In re: United States Oil Fund, LP Securities Litigation

Background

Three proposed securities class actions were pending against United States Oil Fund, LP; 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 omitted risks related to the COVID-19 pandemic and an alleged 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 cases were Lucas v. United States Oil Fund, LP, No. 20 Civ. 4740 (PGG); Ephrati v. United States Oil Fund, LP, No. 20 Civ. 6010 (PGG); and Palacios v. United States Oil Fund, LP, No. 20 Civ. 6442 (PGG). The court considered motions to consolidate the cases, appoint a lead plaintiff under the Private Securities Litigation Reform Act, and approve lead counsel.

Consolidation

The court held that consolidation was appropriate under Federal Rule of Civil Procedure 42(a) because all three actions involved common questions concerning alleged omissions and misrepresentations in U.S. Oil’s registration statements, similar securities claims, and the same four defendants. The cases, along with any other related U.S. Oil class actions later filed in or transferred to the Southern District of New York, were consolidated under the caption In re: United States Oil Fund, LP Securities Litigation, No. 20 Civ. 4740 (PGG). The cases will be maintained in one file for all purposes, including discovery, pretrial proceedings, and trial.

Lead Plaintiff

The court applied the statutory presumption that the person or group with the largest financial interest in the relief sought is the most adequate lead plaintiff, if that person or group preliminarily satisfies the relevant class-representation requirements. The court considered three applicants: Joseph A. O’Connor Trust and Arjun Bhartia, Heritage Investment Corp., and Nutit A.S.

Joseph A. O’Connor Trust and Arjun Bhartia did not oppose the motions submitted by Heritage and Nutit and did not rebut the largest-financial-interest presumption. Their motion to be appointed lead plaintiff was therefore denied.

The court compared Nutit’s and Heritage’s alleged losses using the longer class period from February 25, 2020, to April 28, 2020. Nutit alleged losses of approximately $13.5 million, while Heritage alleged losses of approximately $6.2 million. The court concluded that the longer class period was plausible and not obviously frivolous. It also rejected Heritage’s effort to use a shorter class period after Heritage had initially calculated its losses using the longer period.

The court concluded that Nutit had the largest financial interest and was the presumptive lead plaintiff. It found that Nutit had made the required preliminary showing that its claims were typical of those of other investors and that it could fairly and adequately protect the proposed class’s interests. The court also considered Nutit’s revised certification, signed by both directors, and concluded that the certification issue did not prevent Nutit’s appointment.

Lead Counsel

Nutit selected Robbins Geller Rudman & Dowd LLP as class counsel. The court concluded that the firm was qualified to serve as lead counsel and approved Nutit’s selection.

Disposition

Nutit’s motion to be appointed lead plaintiff was granted. Nutit’s motion to consolidate related actions was granted. Nutit’s motion to approve Robbins Geller as lead counsel was granted. All other motions were denied. The court set November 16, 2020, as the deadline for any amended or consolidated complaint and set related deadlines for any response to a motion to dismiss. The initial pretrial conference was adjourned without a new date.