In re: United States Oil Fund, LP Securities Litigation

Background

Three proposed securities class actions were pending against United States Oil Fund, LP (U.S. Oil), United States Commodity Funds LLC, John P. Love, and Stuart P. Crumbaugh. The plaintiffs alleged that U.S. Oil’s February and March 2020 registration statements failed to disclose risks related to the COVID-19 pandemic and an oil-price war between Russia and Saudi Arabia. The complaints asserted similar claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The three cases were Lucas v. United States Oil Fund, LP, No. 20 Civ. 4740; Ephrati v. United States Oil Fund, LP, No. 20 Civ. 6010; and Palacios v. United States Oil Fund, LP, No. 20 Civ. 6442. The court noted that the complaints used different proposed starting dates for the class period. The Lucas and Ephrati complaints used March 19, 2020, while the Palacios complaint used February 25, 2020; all proposed ending the period on April 28, 2020.

Consolidation

All movants sought consolidation, and no party objected. Applying Federal Rule of Civil Procedure 42(a), the court found consolidation appropriate because the cases involved common alleged omissions and misrepresentations, similar legal claims, and the same four defendants.

The court consolidated the three cases, and any later related U.S. Oil class actions filed in or transferred to the Southern District of New York, under the caption In re: United States Oil Fund, LP Securities Litigation, No. 20 Civ. 4740 (PGG). The cases were consolidated for all purposes, including discovery, pretrial proceedings, and trial. Future filings were generally to be made under the master docket. The court also clarified that consolidation did not make a person or entity a party to a case in which that person or entity had not been named, served, or added under the Federal Rules of Civil Procedure.

Lead Plaintiff

The Private Securities Litigation Reform Act creates a rebuttable presumption that the applicant with the largest financial interest is the most adequate lead plaintiff, if that applicant makes the required preliminary showing under Federal Rule of Civil Procedure 23. The court considered three applicants: Joseph A. O’Connor Trust and Arjun Bhartia, Heritage Investment Corp., and Nutit A.S.

The Joseph A. O’Connor Trust and Arjun Bhartia did not oppose the motions by Heritage and Nutit. The court therefore did not consider them for appointment as lead plaintiff and denied their motion.

The court compared Nutit’s and Heritage’s alleged losses. Nutit alleged losses of approximately $13.5 million, while Heritage alleged losses of approximately $6.2 million using the longer proposed class period. The court held that the longer period—from February 25 through April 28, 2020—was plausible and not obviously frivolous, relying in part on allegations that the February registration statement did not mention the pandemic. Because Nutit’s losses were more than twice Heritage’s under that approach, the court found that Nutit had the largest financial interest.

The court also rejected Heritage’s argument that Nutit’s certification was invalid because it had initially been signed by only one of Nutit’s two directors. Nutit submitted a revised certification signed by both directors, and the court considered the issue resolved. The court further found that Nutit had made the required preliminary showing that its claims were typical of the proposed class and that it would fairly and adequately protect the class’s interests. The court therefore appointed Nutit as lead plaintiff.

Lead Counsel

Under the securities statute, the lead plaintiff selects class counsel, subject to court approval. Nutit selected Robbins Geller Rudman & Dowd LLP. The court found the firm qualified and experienced in complex securities litigation and approved it as lead counsel.

Disposition

The court granted Nutit’s motion to be appointed lead plaintiff, granted Nutit’s motion to consolidate related actions, and granted Nutit’s motion to approve Robbins Geller as lead counsel. All other motions were denied. The order addressed case management and representation of the proposed class; it did not decide the underlying securities claims or determine whether defendants were liable.