In re VEON Ltd. Securities Litigation

Background

This securities-fraud class action concerns purchases of VEON shares between June 30, 2011, and November 3, 2015. The plaintiffs alleged violations of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5, asserting that VEON made false or misleading statements and failed to disclose material information about its business and investigations into alleged bribery in Uzbekistan.

VEON later entered into an agreement with the United States Department of Justice in which it pleaded guilty to two criminal charges involving the Foreign Corrupt Practices Act. The alleged misconduct and related disclosures were followed by declines in the price of VEON’s American Depository Receipts.

The litigation previously had a different lead plaintiff, Westway Alliance Corp. The court dismissed Westway because there was no continuing live dispute between Westway and VEON, then reopened the process for selecting a lead plaintiff. The competing applicants were Boris Lvov and the group of Sherman Steele, Leonard Karpwich, and Stan Sinitsa, referred to as SKS.

Legal Standard

The Private Securities Litigation Reform Act requires the court to appoint the proposed class member best able to represent the class. The statute creates a presumption in favor of the applicant who timely sought appointment, has the largest financial interest, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23. That presumption can be defeated by proof that the applicant cannot fairly and adequately represent the class or faces defenses unique to that applicant.

At the lead-plaintiff stage, Rule 23 requires a preliminary showing that the applicant’s claims are typical of the class and that the applicant can adequately represent the class’s interests.

SKS’s Motion

SKS had the larger reported financial loss: $701,412, compared with Lvov’s reported loss of $388,985. But the court concluded that SKS’s class claims were barred by the two-year statute of limitations applicable to the securities claims.

SKS argued that the filing of the earlier class action had paused the time limit for its claims under a rule associated with the Supreme Court’s American Pipe decision. The court rejected that argument based on the Southern District of New York’s interpretation of that rule in a prior case. It held that the filing of a proposed class action may pause the time limit for individual claims, but does not pause the time limit for class claims asserted by a newly added plaintiff who joins an existing proposed class action after the limitations period has expired.

Because SKS’s class claims were time-barred, the court found that SKS faced a unique defense that prevented it from adequately representing the class. This rebutted the presumption favoring SKS despite its larger financial interest.

Lvov’s Motion

The court found that Lvov timely sought appointment and had the second-largest financial interest. It also found that he made the required preliminary showing under Rule 23.

The court held that Lvov’s claims were typical because he purchased VEON stock during the class period and suffered a financial loss based on the same alleged conduct as other proposed class members. The court rejected the argument that his purchases after some partial disclosures made his claims atypical. It also found that Lvov’s interests were aligned with the proposed class, that he had retained competent and experienced counsel, and that his continued participation in the litigation showed his interest in pursuing the case.

Lead Counsel

Lvov selected Rosen Law as lead counsel. The court found the firm qualified to litigate the action and approved its selection.

Disposition

The court denied SKS’s motions for appointment as lead plaintiff and lead counsel. It granted Lvov’s motion for appointment as lead plaintiff and his motion for appointment of lead counsel. The Clerk was directed to close the docket entries for SKS’s motions.