Woodley v. Gulfport Energy Corporation

Background

Robert F. Woodley filed a proposed securities class action under federal securities laws against Gulfport Energy Corporation, David M. Wood, Keri Crowell, and Quentin R. Hicks. The proposed class consisted of people who purchased or otherwise acquired Gulfport securities between May 3, 2019, and February 27, 2020.

The complaint alleged that Gulfport made materially false or misleading statements in its quarterly reports to the Securities and Exchange Commission. According to the complaint, Gulfport failed to disclose a material weakness in its internal controls over financial reporting, the ineffectiveness of its disclosure controls, and resulting misstatements in its financial statements. On February 27, 2020, Gulfport disclosed that its financial statements for certain periods in 2019 should not be relied on because of material misstatements. The complaint alleged that Gulfport’s stock price fell after that disclosure.

Lead-Plantiff Appointment

The pending motion sought to appoint class member Joseph Rotunno as lead plaintiff and Kaplan Fox & Kilsheimer LLP as lead counsel. The Private Securities Litigation Reform Act requires the court to appoint the class member most capable of adequately representing the class. The statute generally presumes that the most adequate plaintiff is the person who timely responds to public notice, has the largest financial interest in the relief sought, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23.

Rotunno filed a timely motion. The court compared the financial interests of the applicants, focusing especially on their approximate losses. Rotunno submitted documentation showing a claimed loss of $517,113.35. The court stated that Mark Treutelaar had the next-largest claimed loss, $287,144.97, and that the other applicants had acknowledged that they did not have the largest financial interest or had withdrawn their motions. No other applicant asserted a larger financial interest.

Rule 23 requires, among other things, that the proposed lead plaintiff’s claims be typical of the class and that the lead plaintiff adequately represent the class. At the lead-plaintiff stage, the court required only a preliminary showing of typicality and adequacy. The court found Rotunno’s claims typical because he purchased Gulfport securities during the class period, was allegedly affected by the same statements, and sought substantially the same relief under substantially the same legal theories as the proposed class. The court also found adequacy because Rotunno retained experienced counsel, had a significant financial interest in the outcome, and had no identified conflict with other class members.

Because Rotunno met the statutory requirements and the motion was unopposed, the court found no basis to overcome the presumption that he was the most adequate plaintiff. The court therefore appointed Rotunno as lead plaintiff.

Lead Counsel and Disposition

The statute permits the most adequate plaintiff to select class counsel, subject to court approval. The court approved Kaplan Fox as lead counsel after finding, based on the submitted materials and other decisions cited in the opinion, that the firm had extensive experience litigating securities class actions.

The court granted Rotunno’s motion for appointment as lead plaintiff and approval of Kaplan Fox as lead counsel. It also stayed the matter as to Gulfport because Gulfport had filed a bankruptcy petition. The court directed the clerk to terminate the listed motions. The opinion did not decide whether Gulfport or the individual defendants violated federal securities laws.