Sun v. TAL Education Group
- Andrew Carter
- 1:22-cv-01015
- U.S. District Court · Southern District of New York
- 8
In Sun v. TAL Education Group, Judge Parker appointed NMSIC and MSPERS as lead plaintiffs, approved co-lead counsel, denied Ganji’s motion, and denied two others as moot.
The order determined which investors would direct the proposed securities class action and which law firms would represent the proposed class. It appointed the New Mexico State Investment Council and the Public Employees’ Retirement System of Mississippi as lead plaintiffs, approved Grant & Eisenhofer P.A. and Berger Montague PC as co-lead counsel, denied Macy Ganji’s motion, and denied two other motions as moot.
What happened
In Sun v. TAL Education Group, Ruoshui Sun brought a securities-fraud case for people who purchased TAL American depositary shares between April 26, 2018, and July 22, 2021. The complaint alleged that TAL Education Group and three officers or former officers misled investors about the company’s business, practices, and risks from Chinese regulation. The opinion addressed who should represent the proposed class during the litigation, not whether the alleged fraud occurred.
The New Mexico State Investment Council and the Public Employees’ Retirement System of Mississippi sought appointment as lead plaintiffs, meaning the investors responsible for directing the class case. They reported the largest financial losses among the applicants and agreed to serve jointly. Other applicants included Macy Ganji, Potrero LLC, Pranav Jain, and Jianwu Wu; Jain withdrew, and Potrero LLC and Wu did not oppose the joint appointment.
Judge Katharine H. Parker granted the motions of the New Mexico State Investment Council and the Public Employees’ Retirement System of Mississippi, appointed them as lead plaintiffs, and approved Grant & Eisenhofer P.A. and Berger Montague PC as co-lead counsel. Judge Parker denied Ganji’s motion and denied two other motions as moot. The court also consolidated related actions and directed that an amended complaint be filed within seven days.
The detailed version
- Sun v. TAL Education Group · No. 1:22-cv-01015
- Andrew Carter
- Oct. 12, 2022
Background
Ruoshui Sun filed a securities action against TAL Education Group, Bangxin Zhang, Rong Luo, and Linda He on behalf of people who purchased TAL American depositary shares between April 26, 2018, and July 22, 2021. The complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.
The alleged misconduct included deceptive advertising, fabricated course reviews, unlawful advance-payment and recurring-debt practices, misrepresentations about teachers and courses, mishandling of user data, and allegedly rigged promotional events. The complaint alleged that TAL concealed these practices and the resulting risk of government action, causing its share price to be artificially inflated. It identified allegedly misleading statements and omissions in financial announcements, earnings calls, and filings with the Securities and Exchange Commission.
The opinion did not decide whether these allegations were true or whether any defendant violated the securities laws. It concerned motions to appoint a lead plaintiff and lead counsel under the Private Securities Litigation Reform Act of 1995, or PSLRA.
Motions for Lead Plaintiff and Counsel
The New Mexico State Investment Council, or NMSIC, moved to be appointed lead plaintiff and sought approval of Grant & Eisenhofer and Robbins Geller Rudman & Dowd as co-lead counsel. The Public Employees’ Retirement System of Mississippi, or MSPERS, separately moved for lead-plaintiff appointment and approval of Berger Montague PC as lead counsel. Macy Ganji, Potrero LLC, Pranav Jain, and Jianwu Wu also filed motions. Jain later withdrew. Potrero LLC and Wu filed statements of non-opposition to the appointment of NMSIC and MSPERS in light of those entities’ larger claimed losses.
NMSIC claimed a $9.5 million first-in, first-out loss and a $5.3 million last-in, first-out loss. MSPERS claimed a $5.4 million first-in, first-out or last-in, first-out loss. The court stated that these losses exceeded those claimed by the other applicants. NMSIC and MSPERS later agreed to seek appointment jointly as lead plaintiffs.
Legal Standard
The PSLRA directs the court to appoint the class member or group of class members most capable of adequately representing the class. The statute creates a presumption in favor of the applicant who responded to the required notice, has the largest financial interest in the relief sought, and makes a preliminary showing that the requirements of Federal Rule of Civil Procedure 23 are satisfied.
That presumption may be rebutted by evidence that the presumptive lead plaintiff will not fairly and adequately protect the class or faces unique defenses that would make adequate representation impossible. For this appointment decision, the court explained that a preliminary showing of Rule 23’s typicality and adequacy requirements was sufficient.
Court’s Analysis
The court determined that NMSIC and MSPERS had the largest financial interests among the competing applicants. It also noted that both were institutional investors, had previously served as lead plaintiffs and class representatives in other PSLRA actions, and had an established record of prosecuting securities class actions. Both represented that they would supervise their counsel and coordinate their work to avoid duplication.
The court found that NMSIC and MSPERS had made the required preliminary showing under Rule 23 and that their joint prosecution would benefit the proposed class. It further found that the selected law firms had experience litigating securities class actions and would adequately represent the proposed class.
Disposition
The court GRANTED the motions for appointment as lead plaintiff submitted by NMSIC and MSPERS. It appointed NMSIC and MSPERS as Lead Plaintiff and appointed Grant & Eisenhofer P.A. and Berger Montague PC as Co-Lead Counsel. The court DENIED Ganji’s motion. Because of non-opposition filings, the court also denied as moot the motions at ECF Nos. 12 and 22.
The court ordered that any pending, later-filed, removed, or transferred actions related to the claims in this action be consolidated for all purposes under Federal Rule of Civil Procedure 42(a). It also directed that the amended complaint be filed within seven days of the order.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.