San Antonio Fire and Police Pension Fund v. Dentsply Sirona Inc.

Background

The opinion concerns two proposed class actions under the Securities Exchange Act of 1934. The complaints allege that Dentsply Sirona Inc. and former executives Donald M. Casey, Jr. and Jorge Gomez improperly recognized revenue so that Dentsply’s financial performance would trigger incentive-based compensation for the second half of 2021.

Three proposed lead-plaintiff groups filed motions: (1) San Antonio Fire and Police Pension Fund, with Bleichmar Fonti & Auld LLP as proposed lead counsel; (2) City of Miami General Employees’ & Sanitation Employees’ Retirement Trust and Louisiana Sheriffs’ Pension & Relief Fund, with Bernstein Litowitz Berger & Grossman LLP as proposed lead counsel; and (3) City of Birmingham Retirement and Relief System, El Paso Firemen & Policemen’s Pension Fund, and Wayne County Employees’ Retirement System, with Robbins Geller Rudman & Dowd LLP as proposed lead counsel.

The Exchange Act requires the court to appoint the member or group of members best able to represent the class. The statute creates a presumption in favor of the person or group that timely seeks appointment, has the largest financial interest in the relief sought, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23.

Lead Plaintiff Analysis

The court held that the Birmingham, El Paso, and Wayne County group was timely because all three motions were filed by the August 1, 2022 deadline described in the opinion. It also held that the statute permits the court to consider the combined financial interests of a proposed group rather than only the financial interest of each individual entity.

To compare financial interests, the court considered four factors commonly called the Lax factors: the gross number of shares purchased, the net number of shares purchased, the net funds spent, and the net loss suffered. The court treated net loss as the most important factor and chose the last-in, first-out method for measuring actual investment loss. Under that method, Birmingham, El Paso, and Wayne County had the greatest net loss. The group also had the greatest gross number of shares purchased and the greatest net expenditure of funds, while Miami and Louisiana Sheriffs had the greatest net number of shares purchased.

The court rejected Miami and Louisiana Sheriffs’ proposed method of measuring only losses allegedly recoverable from the price declines following particular disclosures. It reasoned that this method ignored the prices paid for the shares and did not accurately account for losses arising from alleged misrepresentations made at different times during the class period.

The court also found that Birmingham, El Paso, and Wayne County satisfied the relevant Rule 23 requirements. Their claims were typical because, like the proposed class members, they alleged that they purchased Dentsply shares at prices inflated by fraudulent misrepresentations and were injured when the share price declined after corrective disclosures. The court found the group adequate because Robbins Geller had securities class-action experience, the group had a sufficient financial interest, and the court identified no conflict with other class members. The court also considered the group’s prior contacts, participation in the litigation, plans to cooperate, sophistication, and selection of counsel.

Rulings and Case Administration

The court granted the motion filed by Birmingham, El Paso, and Wayne County, denied the motions filed by San Antonio and by Miami and Louisiana Sheriffs, and appointed Birmingham, El Paso, and Wayne County as Lead Plaintiffs. No competing party produced proof sufficient to rebut the statutory presumption in their favor.

The court approved the group’s selection of Robbins Geller Rudman & Dowd LLP as Lead Counsel because the firm had extensive experience representing plaintiffs in class actions. The court directed the defendants to confer with the Lead Plaintiffs about a possible venue transfer and, if no party sought transfer, about a schedule for any amended complaint and defendants’ responses.

With the parties’ consent, the court directed the Clerk to consolidate case number 23 Civ. 2910 with case number 22 Civ. 6339. The court also directed the Clerk to lift the stay and close the motions pending at specified docket numbers in case number 22 Civ. 6339. The opinion did not decide whether the alleged securities violations occurred.