In re: United States Oil Fund, LP Securities Litigation

Background

United States Oil Fund, LP is an exchange-traded fund designed to track daily changes in the spot price of West Texas Intermediate crude oil. Three proposed class actions were filed by Robert Lucas, Moshe Ephrati, and Danny Palacios against United States Oil Fund, LP; United States Commodity Funds LLC; John P. Love; and Stuart P. Crumbaugh.

The complaints alleged that United States Oil Fund’s February and March 2020 registration statements omitted or misrepresented risks related to the COVID-19 pandemic and an oil-price war between Russia and Saudi Arabia. The plaintiffs asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The actions proposed different class-period start dates: February 25, 2020, or March 19, 2020; all ended April 28, 2020.

Consolidation

All applicants sought consolidation, and no one objected. Applying Federal Rule of Civil Procedure 42(a), the court found consolidation appropriate because the cases involved common allegations, similar securities claims, and the same four defendants. The cases were consolidated for all purposes, including discovery, pretrial proceedings, and trial, under master docket number 20 Civ. 4740 (PGG), with the caption In re: United States Oil Fund, LP Securities Litigation.

The court also directed that future filings in related United States Oil Fund class actions filed in or transferred to the Southern District of New York be consolidated under the master file number if they involved substantially related questions of law and fact. Consolidation alone did not make a person or entity a party to an action in which that person or entity had not been named, served, or added under the Federal Rules of Civil Procedure.

Lead Plaintiff Selection

The Private Securities Litigation Reform Act generally gives a rebuttable presumption of lead-plaintiff status to the applicant with the largest financial interest who otherwise 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.

The court did not consider the O’Connor Trust and Bhartia for appointment because they did not oppose the motions filed by Heritage and Nutit and therefore had not rebutted the largest-financial-interest presumption. Between Heritage and Nutit, the court used the longer February 25-to-April 28 class period because the Palacios complaint plausibly supported that period and it was not obviously frivolous. Nutit alleged approximately $13.5 million in losses, while Heritage alleged approximately $6.2 million. The court therefore found that Nutit had the largest financial interest.

The court also rejected Heritage’s arguments that Nutit’s certification was invalid and that Nutit should be excluded from consideration. Nutit filed a revised certification signed by both directors, which remedied the alleged defect, and the court considered the revised filing.

Rule 23 Requirements

For lead-plaintiff purposes, the court examined whether Nutit had made the required preliminary showing of typicality and adequacy under Federal Rule of Civil Procedure 23. The court found that Nutit’s claims arose from the same alleged misconduct as the other investors’ claims and involved similar legal arguments. It also found that Nutit had retained competent and experienced counsel, had a significant interest in the outcome, and had no identified conflict with the putative class. The court appointed Nutit lead plaintiff.

Lead Counsel and Disposition

Nutit selected Robbins Geller Rudman & Dowd LLP as class counsel. The court found the firm qualified to handle the securities litigation and approved Nutit’s selection of Robbins Geller as lead counsel.

The court granted Nutit’s motion to be appointed lead plaintiff, granted Nutit’s motion to consolidate the related actions, and granted Nutit’s motion to approve Robbins Geller as lead counsel. All other motions were denied. The court set deadlines for an amended or consolidated complaint and later responses, and adjourned the initial pretrial conference without setting a new date. This order addressed case management and leadership of the proposed class actions; it did not decide the underlying securities claims.