminary showing of satisfying Rule 23’s typicality and adequacy requirements.

The court explained that financial interest is generally assessed using the number of shares purchased, net shares purchased, net funds spent, and approximate losses, with losses usually receiving the greatest weight. Typicality generally exists when the proposed lead plaintiffs’ claims arise from the same events and rely on similar legal arguments as the other class members. Adequacy requires qualified counsel, no antagonistic interests among class members, and a sufficient interest in the outcome to support vigorous representation.

Analysis

The court found that the published notice satisfied the PSLRA and that the motion was timely. Owen and Wandling had filed the complaint and timely moved for appointment. They also had the largest—and only demonstrated—financial interest: the opinion attributed alleged losses of $11,223.37 to Wandling and $717.80 to Owen, for a combined total of $11,941.17.

The court found a preliminary showing of typicality because both proposed lead plaintiffs alleged that they purchased unregistered securities issued by a defendant, and the proposed class members’ claims arose from the same events and would involve similar legal arguments. The court found no indication that Owen and Wandling’s interests conflicted with those of other class members. It noted that the record did not provide information about possible differences between class members who participated in the initial offering and those who bought securities on the secondary market, but concluded that the case appeared to be a common class action involving alleged sales of unregistered securities.

The court also found BFA qualified, experienced, and generally able to conduct the litigation. Under the PSLRA, the most adequate plaintiff selects counsel subject to court approval, and the court stated that there is a strong presumption favoring approval of a properly selected lead plaintiff’s counsel.

Disposition

The court GRANTED the motion. Owen and Wandling were appointed Lead Plaintiffs, and Bleichmar Fonti & Auld LLP was appointed Lead Counsel. The court set June 16, 2020, as the deadline for defendants to answer or otherwise respond to the complaint and directed the Clerk of Court to close the motion at Dkt. No. 46.